What is the Voluntary Sustainability Reporting Standard for non-listed SMEs (VSME) and how to use it

The Voluntary Sustainability Reporting Standard for non-listed SMEs (VSME) is a reporting framework issued by EFRAG in December 2024 and adopted as a European Commission Recommendation on 30 July 2025. It gives small and medium-sized enterprises a single, standardised way to respond to ESG data requests from banks, investors and large corporate clients — replacing the fragmented landscape of ad hoc questionnaires that currently costs SMEs time and money.

The standard sits outside the Corporate Sustainability Reporting Directive (CSRD). It is voluntary, applies to non-listed undertakings with fewer than 250 employees, and covers the same sustainability topics as the European Sustainability Reporting Standards (ESRS) — but in a simplified, proportionate format designed for companies without dedicated sustainability teams.

Why the VSME was created

Non-listed SMEs are not required to report under the CSRD. However, they face growing pressure from two directions. Banks and investors need ESG data to meet their own obligations under the Sustainable Finance Disclosure Regulation (SFDR), EBA Pillar 3 requirements and the EU Benchmark Regulation. Large corporations subject to ESRS must collect sustainability data from suppliers across their value chains. Until now, each institution has sent its own questionnaire, often with inconsistent definitions and formats.

EFRAG analysed 12 ESG questionnaires covering approximately 26,000 SMEs, used by banks, rating agencies and supply chain initiatives. The VSME was designed to satisfy the recurring datapoints across these questionnaires, so that a single report can replace multiple bilateral requests.

Which companies can use the VSME

The standard targets non-listed undertakings falling within the EU Accounting Directive’s size thresholds. An undertaking qualifies if it does not exceed two of the three criteria below for its category:

While aimed at these companies, the VSME has wider relevance. Under the Omnibus I simplification package (February 2025), the European Commission proposed raising the CSRD threshold to companies with more than 1,000 employees. Companies between 250 and 1,000 employees that fall out of CSRD scope may use the VSME — or a future voluntary delegated act based on it — as their reporting framework.

Two modules: Basic and Comprehensive

The VSME uses a modular structure. The Basic Module provides a minimum set of disclosures suitable for micro and small undertakings. The Comprehensive Module adds more detailed datapoints likely to be requested by banks, investors and corporate clients. Applying the Basic Module is a prerequisite — an undertaking cannot report on the Comprehensive Module alone.

Disclosures follow an “if applicable” principle rather than requiring a full materiality analysis. If a disclosure does not apply to the undertaking’s circumstances, it can be omitted — and the omission is assumed to mean the topic is not applicable. This removes one of the most significant cost drivers identified during the public consultation, where 311 respondents flagged materiality assessment as too complex and expensive for SMEs.

How the VSME connects to other frameworks

The VSME was designed with interoperability in mind. Its Comprehensive Module specifically includes datapoints aligned with SFDR principal adverse impact indicators, EBA Pillar 3 and the EU Benchmark Regulation.

The standard also maps to ESRS Set 1, ensuring that large companies requesting data from SME suppliers receive information consistent with their own reporting obligations. For companies already reporting under GRI standards, the overlap is substantial — VSME environmental disclosures correspond to GRI 302, 303, 304, 305, 306 and 301, while social disclosures map to GRI 401, 403, 404 and 405.

Digital reporting: the XBRL taxonomy and Excel template

EFRAG has developed a free Digital Template (Excel, version 1.2.0 as of February 2026) and an XBRL taxonomy to support machine-readable VSME reporting. The template includes built-in validation, auto-calculations and a fuel-to-MWh converter. An online converter on EFRAG’s website transforms the completed file into an Inline XBRL report. The template is available in 11 EU languages under an MIT open-source licence.

However, EFRAG has been explicit about the template’s limitations: single-period reporting only (no year-on-year comparisons), no GHG emissions calculator, no multi-entity consolidated reporting, and limited accessibility compared to dedicated web applications. EFRAG’s stated position is that the template is educational guidance — the expectation is that software providers will build comprehensive tools on top of the XBRL taxonomy.

What the VSME means for banks, investors and large corporates

The Commission Recommendation explicitly encourages financial institutions to base their ESG data requests on the VSME. For banks, this simplifies credit risk assessment and Pillar 3 reporting. For asset managers, alignment with SFDR PAI indicators provides standardised portfolio-level data. For procurement teams, a supplier reporting under VSME provides a structured dataset that feeds directly into ESRS value chain disclosures.

The practical implication is scale. A bank with thousands of SME borrowers can standardise ESG data intake around the VSME structure, automate ingestion through XBRL, and eliminate manual processing of diverse questionnaire responses. At Generation Impact Global, our platform supports exactly this workflow — aggregating VSME data from portfolio companies and mapping it to the reporting obligations of the requesting institution.

The VSME Ecosystem and what comes next

EFRAG is building a broader ecosystem: an SME Forum, a mapping of national sustainability tools, outreach events, an acceptance survey, and supporting guides on transition plans, pollution and human rights. Support has been extended through to the end of 2026.

Looking further ahead, the Omnibus I package proposes a voluntary sustainability reporting standard as a delegated act — based on the VSME — for companies with up to 1,000 employees. This would give the standard formal legal standing and could form the basis of the “value chain cap” that limits ESG data requests from larger entities. The final content and timeline depend on co-legislator negotiations.