Last updated: Feburary 28, 2025
EFRAG officially published the voluntary ESRS (European Sustainability Reporting Standards) for small and medium-sized enterprises in December. After the draft version of the standard was published in January 2024, EFRAG completely revised it again following the public consultation (you can read about the differences between the draft and the current version here).
Among other things, these standards are intended to encourage micro, small and medium-sized enterprises to contribute to a more sustainable and inclusive economy. They should improve their management of sustainability issues such as climate protection, environmental pollution, health and safety of employees – issues that they are confronted with on a daily basis. The standards are also intended to facilitate access to finance and meet the requirements of larger companies in the value chain.
Once the Omnibus proposals are published, the voluntary standards will become THE standard for all companies with less than 1000 employees and €50 million turnover. The European Commission recommends that smaller companies also focus on sustainability reporting so that they can provide information to ESRS-reporting companies in the value chain.
This article explains who exactly is affected, how the standards are structured and what first steps affected companies can take now.
Inhaltsverzeichnis
- What are the VSME ESRS?
- Which companies must report in accordance with the voluntary ESRS?
- How are the voluntary ESRS structured?
- How do you decide what to report and what are the first steps for companies?
1. What are the VSME ESRS?
VSME ESRS is the abbreviation for “Voluntary Small and Medium Enterprise European Sustainability Reporting Standards”, which are recommended for voluntary use by micro, small and medium-sized enterprises (all companies with less than 1000 employees and €50 million turnover) operating in the European Union. Application of the VSME standards should be considered by any European company that is not required by regulation to report.
In EFRAG’s words, the VSMEs are intended as a simple reporting tool to help SMEs respond efficiently and appropriately to requests for sustainability information from business partners (i.e. banks, investors or larger companies for which SMEs are suppliers) and to facilitate their participation in the transition to a sustainable economy.
It is expected that the standards will “standardize the current multitude of ESG data requests (which represent a significant burden for SMEs) by reducing the number of uncoordinated requests they receive. This should give them better access to lenders, investors and customers” (EFRAG).
2. Which companies must report in accordance with the voluntary ESRS?
Companies that are required under the CSRD to prepare a “sustainability statement” in accordance with the ESRS should not apply the voluntary standards. The voluntary standards are intended for companies that are “micro-enterprises” and small and medium-sized enterprises. In particular, if the European Commission’s proposals on the Omnibus are adopted by the European Parliament, the importance of the VSME will increase for many European companies. Reporting according to the voluntary standards is both feasible for smaller companies and helpful for familiarizing themselves with ESG issues.
3. How are the VSME structured?
The VSME standards follow a very simple structure consisting of two modules:
1. Basic Module
2. Comprehensive Module
This modular approach to reporting is suitable for SMEs of all sizes and prevents smaller companies from being overwhelmed with little or no formalized sustainability reporting processes.
The basic module consists of 11 disclosure requirements and requires a set of standard indicators in the environmental, social and governance categories. The indicators are a scaled-down version of the ESRS disclosure requirements for large companies. This module is the minimum requirement that must be met by all reporting companies.
The comprehensive module is designed to help SMEs collect data that is relevant to business partners, investors and lenders. These 9 disclosure requirements are in addition to the information in the basic module and contain a mixture of quantitative and qualitative requirements.
While the basic module is simply a collection of key figures and can be easily adopted by micro and small enterprises, the comprehensive module also requires strategic information on concepts and objectives to be reported. Nevertheless, we recommend reporting both modules in order to get the most out of the standard.and can be easily adopted even by micro and small enterprises, the other two modules require the completion of a materiality assessment beforehand. This will help the company to identify which topics are relevant to them and thus need to be reported on.
Nevertheless, we recommend reporting both modules in order to make the best use of the standard. As the standard does not require a materiality analysis, the VSME instead introduces the “if applicable” principle. This principle describes that some information is simply not relevant for some companies and can therefore be omitted. So you can simply apply common sense here.
4. How do you decide what to report and what are the first steps for companies?
The VSME ESRS are a suitable tool for collecting and reporting sustainability information that is explicitly tailored to smaller companies in Europe.
In contrast to the full ESRS, the scope of VSME reporting is not explicitly determined by company size, sector or a materiality process. Rather, the decision as to which modules are practicable or useful should initially be made by the reporting company.
While the basic module must be reported by all VSME-reporting companies and is a prerequisite for the application of the comprehensive module, the latter is reported depending on its applicability.
Code Gaia is of the opinion that, if possible, both modules should definitely be reported. The additional effort required by the comprehensive module is manageable, although companies can derive some benefit from it. In addition, the “if applicable” principle is also applied here, so that companies can still assess for themselves whether a given disclosure obligation makes sense.
Particularly in the context of greenhouse gas emissions, it is advisable to also voluntarily report Scope 3 emissions via indirect emissions in the value chain in order to present a comprehensive picture of one’s own company.
In summary, the VSME ESRS provide small and medium-sized enterprises in the EU with clear guidelines for sustainability reporting.
With a simple, modular approach, they enable a step-by-step implementation, while a smart selection of modules minimizes the reporting effort. It is expected that the VSME will establish itself as a voluntary standard in Europe.
