VSME standard: voluntary ESG reporting for SMEs

What is the VSME standard?

The VSME (Voluntary Sustainability Reporting Standard for Non-Listed SMEs) is a voluntary ESG reporting standard developed by EFRAG.

Its structure reflects the mandatory ESRS for companies subject to the CSRD, but in a simplified version designed for unlisted small and medium-sized enterprises and microenterprises.

These standards help SMEs standardize their ESG reporting—which is often characterized by inconsistent methodologies—by providing a clear and structured framework for communicating their sustainability performance.

These are the only standards specifically designed for SMEs, and they currently serve as the basis for preparing a VSME report.

How is VSME structured (VSME modules)?

The VSME are the ESRS’s voluntary standard for unlisted small and medium-sized enterprises, and they provide a simplified and standardized ESG reporting framework. They are divided into two modules:

• Basic Module
• Comprehensive Module

Let’s take a closer look at them.

Basic Module (B1-B11)

The Basic Module (VSME Basic Module) of the ESRS VSME Standards consists of 11 points (B1 through B11). Below is a summary of the topics to be included in each section of the VSME report:

General Information

• B1: General information about the type of report (Basic Module only, or Basic and Comprehensive Modules) and the company preparing it.
• B2: Practices, strategies, and future initiatives for the transition to a more sustainable economy. This section provides information on the company’s current status in terms of ESG: for example, what actions have been taken to reduce emissions, water consumption, and energy consumption, etc.

Environmental (Environment)

• B3: Energy and Greenhouse Gas Emissions. Report total energy consumption (in MWh), broken down by energy source; estimated greenhouse gas emissions in tCO2eq, in accordance with the GHG Protocol (Scopes 1, 2, and 3).
• B4: Air, Water, and Soil Pollution. Pollutant emissions from the company’s operations into the air, water, and soil, specifying the quantities for each pollutant.
• B5: Biodiversity. Number and total area of sites owned by the company in the vicinity of a biodiversity-sensitive area.
• B6: Water. Total water withdrawal, distinguishing between withdrawals in areas with high water stress and significant water consumption resulting from production processes.
• B7: Resource Use, Circular Economy, and Waste Management. The company indicates whether and how it adopts the principles of the circular economy, reporting the total annual amount of waste, as well as the amounts recycled and reused.

Social (Society)

• B8: Workforce – General Characteristics. Number of employees by contract type, gender, and country; employee turnover.
• B9: Workforce – Health and Safety. Number and rate of workplace accidents; number of deaths caused by work-related injuries or illnesses.
• B10: Workforce – Compensation, Collective Bargaining, and Training. Indicate whether employees receive compensation equal to or greater than the legal minimum (there is no minimum wage in Italy!) or as stipulated in the collective bargaining agreement, the gender pay gap (only for companies with at least 150 employees, reduced to 100 starting in 2031), and the average annual hours of training.

Governance

• B11: Convictions and Fines for Corruption and Extortion. The number of convictions and the total amount of fines imposed during the reporting period for violations of anti-corruption and anti-extortion laws.

The structure of the VSME standards is very similar to that of the ESRS standards, which are mandatory for companies subject to the CSRD, but it is significantly more simplified and accessible.

Comprehensive Module (C1–C9)

The Comprehensive Module (VSME Comprehensive Module) of the VSME standards is designed to incorporate additional data, should stakeholders request it. The Comprehensive Module is therefore complementary to the Basic Module. It consists of the following points:

• C1: Strategy: Business model and sustainability initiatives.
• C2: Practices, policies, and future initiatives for the transition to a more sustainable economy.
• C3: Corporate Emissions Reduction Targets and Climate Transition Plan.
• C4: Climate risks.
• C5: Additional general characteristics of the workforce.
• C6: Human Rights Policies and Processes.
• C7: Serious incidents that negatively impact human rights.
• C8: Revenue from specific sectors and exclusion from EU benchmarks.
• C9: Gender diversity in governance bodies.

The Comprehensive Module is an optional add-on that can only be used if you are also using the Basic Module. It can be useful in cases where clients, banks, or partners request more in-depth ESG information.

VSME vs. ESRS: The Main Differences

Let’s now outline the main differences between the VSME and ESRS standards:

1. The VSME standards are voluntary reporting standards, while the ESRS are mandatory for companies subject to the CSRD.
2. The ESRS standards require a double materiality analysis to determine what the company must report (the most relevant issues—the “material” ones). The VSME do not require a dual materiality analysis, but follow a much simpler principle of “proportionality and materiality.”
3. The VSME were designed for unlisted SMEs, while the ESRS are intended for companies subject to the CSRD. Following the approval of the Omnibus Directive, a revised version of the VSME will be extended to all companies that fall under the CSRD (not just SMEs).
4. The VSME aims to reduce the corporate reporting burden on small and medium-sized enterprises by providing a common framework to help them respond to ESG information requests from stakeholders; the ESRS requires much more information to ensure comprehensive reporting aligned with the EU Taxonomy and the SFDR.

VSME acts as a Value Chain Cap

One of the most tangible effects of the official adoption of the VSME concerns the relationships between large companies and their suppliers. With the Omnibus Package, the so-called “value chain cap” was introduced: companies subject to the CSRD cannot require their suppliers and partners with fewer than 1,000 employees to provide more information than is required by the VSME.

In practice, adopting the VSME is not only a tool for communicating your sustainability efforts; it also provides concrete protection against excessive demands from major clients. A supplier that has already structured its reporting according to the VSME can respond to ESG requests from the value chain using a recognized framework, without having to adopt more burdensome standards.

Benefits of a VSME sustainability reporting

Preparing a voluntary VSME financial statement offers numerous tangible benefits to companies that choose to follow this path. Thanks to VSME reporting, companies can enjoy several advantages; here are the main ones:

1. Protection within the value chain (value chain cap). As we have just seen, large companies subject to the CSRD cannot request more information than is provided for by the VSME. Those who adopt the standard have a formal safeguard against excessive requests.

2. Response to requests from banks and investors. Starting in 2026, banks will be required to incorporate ESG risks into their lending terms. Having a reporting framework structured according to an official European standard significantly improves access to green and sustainability-linked financing.

3. Simplicity compared to the ESRS. The VSME does not require a dual materiality analysis and has far fewer data points than the ESRS. For an SME, it is the most manageable way to structure credible reporting without the burden of mandatory reporting.

4. Official European standard. With its adoption on July 3, 2026, the VSME is no longer an EFRAG recommendation but a delegated act of the Commission. This gives it greater weight with banks, investors, and large clients: it is a recognized standard, not a discretionary choice by the company.

VSME: Who exactly are they intended for?

The VSME standard is voluntary and is intended for micro, small, and medium-sized enterprises. According to European regulations, SMEs are defined as follows:

• Micro-enterprises: They do not exceed two of the following limits: a balance sheet total of €450,000, net revenue of €900,000, and an average of 10 employees.
• Small businesses: They do not exceed two of the following limits: €5 million in balance-sheet total assets, €10 million in net revenue, and an average of 50 employees.
• Medium-sized enterprises: They do not exceed two of the following thresholds: €25 million in balance sheet total, €50 million in net revenue, and an average of 250 employees.

After the official approval of the Omnibus package, the voluntary standard (VSME) can now be applied to all the companies that do not fall into the scope of the CSRD.

How can we support you?

The VSME standards are now the most accessible ESG reporting tool for SMEs: they are voluntary, proportionate, and increasingly relevant in light of the simplifications introduced by the Omnibus Directive. Whether it’s responding to requests from a major client, accessing financing, or preparing for future requirements, adopting them today is a strategic choice. Ollum supports companies in preparing their sustainability reports in accordance with VSME standards, from data collection to the publication of the report.