Disclaimer: The VSME ESRS is still in its draft version and subject to change. The final version of the standard is expected to be released towards the end of 2024.
Following our last blog post in which we introduced the Voluntary ESRS for SMEs (VSME ESRS), we now had the first clients finalise their VSME report in the Code Gaia Software.
More and more companies become interested in reporting in accordance with the VSME ESRS and have started looking into the standard. These questions seem to arise particularly often:
- Which modules should I report?
- What is really necessary to comply?
- What actually makes sense for my company?
This blog post aims to shed some light on these questions and go further into the details of each module. If you are still deciding which standard is relevant for you, or you need a general overview of the VSME ESRS, we suggest taking a look at our last blog post.
1. What are the VSME ESRS?
Consistent with the standard’s name, the VSME ESRS is a standard which can be used on a voluntary basis. This also entails that the reporting undertaking can freely decide which modules to report. The modular approach was adopted to make the VSME ESRS applicable for SMEs of all sizes because it allows the reporting undertaking to tailor the report to their needs and realities. This also means that a reporting undertaking should always prioritise what aligns with its own needs and objectives, instead of necessarily adopting the same reporting burned as larger undertakings.
2. What are the modules of VSME ESRS?
The VSME ESRS includes three modules:
1 – Basic module: 12 mainly metric-based requirements in the fields of Environment, Social, and Governance
2 – Narrative – Policies, Actions, and Targets module: 5 qualitative requirements to describe how sustainability topics are managed by the undertaking
3 – Business Partners module: 11 quantitative and qualitative requirements that are also relevant for other frameworks and regulations such as SFDR, EBA, and the Benchmark Regulation.
The Basic module is mandatory for all reporting undertakings who adopt the standard. The other two modules can be added based on applicability. Once a module has been chosen, it should be completed fully (with respect to materiality and relevance). Companies that already have policies, actions, and targets with regard to sustainability matters “formalised and implemented”, are advised to also report the Narrative module. Companies that regularly interact with investors and lenders, or need to supply information for larger reporting corporations in their value chain, should also prepare the Business Partners module.
The flow chart below illustrates this decision-making process.
With this information in mind, it is still necessary to consider that the reporting of the Narrative module and the Business Partners module demands a materiality analysis (as described by the VSME ESRS). Thus, the reporting process also becomes more extensive and requires input from various stakeholders. Nevertheless, we recommend that an undertaking reports as much information as possible. This will facilitate reporting in the future and make companies more resilient to sustainability challenges.
Please refer to the previous blog post on the VSME ESRS to learn more about the different modules and the VSME ESRS in general.
3. How does Code Gaia implement the VSME?
The standards, which are currently in draft form, are expected to be published later this year. Code Gaia has already started to integrate the VSME into its software to enable companies to adapt at an early stage.
