European Commission adopts Recommendation backing EFRAG voluntary VSME reporting standard

The European Commission formally adopted a Recommendation endorsing EFRAG's Voluntary Sustainability Reporting Standard for non-listed SMEs, released December 2024. The proportionate, voluntary framework signals how simplified ESG disclosure can ease compliance burdens, offering a reference model for Indian SMEs facing value-chain sustainability data demands.

Following the SME Relief Package, the European Commission adopted a Recommendation supporting the Voluntary Sustainability Reporting Standard (VSME) for non-listed micro, small, and medium enterprises, developed by EFRAG and released in December 2024. As Action 14 of the 2023 SME Relief Package, the VSME helps SMEs with fewer than 250 employees provide sustainability disclosures to large undertakings, investors, and financial institutions. Its two-tiered modular approach offers a Basic Module requiring 11 disclosures for micro enterprises under 10 employees, plus a Comprehensive Module adding nine disclosures.

Non-listed micro, small, and medium enterprises are the direct beneficiaries, alongside banks, investors, and supply-chain partners who request SME ESG data. The Basic Module covers Scope 1 and 2 GHG emissions, environmental metrics, workforce data, and anti-corruption measures, while the Comprehensive Module addresses value-chain risks, climate-transition planning, and EU benchmark alignment. The VSME does not mandate a materiality assessment and lets SMEs apply only relevant disclosures, aligning with European Sustainability Reporting Standards and the Sustainable Finance Disclosure Regulation to ease comparability for financiers.

SMEs should evaluate adoption using EFRAG's digital toolkit, which includes an Excel-based template, an XBRL taxonomy, and an automated converter for machine-readable reporting. Additional guidance is in development to help SMEs set climate targets and identify value-chain risks, particularly around human rights. Firms requesting SME data, including banks and large undertakings, should adopt the VSME as a common reference to harmonise ESG data requests and reduce duplication, improving SME competitiveness and access to sustainable finance.

Key figure — VSME Basic Module: 11 disclosures required for micro enterprises under 10 employees