Unlocking Success: How SMEs Can Maximize Opportunities with the New VSME Reporting Framework

The European Commission has recently unveiled the ‘Sustainability Omnibus’ proposal, a transformative initiative designed to enhance sustainability reporting across the EU. This proposal introduces the Voluntary Sustainability Reporting Standard for SMEs (VSME), which aims to revolutionize how small and medium-sized enterprises (SMEs) address their Environmental, Social, and Governance (ESG) responsibilities.

What is the VSME?

The VSME is positioned outside the broader Corporate Sustainability Reporting Directive (CSRD) and promises to simplify the compliance landscape for businesses that are not encompassed by the directive. This standard provides a two-tier reporting framework specifically tailored for SMEs, making it easier for them to manage their sustainability commitments.

Two-Tier Reporting Framework

The VSME’s framework consists of two modules:

• Basic Module: This serves as an entry point for SMEs and covers essential ESG metrics across four key areas:
  • General Information
  • Environmental Metrics
  • Social Metrics
  • Governance Metrics
• Comprehensive Module: For businesses seeking deeper insights to satisfy stakeholder requirements, this module adds detailed disclosures on business models, strategies, and complex ESG factors such as Scope 3 GHG emissions and climate risks.

Benefits of the VSME for SMEs

The introduction of the VSME presents several advantages for SMEs:

• Accessibility: Unlike the European Sustainability Reporting Standards (ESRS), which cater to larger corporations with complex requirements, the VSME offers a more manageable path for SMEs.
• Flexibility: It eliminates the mandatory Double Materiality Assessment required under ESRS, allowing businesses to customize their reporting based on their specific operational realities.
• Stakeholder Engagement: By adopting the VSME, SMEs can meet growing stakeholder demands for ESG information without the heavy obligations faced by larger companies.

Implications for the CSRD Compliance Timeline

The ‘Sustainability Omnibus’ also suggests potential changes in the CSRD landscape. The proposal indicates that only companies with over 1,000 employees and significant financial metrics should be subject to mandatory sustainability reporting. This could potentially delay the compliance timeline for smaller enterprises.

Despite this, larger corporations will still be expected to provide ESG data, underscoring the importance for SMEs to align with the VSME in order to maintain competitiveness and prepare for future regulatory demands.

Strategic Advantages of Adopting VSME

Implementing the VSME not only positions SMEs ahead of regulatory changes but also empowers them to use ESG reporting as a strategic tool for internal decision-making and external stakeholder engagement. As noted by Frida Stolpe, Senior Associate at Position Green, “VSME reporting offers multiple benefits—helping businesses improve internal decision-making, meet growing stakeholder expectations, and streamline ESG data management.”

Conclusion

In summary, the ‘Sustainability Omnibus’ aims to simplify sustainability reporting while maintaining rigorous standards through frameworks like the VSME. For SMEs, beginning with the Basic Module and gradually incorporating more comprehensive reporting can lay a strong foundation for future regulatory requirements and improve their overall sustainability profile.

For more detailed insights on sustainability reporting and compliance, visit our Sustainability Resources page or explore the European Commission’s official page on sustainability reporting.