Understanding the VSME standard: a comprehensive guide for SMEs

In this guide, our experts provide an overview of the regulatory context that led to the development of the VSME standard, detailing its requirements and presenting the key steps to consider in implementation. Although it does not go into detail about the process of developing an ESG strategy, this guide aids companies in aligning their voluntary sustainability reporting practices with the principles of the VSME standard. 

Regulatory context 

The idea of offering unlisted SMEs accessible framework originated in the CSRD Directive. The VSME standard was hence designed as a voluntary tool, offered to the market outside of any European legislative process and without formal adoption by delegated act. In accordance with the European Commission's initial mandate, EFRAG conducted an in-depth due process, which led to the submission of its technical opinion on the VSME standard on 17 December 2024. 

However, the European Commission's adoption on 26 February 2025 of the Omnibus I simplification package, for which the legislative process is still ongoing, marked a decisive step in the evolution of European sustainability reporting regulations. By proposing to raise the mandatory reporting threshold to 1,000 employees, strengthen the voluntary standard through a delegated act and consolidate the “value chain cap” to protect smaller entities from disproportionate information requests. These proposals have direct implications for the VSME standard.  

VSME standard: main objectives and key points  

The objective of the VSME standard is to provide a simplified and tailored framework for sustainability reporting, accessible to all micro-enterprises and SMEs that fall outside the scope of the CSRD. 

This standard stands out for its simplicity and modularity and is based on two complementary modules that companies can use to prepare their sustainability reports: 

1. A basic module that defines the minimum requirements for sustainability reporting. 
2. A comprehensive, optional module that provides additional information that may be required by business partners.  

This flexibility allows each company to tailor its reporting to its level of sustainability maturity and meet the specific expectations of its stakeholders.  

VSME standard: key challenges for companies  

The implementation of the VSME standard should not be seen as a simple compliance exercise, but a strategic opportunity to integrate sustainability into the heart of the company's business model. When implementing the VSME standard, companies should follow three key steps:  

1. It is important to assess ESG maturity. An internal diagnosis can determine whether the basic module is sufficient or whether a combination with the full module is required. 
2. The collection of reliable, consistent and traceable data over time remains a key challenge for successful reporting. To facilitate this process, the “VSME ecosystem” developed by EFRAG provides practical resources such as concrete examples, educational videos and digital reporting templates to facilitate the implementation of the standard.  
3. Finally, although the VSME standard does not require the publication of a sustainability report, sharing progress and commitments can enhance transparency, build stakeholder confidence and demonstrate alignment with market expectations. 

What are the next steps? 

The formal adoption by delegated act of a voluntary reporting standard based on VSME will depend on the ongoing negotiations between the two co-legislators on the Omnibus I Package, the Council of the EU and the European Parliament. It is also important to note the final version may differ from the current recommendation and to consider the ongoing review of Set 1 by the ESRS. 

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