Small and medium-sized enterprises are entering a new chapter in ESG reporting. While much attention has centred on the Corporate Sustainability Reporting Directive (CSRD) and its extensive ESRS standards, the European Commission has introduced a more proportionate framework tailored for smaller organisations: Voluntary SME (VSME) Disclosure Standards.
Although voluntary, these standards carry significant strategic weight. As larger companies face stricter ESG requirements, SMEs - often integral parts of their value chains - must demonstrate sustainability performance to remain competitive, credible and compliant with downstream expectations.
For ESG professionals supporting SMEs, VSME disclosure is a critical opportunity to strengthen sustainability governance and prepare for increasingly data-driven stakeholder demands.
Why VSME Disclosure Matters?
SMEs may not face mandatory CSRD reporting, but they operate within the same ecosystem. Investors, banks, large customers and regulators increasingly expect consistent, comparable ESG information - regardless of company size.
VSME disclosure helps SMEs:
- Meet customer and supply chain expectations, especially from CSRD-regulated partners
- Improve access to finance, as lenders increasingly integrate ESG criteria
- Strengthen credibility with investors, customers and employees
- Enhance operational resilience by identifying risks and opportunities early
- Build foundations for future mandatory reporting requirements
In many ways, VSME is not about compliance - it’s about staying competitive.
What the VSME Standards Cover?
Unlike the full ESRS suite, VSME standards are intentionally simplified. They offer SMEs a structured but manageable way to disclose sustainability performance.
General Disclosures
Covers essential information on governance, strategy and policies relevant to sustainability.
SMEs must describe:
- Governance structure and responsibilities
- Key sustainability risks and opportunities
- Any relevant policies and processes
Environmental Disclosures
SMEs report on core environmental topics, such as:
- Greenhouse gas emissions (simplified categories)
- Energy use
- Waste and water management
- Pollution risks
Social Disclosures
These may include:
- Workforce metrics
- Health and safety
- Training and development
- Diversity and inclusion basics
Governance Disclosures
Focused on ethics, compliance, anti-corruption and supplier management.
The aim is to ensure SMEs offer meaningful, credible ESG information without the administrative burden of full ESRS.
How VSME Differs from CSRD/ESRS Requirements?
The VSME standard is designed to be proportional:
- Less detail required compared to ESRS
- Simplified metrics (e.g., easier GHG calculation methods)
- Reduced documentation burden
- More flexible data collection
- Voluntary adoption rather than mandatory reporting
- No external assurance requirement
Despite this, the structure aligns with ESRS, making it easier for SMEs to integrate into value chain reporting.
What SMEs Need to Prepare For?
Preparing for VSME disclosure requires several foundational steps.
Map Sustainability Topics Relevant to Your Business
Identify which environmental, social and governance topics matter based on operations, stakeholders and risks.
Define Basic ESG Governance
Clarify roles, responsibilities and escalation processes - even small steps improve clarity.
Begin Collecting Core Data
Particularly around emissions, energy use, workforce metrics and policies.
Establish Simple Documentation
Policies do not need to be complex, but they must be clear and grounded in practice.
Involve Key Stakeholders
Suppliers, customers, employees and investors can all shape priority topics.
Consider Digital Tools from the Start
This ensures scalability and reduces manual effort as reporting expectations grow.
Challenges SMEs May Face
SMEs often report similar barriers when approaching ESG disclosure:
- Limited internal resources
- Lack of ESG expertise
- Fragmented data and documentation
- Competing operational priorities
- Difficulty interpreting regulatory language
A lightweight, digital-first approach can help overcome these challenges without overwhelming the organisation.
How Digital Tools Support VSME Reporting?
Manual ESG reporting becomes inefficient quickly, even with simplified standards. Digital platforms provide structure, traceability and repeatability - crucial for scaling sustainability maturity.
Digital platforms help SMEs:
- Collect and manage ESG data in a centralised system
- Build structured disclosures aligned with VSME and ESRS
- Conduct stakeholder surveys and double materiality assessments
- Track actions, risks and improvements over time
- Produce audit-ready documentation as reporting needs evolve
Digitalisation ensures that ESG reporting adds strategic value rather than administrative weight.
Conclusion - VSME as Stepping Stone to Future Sustainability Leadership
The VSME Disclosure Standards offer SMEs a practical, approachable way to enter the ESG reporting landscape. They help organisations build foundational governance, improve transparency and position themselves as credible partners in increasingly sustainability-driven value chains.
For ESG professionals, VSME is not only a compliance exercise - it is a strategic opportunity. By adopting structured disclosure practices early, SMEs build resilience, unlock new opportunities and prepare for more complex requirements in the years ahead.
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More information at falcony.io.
