The European Commission has adopted a recommendation on voluntary sustainability reporting by SMEs

On 30 July 2025, the European Commission adopted a recommendation on voluntary sustainability reporting for small and medium-sized enterprises (SMEs). The Commission also encourages large companies and financial institutions to use this voluntary standard when requesting sustainability information from SMEs whenever possible.

Applying the standard increases transparency, strengthens business partner trust, and may provide a competitive edge. The VSME allows for both gradual preparation for CSRD compliance and voluntary sustainability reporting. Through this process, SMEs can improve their access to sustainable finance and better understand and monitor their own sustainability performance, thereby enhancing resilience and competitiveness.

Who is it for?

The VSME standard primarily targets businesses that:

• are outside the scope of the CSRD (Corporate Sustainability Reporting Directive),

• employ fewer than 250 people,

• are not publicly listed and/or
• wish to voluntarily report on their sustainability performance.

In line with the Omnibus package, the standard is especially useful for companies excluded from the mandatory scope of the CSRD but still required to provide sustainability data to value chain partners or financial backers, or for those who choose to report voluntarily for other reasons.

Main features of the VSME

• Design and purpose: The VSME is tailored specifically for smaller enterprises and focuses on transparent accountability for basic ESG topics – including related actions, policies, and sustainability initiatives.

• Double materiality: Unlike the ESRS, the VSME does not mandate a double materiality assessment for reporting entities.

• Materiality of information: It follows the “if applicable” principle, allowing companies to report only on relevant indicators.

• Value chain focus: Mainly targets the organisation’s own operations and limited value chain information, such as Scope 3 emissions.

• Modularity: Includes a basic and a comprehensive module, enabling organisations to align reporting with their preferred level of detail.

• Data points: Offers a simplified approach with 21 reporting requirements, half of which are quantifiable.

• Assurance: External assurance is not required, though it is recommended to improve report credibility.

Structure of the VSME standard

The VSME standard consists of two modules: the basic module and the comprehensive module.

The basic module includes eleven reporting requirements covering general sustainability policies and initiatives, as well as ESG-related indicators. It offers a targeted approach for microenterprises and serves as a minimum requirement for other businesses.

The comprehensive module builds on the basic one with nine additional reporting requirements, offering deeper insights and more detailed data points. This module is tailored to meet the information needs of stakeholders such as banks, investors, and B2B clients.

Both modules can be customised with company-specific or sector-specific sustainability topics to ensure the report remains relevant and valuable for the organisation and its stakeholders. The comprehensive module defines additional data points likely to address demands from banks, investors, and business partners, complementing the information in the basic module.