What is the VSME standard and why should companies adopt it?
The VSME standard, or Voluntary Sustainability Reporting Standard for non-listed SMEs, was published on 17 December 2024. It is a voluntary sustainability reporting standard developed by the European Financial Reporting Advisory Group (EFRAG) for micro, small and medium-sized enterprises. These companies do not have to comply with the requirements of the Corporate Sustainability Reporting Directive (CSRD), but they can benefit from complying with the VSME standard in many ways.
Why was the VSME standard developed?
The VSME standard was developed to meet the market need for a simple reporting tool to help SMEs respond to the increasing demands for sustainability information from their business partners, such as banks, investors, and large companies. The standard aims to reduce the preparation costs caused by the many different and uncoordinated ESG (E=environment, S=social responsibility and G=good governance) information requests and to support SMEs in accessing green finance.
Why should companies follow the VSME standard?
Although the VSME standard is voluntary, following it can bring significant benefits to SMEs:
- Competitive advantage: Large companies compare their suppliers and, as a result of EU sustainability requirements, request sustainability information from their value chain. Following the VSME standard helps SMEs meet these requirements and enables them to differentiate themselves from their competitors.
- Lighter reporting: Following the VSME standard enables SMEs to carry out sustainability reporting more easily than large companies.
- Systematic data collection: The standard helps to systematically collect the necessary information and develop the company’s sustainability work.
- Credible reporting: The VSME standard helps to report sustainability work credibly to both internal and external stakeholders.
What is the structure of the VSME standard?
The VSME standard is divided into two parts: the basic module and the comprehensive module. The basic module contains information on energy consumption and emissions as well as working conditions and remuneration. By going through its sections, a company can easily get started in its own sustainability work. The company’s current situation is mapped and it is known what concrete impacts its own operations have on the environment and society. The purpose of the reporting criteria in the basic module is to produce numerical and quantitatively measurable information on the company’s environmental impacts.
The comprehensive module, on the other hand, deepens the disclosure requirements of the basic module. It helps the company to analyze the sustainability of its own business from a strategic perspective. The reporting criteria of the comprehensive module help to understand the climate and environmental risks related to the company’s operations and to prepare for them. The impacts of the company’s business must first be identified, after which the risks and opportunities related to them can be identified. Responding to the above-mentioned themes contributes to the company’s strategic, long-term planning.
Does the VSME standard include Double Materiality Assessment?
Double Materiality Assessment (DMA) is not included in the VSME reporting requirements according to the EU Omnibus proposal. However, from the company’s perspective, it makes sense to analyze the magnitude of the identified impacts, risks and opportunities in relation to the environment or the financial impacts on the company itself, even though the reporting obligation itself is not included in the legislation.
Green Advisors can help your company implement the VSME standard. We can conduct a current status and gap analysis and develop a plan to get from the current state to the future target state, whether it is to comply with the basic or comprehensive module of VSME. We can help with the planning of data collection and the data collection itself, as well as help with the preparation of the report. Get in touch and let’s start the journey towards a more sustainable future together!