VSME: new sustainability reporting standard for SMEs

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The Voluntary Sustainability Reporting Standard for Nonlisted SMEs (VSME), developed by EFRAG at the request of the European Commission, is a new voluntary sustainability reporting standard designed for micro, small, and medium non-listed enterprises. The VSME aims to simplify the collection and communication of ESG (Environmental, Social, and Governance) data, improving SMEs' access to sustainable financing and supporting them in seizing new opportunities in the sustainable transition. This tool represents a pillar of the European Union's SME Relief Package (September 2023), which aims to reduce administrative burdens for these companies.

The VSME is structured into three main modules, adaptable to SMEs' needs: Basic Module provides fundamental metrics on energy, greenhouse gas emissions, biodiversity, and other environmental topics; Narrative Module (PAT) includes information on sustainability policies, actions, and objectives; Business Partner Module (BP) addresses requests for specific data from investors, banks, and business partners. This modular structure allows SMEs to adapt reporting to their capabilities and resources, ensuring greater flexibility. The sustainability report must be prepared annually and made available concurrently with the publication of the financial statement. The company can include the sustainability report within a separate section of the management report if it is legally required or voluntarily prepared. Alternatively, it can be presented as a standalone document.

The VSME dedicates a specific section to biodiversity impacts, requiring companies to consider metrics related to biodiversity impacts, on ecosystems and land use. Additionally, companies must indicate the number and area (in hectares) of sites owned, leased, or managed within or in proximity to "sensitive" areas in terms of biodiversity. This enables SMEs to monitor and minimize their impact on ecosystems, promoting practices aimed at nature conservation. Furthermore, transparency on biodiversity data fosters trust among investors and stakeholders interested in environmental sustainability.

The standard includes detailed guidelines on energy consumption, greenhouse gas emissions, and water resource management. Following the updated GHG protocol, companies must report direct (Scope 1) and indirect (Scope 2) emissions in terms of CO2 equivalent. Additionally, the company must indicate, if applicable, the pollutants (with respective quantities) it emits into the air, water, and soil during its activities, which it is legally required to communicate to the competent authorities (for example, pursuant to the Industrial Emissions Directive and the European Pollutant Release and Transfer Register - EPRTR) or already communicates based on an environmental management system such as the Eco-Management and Audit Scheme (EMAS). This focus helps SMEs identify critical areas to act on to reduce their climate impact and align with the global decarbonization goals.

The VSME (Voluntary Sustainability Reporting Standard for non-listed SMEs) offers numerous advantages to European SMEs. In addition to reducing administrative burdens, it allows access to green financing and improves relationships with business partners. The standardization of ESG information (Environmental, Social, and Governance) simplifies processes and increases operational efficiency. Moreover, the VSME helps SMEs appropriately communicate their ESG performance, meeting the growing demands for transparency from investors, banks, and customers. This structured approach to sustainability reporting can also stimulate more comprehensive risk management, contributing to greater resilience and competitiveness in the market.

To promote the adoption of the VSME, EFRAG has planned a series of initiatives starting in 2025. These include the development of digital tools, practical guidelines, and awareness-raising activities. The goal is to make the VSME a benchmark for unlisted SMEs across Europe, ensuring an inclusive and accessible sustainable transition. Additionally, EFRAG conducted a public consultation on the VSME Exposure Draft, receiving input from a wide range of stakeholders, including SMEs, SME associations, banks, banking associations, large companies, accountants, and other interested parties. This process has further refined the standard, ensuring that it meets the real needs of SMEs and facilitates their active participation in sustainability.

This article was created as part of the "Biodiversity services EU expansion" project (CUP: E43D22000480009) under the call by Regione Lombardia "PR FESR 2021-2027 – LINEA INTERNAZIONALIZZAZIONE 21-27," aimed at supporting the internationalization of Italian companies. 3Bee is the naturetech company developing innovative technologies for monitoring, protecting, and regenerating biodiversity, supporting companies in defining personalized climate strategies based on analyzing their impacts and dependencies on nature. With a consolidated portfolio in Italy, Germany, and France and significant partnerships, 3Bee continues its expansion into international markets to create a concrete impact through technology.