EU CSRD: EFRAG publishes Voluntary Sustainability Reporting Standard for non-listed SMEs

On 17 December 2024, the European Financial Reporting Advisory board (EFRAG) released the VSME, the voluntary reporting standard for non-listed micro-, small-, medium-sized undertakings (SMEs). The VSME is designed for undertakings that are not within the mandatory scope of the Corporate Sustainability Reporting Directive (CSRD). It has been prepared to provide a standardised set of information to replace the current multiple and uncoordinated ESG data requests from SMEs’ business partners. 

EFRAG's work on the VSME falls outside the CSRD, meaning the VSME will not be issued as a Delegated Act. This Standard has no legal authority unlike the European Sustainability Reporting Standards (ESRS) for large undertakings.

The VSME is composed of an entry-level Basic Module and a Comprehensive Module, which provides more extensive information beyond what is already offered in the Basic Module. These two modules are expected to satisfy a substantial part of requests from business partners such as banks, investors and large corporates, which SMEs currently receive.

In the context of the European Commission Presidency’s statements regarding an omnibus initiative (for more details, see our blog post), EFRAG asked European Commission representatives during the public EFRAG SRB meeting on 12 December to confirm whether the publication of the VSME was still appropriate, which was affirmed.

In the Cover Letter, Patrick de Cambourg, the Chair of the EFRAG Sustainability Reporting Board, shared some key takeaways: 

• based on the results of the public consultation, EFRAG replaced the materiality analysis with the ‘if applicable’ principle. Materiality analysis was considered too complex by SME preparers while banks and investors questioned the reliability of the possible results of such analysis.
• both prepares and users stressed that the VSME should be available as an online reporting template. EFRAG encourages the European Commission and Member States to develop such platforms.
• to address the concerns related to confidentiality, EFRAG clarified that the primary function of the report is the bilateral exchange of information with business counterparties, but the VSME will also support those who wish to publish the report. 

EFRAG will commence a series of initiatives in 2025, including the issuance of support guides and educational material, events and the monitoring of emerging tools and platforms. EFRAG has already published educational videos to introduce the VSME. The videos also include overview of the Basic Model ad Comprehensive Model and further steps to create a “VSME Ecosystem”. 

For more information on the CSRD and ESRS, see our CSRD Demystified materials.