VSME: A potential lifeboat in a sea of CSRD uncertainty

For those that have been following the Corporate Sustainability Reporting Directive (CSRD), and the debate since the Omnibus simplification proposals were announced it’s fair to say the outlook in relation to these remains uncertain. Under discussion are fundamental questions about the entities in scope for CSRD, and the granularity of the European Sustainability Reporting Standards (ESRS), with both expected to be reduced.

Companies that had begun preparing their first sustainability statements due to be disclosed in 2026 have had to rethink their approach, with several options available to them. For many, CSRD preparation required a significant investment of resources and in the absence of an immediate regulatory requirement, they have been reluctant to continue at the same scale.

However, there is still a need to disclose sustainability information in recognition of stakeholder demand and market expectation. It is in this respect that the Voluntary Standards for SMEs (VSME) may provide a solution in the absence of a finalised CSRD framework.

The VSME were developed by EFRAG, the standard setting organisation of the European Commission, as a voluntary sustainability reporting standard for non-listed micro, small and medium enterprises who did not fall under the original scope of CSRD. While they were not designed with larger enterprises in mind, their structure may provide a framework for companies who want to report sustainability information that will continue to be relevant regardless of the Omnibus outcome.

Understanding the VSME reporting model

Rationale behind standards

Primary aim is to meet the data needs of actors in the value chain (e.g. customers, suppliers and investors), providing SMEs clear guidance of how to report.

Structure

This standard has two modules that the undertaking can use to prepare its sustainability report, a basic module and a comprehensive module. The comprehensive module includes datapoints in addition to the basic disclosures, which are likely to be requested by banks, investors and corporate clients of the undertaking.

The majority of the basic disclosure are data points, while the comprehensive disclosure adds more narrative requirements. In total, there are less than 100 disclosure line items, an order of magnitude less than the ESRS.

If applicable concept

Once chosen, a module shall be complied with in its entirety however, each item of disclosure shall be provided only when it is applicable to the undertaking’s specific circumstances. There is a focus on disclosures that are already required by other regulations, and specifying certain industry-only disclosures.

Disclosure expectations

The same expectations around disclosure quality apply as in the ESRS. The undertaking shall report information that is relevant, faithful, comparable, understandable and verifiable.

The VSME provides more guidance for preparers, including data sources, making it more accessible, with disclosures expected to be shorter, easier to prepare and read. There is no specific format, timeline, structure or requirement to publicly disclose.

Key differences between ESRS and VSME

Legal authority

The standard is voluntary. As of December 2024, it applies to undertakings whose securities are not admitted to trading on a regulated market in the European Union (unlisted). Article 3 of Directive 2013/34/EU defines three categories of small- and medium-sized undertakings based on their balance sheet total, their net turnover and their average number of employees during the financial year.

This remit may change given the Omnibus proposals, which specifically referenced the VSME as a potential mechanism for companies no longer in scope of CSRD to report against.

Materiality approach

There is no requirement to conduct a double materiality assessment, however some disclosures reference targets or policies in relation to impacts. This would require some understanding of what they are for each undertaking.

Perhaps the most detailed disclosures focus on emissions, recognising that they are likely to be the most significant impact for undertakings. The standard has in effect determined material impacts (e.g. greenhouse gas emissions) and focused on those key universal aspects.

Topics not specifically addressed

Information about practices/ policies is kept at a high level focusing mostly on whether or not they exist, rather than specific details.

There are only limited disclosures in relation to governance, risk management, opportunities, financial materiality, and positive impacts.

Stakeholder engagement

There is no requirement or disclosure in relation to stakeholder engagement.

Audit requirements

Potentially a decision for management to demonstrate credibility, but it is not mandated.

Next steps

The VSME standards are published by EFRAG, and accompanied by templates and additional resources. Companies may choose to report on the VSME alone, or in combination with additional disclosures based on best practice (e.g. information on governance, risk management and strategy).

Grant Thornton’s sustainability team is committed to meeting clients where they are on their journey, providing practical and pragmatic advice tailored to your individual needs. If you would like to learn more about the VSME, and if they might add value to your business, speak to us today.

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