18 March 2025

Voluntary Sustainability Reporting made more pragmatic and cost efficient

  • Articles
  • Legal
  • Governance / ESG

The voluntary VSME standard by EFRAG supports SMEs in ESG reporting, aligning with ESRS. CSRD and CSDDD changes increase VSME relevance as they set data limits for EU reporting companies.

  • Adrian Peyer

    Legal Partner

The EU Voluntary Standard for Non-Listed Micro-, Small-, and Medium-Sized Enterprises (VSME Standard), developed by EFRAG, aims to support SMEs in enhancing ESG reporting. This voluntary standard aligns with the European Sustainability Reporting Standards (ESRS) but remains proportionate to the size and capabilities of SMEs.

With the proposed “Omnibus”-changes to the CSRD and CSDDD the VSME will gain much greater importance as they will be the boundaries of data an EU reporting company is allowed to ask in its supply chain. With this, the EU commission wants to eliminate the trickle-down effect of the burdensome reporting requirements (“Value Chain Cap”).

Therefore, the VSME will get into the focus of SMEs in the EU but also in Switzerland as companies are suppliers and therefore in the supply chain of EU companies.

What the VSME are and how you can prepare is summarized below.

1. Objectives and Scope

  • The VSME Standard is voluntary and applies to SMEs whose securities are not listed on regulated EU markets.
  • It helps SMEs provide sustainability information to large corporate clients, banks, and investors, aiding in better financial access.
  • It facilitates better management of environmental and social issues and fosters sustainable business practices.

2. Structure of the Standard

The VSME Standard consists of two reporting modules:

  1. Basic Module: Minimum reporting requirement covering essential sustainability metrics.
  2. Comprehensive Module: Additional disclosures, useful for SMEs seeking deeper engagement with investors and business partners.

3. Key Reporting Areas

The standard is structured around three key areas:

A. Environmental Metrics

  • Energy & GHG Emissions: Reporting total energy consumption, greenhouse gas emissions, and intensity ratios.
  • Pollution & Waste Management: Disclosures on air, water, and soil pollution, as well as waste generation and circular economy practices.
  • Water & Biodiversity Impact: Monitoring water usage and conservation efforts in biodiversity-sensitive areas.
B. Social Metrics
  • Workforce Characteristics: Data on employment types, gender diversity, and workforce safety.
  • Employee Well-being: Workplace health and safety, wage compliance, and training hours per employee.
  • Human Rights & Ethical Conduct: Reporting on collective bargaining, workplace policies, and incidents of discrimination.
C. Governance Metrics
  • Anti-Corruption & Compliance: Disclosures on convictions and fines related to bribery or corruption.
  • Business Conduct & Strategy: Information on sustainability-related policies and governance diversity ratios.

4. Compliance Principles

  • Reports should be relevant, comparable, verifiable, and understandable.
  • Annual Reporting is recommended to align with financial statements.
  • SMEs may exclude sensitive or classified information with proper justification.
  • SMEs are encouraged to provide consolidated reports if they are part of a group structure.

5. Key Modifications to the VSME Standard after public consultation

As a result of feedback from public consultations and field tests, several structural changes were made to simplify the reporting process:

  1. Elimination of the Materiality Assessment – SMEs are no longer required to conduct an internal materiality analysis, significantly reducing compliance costs.
  2. Renaming of Modules – The former “Business Partners” module is now called the “Comprehensive Module”, to better reflect the expectation of broader ESG disclosures.
  3. Increased Automation Potential – The simplified format encourages the development of online reporting tools, such as greenhouse gas (GHG) calculators, to facilitate disclosures.

6. Recommendations for Swiss and EU SMEs

To effectively implement the VSME Standard, SMEs should consider the following action plan:

  1. Adopt a Step-by-Step Approach: Begin with the Basic Module and gradually integrate elements from the Comprehensive Module based on business needs.
  2. Develop a Sustainability Strategy: Identify key environmental and social impacts specific to the business and set clear sustainability goals.
  3. Improve Data Collection and Tracking: Invest in tools or software to efficiently monitor energy consumption, waste, and workforce conditions, e.g. esg2go (https://esg2go.org/ ).
  4. Engage Stakeholders: Collaborate with suppliers, customers, and financial institutions to improve transparency and enhance business relationships.
  5. Train Employees and Management: Foster a culture of sustainability by providing regular training on sustainability practices and reporting requirements.

By aligning with the VSME Standard, SMEs can enhance their competitiveness, meet increasing regulatory and supplier expectations in a cost efficient way and contribute to a more sustainable economy.

ESG Reporting done pragmatically and effectively! We are ready to support you in the same way.

 

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