Voluntary reporting standard for SMEs (VSME)

Andries Scheerboom – Leadenhall Market, London (1865)

Small European companies are not required to complete corporate sustainability reports, unless they are in specific regulated industries. However, there are good reasons to develop such reports, even if they are not legally bound to do so.

The European Financial Reporting Advisory Group (EFRAG) created a voluntary standard which is inspired by the rules which govern large firms, the Corporate Sustainability Reporting Directive (CSRD).

The Voluntary reporting standard for small companies (VSME) is for non-listed micro, small and medium enterprises. It is a simple and standardised framework that covers relevant environmental, social and governance (ESG) issues such as sustainability goals, energy and greenhouse gas emissions, biodiversity, resource use and workforce safety. There are two versions: a Basic module which covers eleven topics and a Comprehensive module which expands upon them.

Benefits of completing a VSME

• Understand your business better. Identify new value you can provide to your customers and ways to improve efficiency and lower costs in your operations.
• Satisfy information requests from banks and investors. Improve access to green financing.
• Satisfy information requests from large suppliers and customers. Meet their procurement criteria.
• Market yourself as serious about sustainability to customers, suppliers, partners and potential employees.
• Improve the management of sustainability issues you face. Identify and reduce potential risks.
• Contribute to a more sustainable and inclusive economy.

Example report

If you would like to see an example of how a VSME could look, see the report we completed for our own operations.

Författare David J. Cord’s VSME sustainability report 2024

Want to learn more? Contact us at info at davidjcord.com

Who is eligible to use the VSME?

The VSME standard is voluntary. It was designed specifically for non-listed small businesses who fall outside of the scope of the Corporate Social Reporting Directive. These are companies whose:

• Securities have not been admitted for trading on a regulated market in the European Union.

And it does not exceed two of the following thresholds:

• €25 million in balance sheet total
• €50 million in net turnover
• An average of 250 employees

However, other entities could use the VSME standard as well, either for their own reporting or as a guide to what information to request from suppliers or potential partners. Examples could include:

• Associations
• Charities
• Companies not based in the European Union
• Financial institutions
• Intergovernmental organisations
• International financial institutions
• Large companies who don’t meet the new CSRD reporting criteria
• Non-governmental organisations (NGOs)
• Venture capitalists

VSME contents

The VSME standard covers the same sustainability issues as the European Sustainability Reporting Standards (ESRS) for large undertakings, but they are proportionate to the characteristics of small companies.

VSME Basic Module

The Basic Module is designed for micro enterprises, meaning companies which do not exceed two of the following thresholds:

• €450,000 in balance sheet total
• €900,000 in net turnover
• An average of 10 employees

It contains these sections:

B1 – Basis for preparation

B2 – Practices, policies and future initiatives for transitioning towards a more sustainable economy

B3 – Energy and greenhouse gas emissions

B4 – Pollution of air, water and soil

B5 – Biodiversity

B6 – Water

B7 – Resource use, circular economy and waste management

B8 – Workforce – general characteristics

B9 – Workforce – health and safety

B10 – Workforce – Remuneration, collective bargaining and training

B11 – Convictions and fines for corruption and bribery

VSME Comprehensive Module

The Comprehensive Module includes the Basic Module and continues with more information which is typically requested by banks, investors and major corporate clients.

It includes:

C1 – Strategy: Business model and sustainability – related initiatives

C2 – Descriptions of practices, policies and future initiatives for transitioning towards a more sustainable economy

C3 – GHG reduction targets and climate transition

C4 – Climate risks

C5 – Additional (general) workforce characteristics

C6 – Additional own workforce information – Human rights policies and processes

C7 – Severe negative human rights incidents

C8 – Revenue from certain sectors and exclusion from EU reference benchmarks

C9 – Gender diversity ratio in the governance body

Want to learn more? Contact us at info at davidjcord.com.