Commission recommendation on voluntary sustainability reporting standard For SMEs

The European Commission’s Omnibus initiative, published on 26 February 2025, aimed to align and simplify the EU’s Sustainable Finance framework and to reduce reporting burdens. The Omnibus proposed inter alia a number of amendments to the sustainability reporting requirements introduced by the CSRD.

The CSRD requires large undertakings, parent undertakings of a large group and undertakings with securities admitted to trading on a regulated market in the Union (except micro-undertakings) to report sustainability information according to sustainability reporting standards. The CSRD allows small and medium-sized undertakings (SMEs) whose securities are admitted to trading on a regulated market in the Union to report using a separate and lighter, proportionate set of standards instead of the full set of the sustainability reporting standards. The CSRD does not impose any mandatory sustainability reporting requirements on SMEs whose securities are not admitted to trading on a regulated market in the Union. If these non-listed SMEs had chosen to prepare a sustainability report on a voluntary basis, there would have been no adequate standard for them to report against. For this purpose, EFRAG, the Commission’s technical advisory body for sustainability reporting, developed a voluntary sustainability reporting standard (VSME).

On 30 July 2025, the Commission adopted a recommendation on voluntary sustainability reporting for SMEs. The Commission recommends that non-listed SMEs and micro-undertakings that wish to voluntarily report sustainability information do so in accordance with the VSME. The primary aim of the VSME is to help undertakings not in the scope of the CSRD to respond to information requests that they receive from financial institutions, large undertakings and other stakeholders. The VSME aims to reduce the need for SMEs to respond to separate requests for information from individual counterparties for their reporting, due diligence and risk management or other uses of sustainability information. The Commission highlighted that, in addition to the above, voluntary reporting of sustainability information can facilitate access to sustainable finance and help SMEs to better understand and monitor their own sustainability performance, thereby improving resilience and competitiveness.

The VSME standard comprises a basic module and a comprehensive module. The basic module is described as the “target approach” for micro-undertakings. This means that micro-undertakings do not need to apply the basic module in its entirety and are welcome to use only certain parts of it. For small and medium-sized undertakings, the basic module is described as the “minimum requirement” for reporting against the standard. In addition to the basic module and the comprehensive module, EFRAG also developed complementary practical guidance to help SMEs implement the provisions of the standard itself.

It is worth following developments in this topic, since the Commission proposes to adopt a voluntary reporting standard by means of a delegated act. The content of the future voluntary reporting standard might differ from the current VSME. The Commission highlighted that the recommendation on the VSME will be used as the basis for the future voluntary standard, as proposed by the Omnibus. However, the Commission stated that, at this stage, it cannot exclude the possibility that certain changes may be necessary.