Supporting Small Businesses in Sustainable Reporting: A New Voluntary Standard

On 30 July 2025, the European Commission adopted a recommendation on voluntary sustainability reporting for small and medium-sized enterprises (SMEs) (the "Recommendation").

The voluntary standard for SMEs (VSME) provides a practical framework for SMEs that are not subject to the Corporate Sustainability Reporting Directive (CSRD) to share sustainable information in a clear and structured manner. The VSME aims to simplify the process of preparing and providing such information by SMEs in response to requests from large financial institutions and corporations.

Understanding VSME

The VSME is a voluntary tool designed to help SMEs communicate their environmental, social, and governance (ESG) efforts effectively. While (certain) large companies are required to report under the CSRD, SMEs can voluntarily choose to adopt the VSME, e.g. when their business partners request sustainability information. The Commission also encourages large organizations to align their information requests with the VSME in order to reduce complexity and ensure consistency for SMEs.

This voluntary standard provides SMEs with an opportunity to demonstrate their commitment to sustainable development. In turn, this can improve their access to financing and strengthen their market position. SMEs applying the VSME will also be able to gain a clearer picture of their sustainability performance. A better understanding of their own sustainability status may increase their competitiveness, especially at a time when aspects such as environmental and social responsibility are gaining strategic importance. 

Context and Background

The Recommendation is in line with the Omnibus I simplification package proposed by the Commission on 26 February 2025, which suggests limiting mandatory CSRD reporting to companies with more than 1,000 employees. For smaller companies, including SMEs, the Commission has proposed a voluntary reporting system, which is yet to be developed and adopted. For now, the VSME serves as an interim solution, protecting SMEs from excessive or inconsistent information requests from larger partners in their value chains.

Outlook

The Recommendation on the VSME is a temporary measure until the Commission adopts a delegated act establishing final voluntary reporting standards for SMEs. The content and timing of the adoption of the delegated act will depend on the ongoing negotiations for Omnibus I. In the meantime, the VSME provides SMEs with a practical tool to meet the current market demand for sustainability data.