In February, the EU announced its groundbreaking Omnibus proposal, aiming to simplify non-financial reporting frameworks. One of the most impactful proposals in this announcement was the severely limited scope of the companies required to report under the CSRD.
VSME vs ESRS
While policymakers debate the details of the Omnibus in the coming months, many companies – particularly those between the old scope and the new scope – are left confused as to the future of their sustainability reporting.
One option for companies is the Voluntary Small and Medium Enterprise standard (VSME), which employs the core elements of the European Sustainability Reporting Standards (ESRS) and other common non-financial reporting standards in a more accessible and simplified way. Companies have the option to take the Basic (B) route or the more Comprehensive (C) route. For example, the ESRS 1&2 can either be the B1–B2 (Basic), C1–C2 (Comprehensive).
The graphic below depicts how the ESRS topical standards translate into the VSME:
As you can see, many of the key areas from ESRS are still addressed in the VSME, just in more simplified ways and often with a smaller scope.
What about the Double Materiality Assessment (DMA)?
While the VSME does not require a formal DMA as the ESRS does, it does apply a “if applicable” principle, where companies are recommended to report only on those topics that are relevant to their operations and stakeholders.
Thus, while an extensive and audited DMA is not mandatory, doing even a simplified assessment can be beneficial to SMEs in multiple ways:
- Identifying relevant disclosures
- Prioritising sustainability efforts and resources and, in the process, strengthening a sustainability strategy
- Laying the groundwork for future CSRD work, where it is required
Why should SMEs report on sustainability?
Companies considering pursuing sustainability reporting, even if they are not obliged to do so by European regulation, should understand six key benefits of increasing data collection and transparency in this area:
- Standardising ESG data requests from larger partners, customers, and other stakeholders as having already gathered this data will make responding to such requests easier and more automatic
- Pinpointing areas for improvement to increase resource efficiency leading to savings in water, energy, materials, labour, etc. – and thus resulting in financial savings as well
- Identifying risks across the supply chain
- Gaining competitive advantage in green financing opportunities – more information available in the recent EU Platform on Sustainable Finance report “Streamlining Sustainable Finance for SMEs” released in March 2025)
- Building transparency, and thus reputation, with consumers, partners, and other stakeholders
- Setting yourself up for success in future growth, especially given that the VSME and ESRS contain many of the same elements
VSME vs LSME
It is also important to note that some Small and Medium Enterprises (SMEs) – those that are publicly listed – may have some mandatory reporting elements. These were included in the Listed SME standard, or LSME, but the recent Omnibus proposal abolished these requirements, so the future of LSME reporting is unclear. Policymakers and experts are debating which standard, the Voluntary SME standard (VSME) or the Listed SME standard (LSME), is better and how to streamline these further to limit confusion between the two non-CSRD alternatives, particularly given that, as discussed, above, the VSME also has a Basic and Comprehensive version.
Conclusion
Despite the cutbacks in the scope of required CSRD reporting, companies that fall outside this obligation can still gain substantial value from adopting the VSME. Its strong alignment with the ESRS framework means that companies voluntarily following VSME not only stay ahead of potential future requirements but also build a solid foundation for strategic sustainability management. Whether for stakeholder transparency, operational efficiency, or long-term resilience, engaging with VSME reporting is a smart step forward.
Sources:
– “Omnibus explained: key changes to sustainability standards proposed by the European Commission” by Accountancy Europe (Mar 2025) 250304-Omnibus-ESRS-factsheet_accountancy-europe-1.pdf
– “Streamlining Sustainable Finance for SMEs” by the EU Platform on Sustainable Finance (Mar 2025) Platform on Sustainable Finance report: Streamlining sustainable finance for SMEs – European Commission
– “Voluntary reporting standard for SMEs (VSME)” by EFRAG (n.d.) Voluntary reporting standard for SMEs (VSME), Concluded | EFRAG
– “VSME vs ESRS: Understanding the key differences in sustainability reporting” by SustainLab (Mar 2025) VSME vs ESRS: Understanding the key differences in sustainability reporting – SustainLab
– “VSME vs LSME” by 414 (Apr 2025) 414 | VSME vs LSME
– “Why SMEs should consider VSME standard in uncertain times of Omnibus – 10 reasons to believe in sustainability.” by Jarosław Kacprzak (Mar 2025) (1) Why SMEs should consider VSME standard in uncertain times of Omnibus – 10 reasons to believe in sustainability. | LinkedIn
