Update on VSME by EFRAG

VSME in Action: Empowering SMEs for a Sustainable Future

On April 7th, 2025, I attended an event on Voluntary SME reporting standards, organized by EFRAG. It was interesting both for the content and the timing, i.e. in the midst of discussions to drastically simplify the ESRS and delay CSRD. While large enterprises are waiting for the verdicts, many SMEs in their supply chains are still interested in VSME.
The information shared by the EFRAG team and their collaborators was concise and useful. Another good thing was the attendance of various stakeholders, such as preparers of sustainability reports (i.e. companies themselves), consultants, representatives of SMEs and users of sustainability data (e.g. European Banking Authority). They had the floor to voice their questions and opinions. The main points were the following.

Currently, VSME is sector-agnostic but in the future, sector-specific chapters might be added to truly address the sustainability nature of different SMEs.

VSME does not require a double materiality analysis (as it is too costly and complicated for SMEs). Instead it follows the applicability principle, asking the SME to disclose information on a topic if it is applicable to their business case. This creates some concerns around cherry-picking of the data to be disclosed.

Assurance of the sustainability report is not required. This creates concerns about the quality of the data collected.

Companies are encouraged to disclose additional information on a topic, even though a KPI may not ask about details.

VSME has a Basic module, and a Comprehensive module. Companies are allowed to adopt just the Basic module, or Basic + Comprehensive modules. Alternatively, they can adopt the Basic module, together with some parts of the Comprehensive module.

Most SMEs are actually micro companies, with less than 10 people. Both they and slightly larger SMEs are not sure how to report on topics like biodiversity, GHG , Scope2 , materiality.

Similarly, they don't have the means to hire materiality consultants or auditors for assurance, considering the fact that an assurance service can cost around €20,000.

The main goal of VSME is to help as many SMEs as possible disclose sustainability data, and as such improve bilateral cooperation with their clients and investors (e.g. banks). This is also why a standard measurement scale for each KPI or a benchmarking approach is not foreseen for the near future.

However, EFRAG agrees that tools should be developed to standardize the definition, collection and expression of certain data points, such as GHG emissions.

The fact that EBA and EFRAG is collaborating on the framework is a good sign, because European banks are already asking about sustainability performance when SMEs apply for a loan. A common reporting framework will save time for both SMEs and banks. Same is true for the procurement processes of large enterprises, during which SMEs are given various questionnaires.

Sounds optimistic. Don't you think?

Özge Özdemir, MSc., CESGA®