Navigating the VSME: A Guide to ESG Reporting for SMEs

Sustainability reporting is no longer the exclusive domain of large corporations. As expectations around transparency grow, small and medium-sized enterprises (SMEs) are being asked to disclose their environmental, social, and governance (ESG) performance too—by customers, investors, banks, and regulators.

But many existing frameworks are too complex, expensive, or resource-intensive for most SMEs to navigate. That’s why the European Commission introduced the Voluntary Sustainability Reporting Standard for SMEs (VSME) as part of its SME Relief Package in September 2023. Developed by the European Financial Reporting Advisory Group (EFRAG) and delivered in December 2024, the VSME provides a simplified, standardised way for non-listed SMEs to report on sustainability in a practical, proportionate manner.

In this guide, we explain how the VSME works, what’s required, and how SMEs can use it to meet stakeholder expectations while building toward future sustainability goals.

What is the VSME and why was it created?

The Voluntary Sustainability Reporting Standard for SMEs (VSME) a voluntary ESG reporting framework designed for non-listed micro, small, and medium-sized enterprises. It fills a critical gap: allowing SMEs to report on sustainability in a credible, structured way without the burdens typically associated with comprehensive standards like the ESRS.

Rather than requiring detailed materiality assessments or hundreds of data points, the VSME offers a proportionate and flexible solution. It aligns with the types of ESG information SMEs are increasingly being asked for (particularly in supply chains or financial due diligence) and gives them the tools to respond confidently.

Core principles of the VSME 

Modularity and simplicity

What sets VSME apart from other frameworks is its pragmatic, proportionate approach. It recognises the limited capacity and resources of SMEs and offers flexibility by allowing companies to choose the module that aligns with their size, sustainability maturity, and stakeholder demands.

The language used throughout the VSME is intentionally straightforward. By avoiding overly technical terminology and incorporating practical guidance, the standard is accessible even to teams without prior ESG reporting experience. Companies also have the option to include additional qualitative or quantitative information based on their specific circumstances or requests from business partners.

Relevance through the ‘if applicable’ clause

Unlike the ESRS, which require a double materiality assessment, the VSME standard introduces the more SME-friendly "if applicable" principle. This means disclosures only need to be completed when relevant to the company’s operations. If a requirement doesn’t apply, it can be omitted with no justification needed. This reduces both reporting burden and complexity while still maintaining transparency.

Purpose-driven information exchange

The primary purpose of the VSME is to facilitate clear, consistent ESG communication between SMEs and stakeholders. Although publication is voluntary, businesses are encouraged to share their VSME reports to demonstrate transparency and commitment.

If published, the report should ideally be updated annually and aligned with the company’s financial reporting cycle. Companies may choose to withhold sensitive or confidential data, provided they clearly state this within the report. For SME parent companies, a consolidated VSME report is recommended, exempting subsidiaries from separate disclosures.

How is the VSME structured?

The VSME standard is designed to be modular and scalable, accommodating the wide range of capacities and maturity levels among SMEs. It consists of two tiers:

• The Basic Module, a simplified entry point designed for micro and small businesses.
• The Comprehensive Module, which builds on the Basic Module and allows for more detailed sustainability disclosures.

Note: Companies may choose to complete only the Basic Module, but those opting for the Comprehensive Module must first complete the basic one, as it forms the required foundation for the full report.

Each module is supported by detailed implementation guidance to help companies understand what to report and how. The final VSME standard also includes:

• Appendix A: Definitions of key terms used in the standard
• Appendix B: A reference list of common ESG issues relevant to SMEs
• Appendix C: Contextual guidance for report users, including links to other EU regulations such the Sustainable Finance Disclosure Regulation (SFDR)

Looking ahead, EFRAG has announced plans to build out a broader "VSME ecosystem" to make the standards easier to adopt. This ecosystem will include an SME Forum to encourage dialogue among stakeholders, a list of helpful tools and training platforms, and a dedicated support guide launching in 2025.

What information is required by the VSME?

The VSME standard provides a structured yet flexible approach to sustainability reporting through two tiers: the Basic Module and the Comprehensive Module. Each offers a level of detail appropriate to the company’s reporting maturity and stakeholder expectations.

Basic Module: Establishing the foundation

Designed for micro and small businesses, the Basic Module establishes a foundational level of ESG transparency while keeping the workload manageable for SMEs. It includes around 50 data points across four categories:

1. General: Company structure, sector, size, and any sustainability certifications
2. Environment: Energy use, Scope 1 and 2 emissions, carbon intensity, pollution, biodiversity impact, water management, circular economy principles
3. Social: Workforce composition, training, employee turnover, fair wages, health and safety
4. Governance: Anti-corruption measures, bribery convictions, and legal fines

Comprehensive Module: Deepening insights

For SMEs with greater complexity or facing external disclosure demands, the Comprehensive Module adds roughly 100 additional data points. These include:

• Strategy: Business model impacts, customer segments, supply chain insights, and sustainability integration
• Environment: Emission reduction targets, climate risks and transition plans, pollution, and water management
• Social: Labour policies, human rights due diligence, and DEI initiatives
• Governance: Board diversity, revenue from controversial sectors, and ethics policies

Together, these modules provide SMEs with the tools to tailor their ESG disclosures based on internal capacity and stakeholder requirements, without the burden of full ESRS compliance.

How the VSME benefits your business

Reporting through the VSME framework offers more than just transparency. It helps SMEs demonstrate credibility and professionalism to key stakeholders, from customers to investors. It also opens doors to sustainable financing, enables participation in supply chains with ESG requirements, and prepares your company for future regulation. Just as importantly, it allows for better internal decision-making, helping you identify opportunities to improve efficiency, cut waste, and mitigate risks.

How to get started

1. Assess whether the VSME is needed for your company based on stakeholder expectations.
2. Determine the right reporting level, choosing either the Basic or Comprehensive Module.
3. Collect the necessary information and ESG data.
4. Prepare your report, aligning disclosures with the structure of the VSME framework.
5. Share the report with relevant stakeholders.
6. Improve over time, using your first report as a foundation for future progress.

How Zevero supports VSME reporting

For SMEs adopting the VSME standard, Zevero offers a powerful blend of automation, expert guidance, and tailored reporting tools to simplify every step of the process, from data collection to strategy development.

1. Data collection made simple

Zevero helps you gather and structure your data with ease, ensuring alignment with the Basic and Comprehensive VSME modules:

• Identify relevant metrics that matter most to your customers, investors, and supply chain partners
• Use automated tools to measure emissions, track energy use, and more
• Visualise progress with dashboards that highlight gaps and opportunities

2. Expert-led guidance and capacity building

We go beyond software. Zevero’s sustainability experts work directly with your team to build confidence and internal understanding:

• One-on-one support to navigate VSME disclosure requirements
• Bespoke training sessions for teams new to sustainability reporting

3. Sustainability strategy development

VSME isn’t just about reporting; it’s a strategic tool. Zevero helps you use your data to drive long-term value:

• Identify and close data gaps
• Set science-based emissions reduction targets and build roadmaps to achieve them
• Understand how your performance compares to industry benchmarks

4. Reporting and stakeholder communication

Even though VSME is voluntary, presenting your ESG performance professionally can build credibility and unlock new opportunities:

• Generate clear, tailored reports to share with customers, lenders, and partners
• Store data in one central platform, ready for future reporting frameworks like CSRD
• Reuse and repurpose disclosures to stay ahead of evolving regulations

‍Want to take the first step toward VSME reporting? Reach out to Zevero today and let’s start your journey together.