VSME: The New EU ESG Reporting Standard for SMEs – and How Mitigate ESG Supports It

Sustainability reporting isn’t just for big corporations anymore. In late 2024, the European Financial Reporting Advisory Group (EFRAG) released a new Voluntary Sustainability Reporting Standard for Small and Medium Enterprises (VSME) – a simplified ESG reporting standard tailored specifically for non-listed SMEs. This voluntary framework is part of the EU’s Corporate Sustainability Reporting Directive (CSRD) ecosystem, aligning with the European Sustainability Reporting Standards (ESRS) but in a much more SME-friendly way. In this post, we’ll explain what VSME is, why it matters, and how the Mitigate ESG Platform fully supports it to make your sustainability reporting journey easier.

What is the VSME Standard?

VSME stands for Voluntary Sustainability Reporting Standard for SMEs. It’s a new EU-backed ESG reporting standard created for micro, small, and medium-sized companies that are not legally required to report under the CSRD. Think of it as a “lite” version of the official ESRS reporting standards used by large companies. The VSME framework allows SMEs to report on key environmental, social, and governance (ESG) topics in a simplified and consistent way without getting overwhelmed by complex requirements.

EFRAG developed the VSME at the request of the European Commission, which wanted to help smaller businesses join the sustainability movement. Even if an SME isn’t mandated by law to produce a CSRD report, many are still getting asked for ESG information by their banks, investors, or larger corporate customers. The VSME standard is designed to answer those requests. It covers the same sustainability themes as the full ESRS (like climate, resources, workforce, etc.), but it scales the requirements to fit smaller organizations’ realities. Importantly, using VSME is completely voluntary – there’s no legal penalty for not using it – but it’s highly encouraged as a best-practice tool for any SME interested in sustainability and staying competitive.

Why was VSME introduced, and why does it matter?

The EU introduced VSME to tackle a big challenge: how to get SMEs involved in ESG reporting without overburdening them. Large companies and financial institutions increasingly need ESG data from SMEs (for example, to report on their supply chain emissions or to assess investment risks). Without a common framework, SMEs have been bombarded with “multiple uncoordinated questionnaires” from different partners, which is frustrating and time-consuming. The VSME creates one standardized way for small businesses to share sustainability information – saving time and reducing duplication.

The European Commission also sees VSME as a way to open up green financing opportunities for smaller firms. By reporting sustainability data in a clear format, SMEs can more easily demonstrate their environmental and social performance to banks and investors, potentially unlocking loans or investment geared toward sustainable activities. In the Commission’s words, this standard helps SMEs “standardise the sustainability information they wish to report, creating better opportunities to obtain green financing”.

In short, VSME matters because it benefits both SMEs and their stakeholders. Here are some key reasons why VSME is important:

Less complexity, less cost: VSME simplifies reporting procedures. It even replaces the complex materiality assessment (required for large companies) with a simpler “if applicable” principle to determine which topics to report, sparing SMEs a costly and tricky exercise.
One effort, many uses: By using a single standard, an SME’s VSME report can address the ESG information needs of many partners at once. This one-to-many approach means you can answer your clients, investors, and buyers with one consistent report instead of a dozen ad-hoc questionnaires.
Better business prospects: Providing transparent ESG data can make your company more attractive in the marketplace. You’re less likely to lose contracts or supplier status due to a lack of ESG information, and more likely to win business with corporates that prioritize sustainability in their supply chain.
Access to funding: Similarly, having an ESG report aligned with an EU standard can improve your credibility with lenders. Banks are increasingly looking at climate and social risks – a VSME report shows you’re on top of these issues, which can help in loan and investment decisions.
Internal insights and improvement: Going through the VSME reporting process can highlight areas for improvement in your operations. It gives management actionable insights on things like energy use, waste, or workforce well-being, helping drive efficiencies and resilience. As EFRAG’s sustainability board chair noted, VSME can “offer new business and financing opportunities as well as additional management insight” when supported by the right tools.

Not surprisingly, the introduction of VSME has been welcomed across Europe. Over time, it could become common practice for millions of SMEs. In fact, the market is already responding with digital solutions – some ESG platforms even claim that an SME can complete a VSME-based sustainability report in just 30 minutes using online tools. This reflects how straightforward and streamlined ESG reporting for SMEs can be when the right standard and the right technology come together.

What does the VSME include?

So, what exactly do SMEs report under VSME? The VSME standard is organized into two tiers, allowing companies to choose how much detail to provide:

Basic Module: A set of fundamental disclosures (B1, B2, etc.) and basic metrics covering core ESG topics. This module is the recommended starting point – especially for micro and small companies – and represents the minimum information to report (about 11 key disclosures). It spans key areas such as your company’s general information, energy use and greenhouse gas emissions, pollution (if relevant), water and waste management, workforce characteristics (e.g. number of employees, gender split), health and safety incidents, and a few governance details (like any anti-corruption fines). In essence, the Basic Module focuses on the most universally relevant sustainability indicators that almost any business can report.
Comprehensive Module: An optional add-on with additional data points and disclosures for those who need or want to report more extensively. The Comprehensive Module adds roughly nine more disclosure topics on top of the Basic module, which are often needed for more in-depth investor or bank requirements. These include things like your business model’s sustainability strategy and transition plans, climate change targets and risk assessment, more detailed workforce and human rights information, and other advanced metrics (for example, tracking certain Scope 3 emissions or the diversity of your leadership team). An SME can adopt the Comprehensive Module if those extra details are applicable and beneficial for its situation. Importantly, you must complete the Basic Module first – the comprehensive disclosures are an extension on top of the basics.

Even with the Comprehensive Module, VSME remains far simpler than full CSRD reporting for large companies. The idea is proportionality – smaller companies report what’s relevant to them without getting lost in unnecessary detail. And because VSME was built to mirror the structure of the ESRS (just with fewer requirements), the information you report is compatible with what larger companies need. This means if a big customer asks you about, say, your carbon footprint or workforce diversity, and you’ve reported via VSME, your data will already be in a format they can use.

Mitigate ESG Platform Supports VSME Reporting

We have great news for SMEs looking to implement VSME: the Mitigate ESG Platform now fully supports the VSME standard! This means you can use Mitigate to easily create sustainability reports that align with the VSME guidelines, without the headache of figuring out the technical details yourself. Our team has been following the development of VSME closely, and we’ve updated our platform so that everything – from data input to the final report – is in line with this new standard.

How does this help you? Mitigate ESG Platform was built to simplify ESG reporting, and VSME is no exception. When you log into Mitigate, you’ll find a guided workflow specifically for VSME reporting. You don’t need to be an expert on the standard; our software will walk you through each required disclosure and metric, prompting you for the necessary information. It’s like having a checklist that covers all VSME requirements, ensuring you don’t miss anything important.

Our platform’s features are perfectly suited to handle VSME reporting from start to finish:

Automated report generation: Once you input your data (e.g. your energy usage, employee numbers, etc.), Mitigate automatically generates a polished sustainability report that follows the VSME structure and format. The days of wrestling with spreadsheets and Word templates are over – with one click, you get a ready-to-share report aligned to the standard’s criteria.
AI-powered data processing: Mitigate leverages artificial intelligence to improve the quality and efficiency of your reporting. What does that mean for you? The platform can analyze your data for inconsistencies or gaps, suggest improvements, and even provide insights (for example, flagging a high energy intensity that you might want to address). This AI assistance acts like a smart helper, ensuring your ESG data is accurate and robust. The result is a more credible report that stakeholders can trust, achieved with far less manual effort.
Streamlined data collection: We know that gathering data is often the hardest part of ESG reporting. Mitigate comes with tools to simplify this step, such as pre-built data questionnaires and automated reminders tailored to VSME topics. You can assign team members tasks to fill in certain data points, and the platform will compile everything in one place. No more chasing emails or juggling multiple files – all your sustainability information stays organized in a single hub.
Always up-to-date: Sustainability regulations are evolving quickly, but with Mitigate you’re always up to date. We’ve incorporated the latest European sustainability reporting standards and guidance, including the full VSME framework. As VSME or CSRD guidelines change over time, our platform will adapt accordingly. You can be confident that the reports you generate with Mitigate meet current expectations and use the correct format and terminology.

In short, the Mitigate ESG Platform takes the guesswork and labor out of VSME reporting. By using our solution, an SME can likely prepare a comprehensive ESG report in hours instead of weeks – freeing you to focus on actually improving your sustainability performance rather than just reporting it.

Ready to Get Started? (A Warm Welcome to SMEs)

The introduction of the VSME standard marks an exciting new era for small and medium businesses in sustainability reporting. It’s now easier than ever to showcase your company’s commitment to environmental and social responsibility. If you’re an SME eager to tell your sustainability story (or feeling pressure to provide ESG info to customers and investors), we invite you to explore the Mitigate ESG Platform.

With Mitigate’s friendly interface and powerful automation, you can create your first VSME-aligned ESG report in no time. Our platform handles the heavy lifting, so you can concentrate on the insights and actions that matter most to your business. And don’t worry – you’re not alone on this journey. Mitigate’s support team and knowledge base are here to help you every step of the way, whether you’re new to ESG reporting or looking to enhance your existing process.