EU Empowers Small Businesses with New Sustainability Reporting Standard

Brussels, August 2025 — In a landmark move for sustainability in the business sector, the European Commission has officially adopted a new Voluntary Sustainability Reporting Standard for SMEs (VSME). Designed specifically for micro-, small-, and medium-sized enterprises, this standard aims to simplify environmental, social, and governance (ESG) disclosures while enhancing access to finance and value chain transparency.

Why It Matters: A New Reporting Era for Smaller Businesses

While SMEs are currently not obligated to report under the EU’s Corporate Sustainability Reporting Directive (CSRD), the newly released VSME offers a framework that allows them to proactively meet growing demands from investors, banks, and large corporate clients. These stakeholders increasingly request sustainability-related data from their value chain partners, including small suppliers.

This voluntary initiative arrives as the European Commission prepares to scale back the number of firms covered under the CSRD. As part of its Omnibus I regulatory simplification package, the threshold for mandatory reporting may rise from 250 to 1,000 employees. If adopted, this revision would exempt approximately 80% of companies currently within scope—making the VSME even more significant as a practical, accessible alternative.

What Is the VSME?

The VSME standard was developed by the European Financial Reporting Advisory Group (EFRAG) the same body responsible for drafting the European Sustainability Reporting Standards (ESRS). It consists of two main modules:

1. Basic Module (11 disclosures)

Focused on high-priority ESG data most often required by corporate clients and value chain partners, such as:

• Scope 1 and 2 greenhouse gas emissions
• Anti-corruption practices
• Workforce data

2. Comprehensive Module (9 additional disclosures)

Includes information frequently requested by banks and investors, such as:

• GHG emissions reduction targets
• Climate transition plans
• Descriptions of ESG-related initiatives and performance

These modules are intended for businesses with fewer than 250 employees—allowing them to tailor reporting based on their capabilities and stakeholder needs.

Strategic Benefits for SMEs

According to EFRAG, the VSME standard empowers smaller companies to:

• Meet stakeholder data requests from financial institutions and large companies
• Facilitate access to green financing
• Manage ESG risks and opportunities more strategically
• Contribute to a sustainable, inclusive economy

In a Q&A published alongside the adoption notice, the Commission stated that while the VSME is currently voluntary, it may serve as the basis for future simplified reporting frameworks post-Omnibus. The standard could also define limits on what ESG information large companies can reasonably ask of smaller businesses in their supply chains—establishing a sort of “value-chain data ceiling.”

The Road Ahead

The EU’s push for simplification is expected to continue. EFRAG has announced its intention to reduce the data points required by the ESRS by nearly two-thirds—streamlining compliance for both large and small entities.

Although further changes may be introduced depending on the final CSRD scope and ESRS revisions, the VSME represents a proactive, forward-thinking tool. For SMEs striving to integrate sustainability into their core operations, it provides a structured, credible way to demonstrate ESG maturity—without the complexity of full-scale corporate reporting.

CSE’s Perspective

At CSE, we believe that inclusive sustainability frameworks are essential for scaling ESG impact across entire economies. The VSME standard strongly supports our mission to equip organizations of all sizes with actionable tools and globally recognized training. Whether you’re an SME aiming to implement the new standard or a larger enterprise assessing supplier disclosures, CSE offers tailored training and advisory services to help you not only comply—but lead—in today’s evolving ESG landscape. Our upcoming Certified Sustainability (ESG) Practitioner Program — Advanced Edition, scheduled for 27–28 November and 1 December 2025, offers immersive, expert-led live sessions and a comprehensive package—including the ESRS omnibus module—to empower professionals and organizations to excel in ESG strategy, reporting, and implementation.

Looking for affordable, high-impact sustainability training for your team?

Explore our specialized online programs on ESG Reporting and Supply Chain Sustainability—designed for organizations seeking flexible, cost-effective education solutions. Visit sustainability-academy.org to learn more and empower your team with practical ESG skills.