What is it about a voluntary sustainability reporting framework that is attracting interest across Europe? Launched by EFRAG at the end of 2024, VSME (Voluntary reporting standard for SMEs) is aimed at unlisted small and medium-sized enterprises that want to be able to show how they are working with ESG issues – without getting bogged down in the full complexity of CSRD. But VSME is more than just a simplified copy of ESRS. It is also an expression of a changing market logic where business value increasingly needs to be demonstrated through data. Here's what you need to know.
Voluntary reporting in response to financial requirements
The background to VSME is spelled out in one word: need. In recent years, many small and medium-sized enterprises have noticed increased pressure to demonstrate their sustainability performance – not because legislation requires it, but because banks, investors, and business partners have begun to demand it. Being able to demonstrate energy use, climate strategy, or social risk profile has become central to obtaining loans, signing contracts, or becoming part of others' reporting chains. But for smaller companies, there has been a lack of a common and manageable way to structure this type of information.
EFRAG's answer is VSME: a modular and proportionate framework that helps companies structure, formulate, and share their sustainability data in a way that is comparable, reliable, and predictable.
From Omnibus to positioning: Why there is now more talk about VSME
When the European Commission presented the so-called Omnibus proposal in early 2024 to simplify the implementation of CSRD, a vacuum emerged in the market. Many companies that had viewed CSRD as an almost inevitable project could now once again choose to wait and see. But the need to communicate their sustainability remained. This is where VSME begins to be discussed as more than a voluntary complement. In practice, VSME can fill a space where reporting requirements do not exist – but where the need for reporting is real.
By providing a structure for “due diligence-light,” EFRAG now gives smaller companies the tools to communicate risk in a similar way to larger companies. It is not about simplifying the content itself, but about creating the opportunity to be compared and understood on similar terms.
Cost, benefit, and logic – What's in it for VSMEs?
To understand whether it is worthwhile for companies to use VSME, EFRAG conducted a comprehensive cost-benefit analysis. The report, which can be read here, shows that the initial costs of implementation are manageable – but above all that the long-term gains are significant.
According to EFRAG's cost-benefit analysis, which was conducted in collaboration with the analysis company Prometeia, the net profit from using the VSME framework is estimated to amount to over €2.6 billion per year from 2027 onwards.
What does this mean in practice? Well, many SMEs currently devote resources to manually responding to ESG-related questions from banks, investors, clients, and major customers—often in different formats and with varying quality requirements. VSME aims to replace this ad hoc communication with standardized, digital reporting, which not only reduces time and costs but also increases the value of the information.
The calculation is based on the assumption that hundreds of thousands of European companies will use VSME as a common basis for sustainability communication. With a clear framework and support system, it will be possible to report once, in a format that works for multiple stakeholders. This is what creates the cumulative efficiency gains – not least in administration, procurement, and financing.
VSME vs CSRD: Different conditions, different tools
VSME is not a light version of CSRD/ESRS. It is a parallel framework, with different principles and logic. Where CSRD is based on double materiality and the company's own analysis of which risks and opportunities are relevant, VSME is built around predetermined information points linked to typical operating conditions. Instead of a materiality analysis, an “if applicable” structure is used, where certain disclosures only need to be reported if the company meets certain criteria.
This combines a relatively fixed framework with flexibility in application. It increases comparability without placing the entire responsibility for analysis on the reporting company. The modules (Basic and Comprehensive) allow companies to start on a small scale and then build on more detailed information as they mature.
VSME responds to needs
The fact that VSME has become a matter of concern for both European policymakers and small business owners is ultimately about changing business principles. Whereas ESG was previously seen as a legal requirement for large companies, it is now increasingly regarded as a way of ensuring business stability. VSME shows that even smaller players want to be able to communicate risk and capability—not because they have to, but because the market demands it.
It remains to be seen whether VSME will succeed in creating a critical mass of users. But the need it responds to is obvious: a growing number of companies need a tool to calibrate the risk of their operations using data. Now there is a framework for just that. Let's see how many Nordic companies will use it!
