What Is the VSME? The Sustainability Reporting Standard for SMEs, Explained
In brief
- The VSME is a voluntary sustainability reporting standard for small and medium-sized companies that are not listed on a stock exchange.
- It was published by EFRAG in December 2024, and on 30 July 2025 the European Commission recommended it (Recommendation (EU) 2025/1710) as the reference for sustainability data that banks, investors and large customers ask SMEs for.
- The Basic Module has 11 disclosures, B1 to B11; an optional Comprehensive Module adds C1 to C9. Each item is required only when it applies to your company.
- It is voluntary, but it is fast becoming the common language between small suppliers and the larger companies and lenders they work with, inside and outside the EU.
If your company sells to a large European business, borrows from a bank or applies for green finance, you may already have received a long sustainability questionnaire. The VSME was created so that a small company can prepare one standard report and share it with everyone who asks, instead of filling in a different form for every customer. This guide explains what the VSME is, who it is for, what each section asks, and how to prepare your first report.
What does VSME stand for?
VSME stands for Voluntary Sustainability Reporting Standard for non-listed Small and Medium-sized Enterprises. It was developed by EFRAG, the body that also wrote the European Sustainability Reporting Standards (ESRS) used by large companies under the Corporate Sustainability Reporting Directive (CSRD). The VSME covers the same broad topics as the ESRS, environment, people and business conduct, but in a much shorter and simpler form designed for companies without a sustainability team.
Who should use the VSME?
The standard is aimed at non-listed SMEs, including micro-companies, that are not required to report under the CSRD. In practice that covers most businesses with fewer than 250 employees. The main reasons to use it are commercial rather than legal:
| Who asks | What they need it for |
|---|---|
| Large customers | Their own CSRD reports include emissions and risks in their supply chain (Scope 3), so they request data from suppliers |
| Banks and lenders | Green loans, the EU Taxonomy and climate risk assessments require borrower data on energy, emissions and governance |
| Investors | Private equity and impact investors report on the sustainability of the companies they own |
| Public tenders | More public buyers ask bidders about emissions, health and safety and ethics |
| Your own team | Measuring energy, waste and emissions often finds cost savings |
The Commission’s recommendation also asks large companies and financial institutions to base their requests to SMEs on the VSME where possible. That is why companies far outside Europe, in the UK, the US, Turkey, India or Pakistan, are increasingly asked for VSME-style information by their European buyers.
The Basic Module: B1 to B11 explained
Most companies start with the Basic Module. It is the target approach for micro-companies and the minimum for everyone else. Here is what each disclosure asks for, in plain English.
| Disclosure | What you report | Example |
|---|---|---|
| B1 Basis for preparation | Which option you use, whether the report covers one company or a group, legal form, sector (NACE) code, turnover, balance sheet, employees, sites and any certifications | “Individual report, Basic Module only; private limited company; NACE 62.01; 24 employees; one office in Lyon” |
| B2 Practices, policies and future initiatives | Whether you have practices, policies, targets and plans on topics such as climate, pollution, waste, workforce and business conduct | “Environmental policy approved March 2025, available on our website” |
| B3 Energy and GHG emissions | Total energy use in MWh (renewable and non-renewable), gross Scope 1 and location-based Scope 2 emissions in tonnes CO₂e, and emissions per unit of turnover | “Energy 182 MWh, of which 40% renewable; Scope 1: 21 t; Scope 2: 17 t; 19 t per € million revenue” |
| B4 Pollution | Pollutants emitted to air, water and soil, only if you already report them under a permit or an environmental management system | “Not applicable” |
| B5 Biodiversity | Number and area of sites in or near biodiversity-sensitive areas; land use optional | “No sites in or near protected areas” |
| B6 Water | Total water withdrawal, and how much is at sites in high water-stress areas | “1,240 m³, none in water-stressed areas” |
| B7 Resource use and waste | Whether you apply circular-economy principles; hazardous and non-hazardous waste; waste sent for recycling or reuse | “3.2 t non-hazardous waste, 70% recycled” |
| B8 Workforce characteristics | Employees by contract type and gender, and by country if relevant; turnover rate if you have 50 or more employees | “22 permanent, 2 temporary; 11 women, 13 men” |
| B9 Health and safety | Number and rate of recordable work-related accidents, and fatalities | “1 recordable accident, 0 fatalities” |
| B10 Pay, collective bargaining and training | Whether everyone earns at least the minimum wage, gender pay gap (optional below 150 employees), collective bargaining coverage, training hours by gender | “All staff above minimum wage; 18 training hours per employee” |
| B11 Corruption and bribery | Convictions and fines for corruption or bribery, if any | “None in the reporting period” |
Notice how many items can be answered with “not applicable” or a single sentence. A small office-based company can often complete the Basic Module in a few days once the data is collected. The most work is usually in B3, because it requires a greenhouse gas calculation. You can do that with the free GHG inventory template for Excel or get a quick first estimate with the business carbon footprint calculator.
The Comprehensive Module: C1 to C9
The Comprehensive Module is optional and is meant for companies whose banks, investors or customers want more detail. It adds the business model and sustainability strategy (C1), more detail on practices and policies (C2), GHG reduction targets and transition plans (C3), climate risks (C4), more workforce information (C5), human rights policies (C6) and incidents (C7), revenues from certain sectors such as fossil fuels or weapons (C8), and the gender balance of the board (C9). C3 and C4 are the parts most often requested by lenders, because they show whether a company has a plan to cut emissions and has thought about floods, heat and other climate hazards.
How to prepare your first VSME report
Step 1: choose the module. Start with the Basic Module unless a customer or lender has asked for more. Step 2: collect the data for one full year, usually your last financial year: electricity and fuel bills, water bills, waste contractor reports, payroll and HR records, and your accounts. Step 3: calculate energy in MWh and Scope 1 and 2 emissions following the GHG Protocol. Step 4: write the report, one short section per disclosure, saying clearly when an item does not apply. Step 5: share it with whoever asked, and repeat it every year so you can show progress.
EFRAG publishes a free Excel “digital template” for collecting VSME data in a structured way. If you need a written report to share with customers and banks, the climaRevolt VSME Sustainability Report Template for Word follows the B1 to B11 structure with guidance and example wording for each section.
Is the VSME mandatory?
No. The Commission recommendation is not legally binding, and no SME is obliged to publish a VSME report. However, the EU’s Omnibus simplification package proposes a voluntary standard, largely based on the VSME, that would also limit how much information large companies can demand from smaller suppliers, a so-called value-chain cap. The final version may differ from today’s VSME, but companies that report against the current standard will be well placed. For most SMEs the real pressure comes from customers and lenders, not from regulators.
Frequently asked questions
What is the VSME standard?
The Voluntary Sustainability Reporting Standard for non-listed SMEs, published by EFRAG in December 2024 and recommended by the European Commission in July 2025. It gives small and medium-sized companies a simple, common format for reporting environmental, social and governance information.
Is VSME reporting mandatory?
No. It is voluntary. SMEs use it because large customers, banks and investors increasingly ask for sustainability data, and the Commission has asked them to base those requests on the VSME.
What is the difference between the VSME Basic and Comprehensive Modules?
The Basic Module (B1 to B11) covers essential data such as energy, emissions, waste, workforce and corruption. The optional Comprehensive Module (C1 to C9) adds strategy, climate targets, climate risks, human rights and board diversity.
Does the VSME require Scope 3 emissions?
No. The Basic Module asks for Scope 1 and location-based Scope 2 emissions. Scope 3 is not required, although many customers value it.
Can companies outside the EU use the VSME?
Yes. Any company can use it, and suppliers to European businesses in other countries are often asked for VSME-style data.
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