EFRAG Releases the Voluntary Sustainability Reporting Standard for Small Companies

On 16 December 2024, EFRAG introduced its Sustainability Reporting Standard for non-listed SMEs ("VSME").

Designed for businesses outside the mandatory scope of the Corporate Sustainability Reporting Directive, the VSME is voluntary yet aims to enhance consistency in sustainability reporting and facilitate SME access to sustainable finance by providing a standardised framework for information most commonly requested by business partners (i.e., banks, investors and large corporates).

The EU Commission has separately commented on the risk of "trickle down" disclosure requirements where SMEs are compelled to provide information which would not otherwise be mandatory for them, by virtue of being in the value chain of larger organisations with mandatory reporting requirements.

By offering a standardized reporting framework, the VSME seeks to replace the fragmented and uncoordinated ESG questionnaires currently used in the market.

Its structure consists of:

• A Basic Module, covering essential metrics like GHG emissions, water usage, pollution, and workforce characteristics.
• A Comprehensive Module, incorporating more detailed narrative reporting on sustainability practices and policies.
• Sector-neutral disclosures, with limited sector-specific data requirements.
• A double materiality approach (similar to the approach under the European Sustainability Reporting Standards which are mandatory for many larger organisations under CSRD), assessing both financial materiality and the company’s broader impact on people and nature.

Looking ahead, in 2025, EFRAG has stated that it will continue to support adoption through guides, educational materials, outreach initiatives, awareness campaigns, and by monitoring emerging tools and platforms.