ABC of biodiversity compliance | The Voluntary standard for non-listed micro-, small- and medium-sized undertakings (VSME) as a roadmap for sustainable small businesses.
It's not only large listed companies that need to think about sustainability reporting anymore. With growing pressure from investors, regulators, and value chain partners, small and medium-sized enterprises (SMEs) must increasingly demonstrate their environmental and social credentials.
📊 According to S&P Global analysis (2025), 64% of European SMEs disclose information on energy consumption and 65% on climate strategy. Therefore, despite rising ESG demands, many SMEs still don’t report on core environmental metrics, underlining the urgent need for an accessible approach.
The Voluntary Sustainability Reporting Standard for SMEs (VSME), provided by EFRAG in December 2024, provides a practical framework to address this gap. On July 30, the European Commission officially adopted a recommendation on voluntary sustainability reporting based on VSME, so the standard is now positioned as a tool to reduce the reporting burden through a proportionate, phased approach, helping small businesses build capacity without being overwhelmed. Unlike the mandatory full ESRS under CSRD, VSME is optional but highly strategic.
The standard is divided into two modules:
1. The basic module is a simplified questionnaire-style report with 11 disclosures covering general info and key ESG metrics.
2. The comprehensive module, only available after completing the basic, offers materiality-based disclosures and greater reporting flexibility.
Importantly, biodiversity and nature-related issues are covered in both modules, highlighting their relevance for small businesses in diverse sectors. VSME also includes built-in educational guidance, helping companies understand the “why” behind each topic. For businesses new to sustainability reporting, starting with the most accessible and relevant disclosures in the basic module is recommended. This module does not require a fully developed ESG strategy and, for micro-undertakings, complete data. For small and medium-sized enterprises, the basic module represents the foundational minimum for reporting. As internal processes and expertise develop, disclosures can be gradually expanded or transitioned to the more advanced comprehensive module.
What adopting VSME can do for your business:
▶️ helps communicate sustainability information to business partners and clients;
▶️ prepares you for ESG data requests from large customers within their supply chains;
▶️ supports early detection of risks and cost-saving opportunities;
▶️ keeps your business future-ready by aligning with EU sustainability standards.
VSME is more than just reporting for SMEs that strive to remain competitive, secure contracts, or access green finance, bringing businesses closer to strategic alignment with Europe's sustainable transition.
Sources:
- The tradeoffs of EU proposals to simplify sustainability reporting (S&P Global, 2025).
- EFRAG Voluntary Sustainability Reporting Standard for non-listed SMEs (VSME) (EFRAG, 2024).
- Commission Recommendation of 30.7.2025 on a voluntary sustainability reporting standard for small and medium-sized undertakings (European Commission, 2025).
The author: Anna Yalova