Understanding VSMEs in the ESG Reporting Context

As the European Union advances its sustainability agenda, small and micro enterprises—collectively referred to as VSMEs (Very Small and Micro Enterprises)—are increasingly caught in the regulatory crosshairs. While VSMEs are not directly subject to the Corporate Sustainability Reporting Directive (CSRD), they are being indirectly impacted via supply chain pressures. Unlike large companies governed by ESRS (European Sustainability Reporting Standards), VSMEs often lack the resources, knowledge, or infrastructure to meet comparable expectations. This article examines the practical implementation of the EFRAG Voluntary Sustainability Reporting Standard for non-listed SMEs (VSME), officially published in December 2024. It breaks down the structure of the Basic and Comprehensive Modules, highlights specific reporting steps (such as energy use or workforce diversity), and contrasts them with ESRS requirements to help businesses understand and prepare ESG disclosures at a proportional scale.

The Regulatory Divide: ESRS vs. VSME Frameworks

The ESRS, developed by EFRAG, is a comprehensive framework tailored to large and listed companies. It mandates structured disclosures on a wide array of ESG issues—ranging from climate risks to biodiversity impacts—and requires digital XBRL-tagged reporting and limited assurance by independent auditors.

In contrast, the VSME standard introduces two voluntary modules:

• Basic Module: Tailored to micro-enterprises, requiring a minimal set of disclosures. It is simple and suitable for first-time reporters.
• Comprehensive Module: An optional add-on for SMEs facing stronger investor or customer demands, expanding disclosure scope.

Comparison	ESRS	VSME Standard
Applicability	Large & listed companies	Voluntary for unlisted micro to medium SMEs
Disclosure Scope	Wide (GHG Scope 1-3, biodiversity, governance, etc.)	Modular: Basic (B1–B11), Optional (C1–C9)
Format	Structured, XBRL	PDF, Word, Excel supported
Assurance	Required (limited assurance)	Not required
Timeline	From FY2024	Pilot from FY2025

Disclosure Structure of the VSME Standard

Basic Module (B1–B11)

B1 – Basis for preparation

B2 – Practices, policies and future initiatives for transitioning towards a more sustainable economy

B3 – Energy use (MWh) and GHG emissions (Scope 1 and Scope 2 in tCO2e)

B4 – Pollutants to air, water, or soil (if legally required)

B5 – Operations near biodiversity-sensitive areas

B6 – Water withdrawal and consumption

B7 – Resource use, circular economy, and waste management

B8 – Workforce characteristics (gender, contract type, location)

B9 – Health and safety (accidents, fatalities)

B10 – Remuneration, collective bargaining, and training hours

B11 – Convictions or fines for corruption or bribery

Comprehensive Module (C1–C9)

C1 – Business model and strategy

C2 – Extended policies and governance accountability

C3 – GHG reduction targets (Scope 1, Scope 2, and Scope 3 if applicable) and transition plans

C4 – Physical and transition climate risks

C5 – Gender diversity at management level

C6 – Human rights policies and processes

C7 – Confirmed human rights incidents

C8 – Revenues from fossil fuels, tobacco, or controversial sectors

C9 – Gender diversity ratio in governance body

Operational Challenges: Data, Capacity, and Value Chains

Many VSMEs are still new to sustainability reporting. Challenges include:

• Lack of digital systems to track energy, waste or HR data.
• Manual records or invoices (e.g. utility bills, payroll spreadsheets).
• Requirement to report geolocation of sites using latitude and longitude coordinates (5 decimal places).

Example: Under B1, firms must state their legal structure, turnover, NACE code, number of employees, and the location of operations—even if completed in a basic spreadsheet or document.

The VSME Standard includes practical guidance such as:

• Converting liters of diesel to MWh using emission factors.
• Estimating water use in shared offices with number of employees and flow rate per fixture.
• Tracking waste volumes with logbooks, service invoices, or utility data.

Templates and sample disclosures are available in the official guidance. For example:

Sample Disclosure Table – Energy Module (B3)

Metric	Example Input	Source
Total energy (MWh)	486	Electricity bill
Renewable share (%)	45%	Supplier documentation
Scope 1 CO2 (tCO2e)	20.0	Fuel invoice × emission factor
Scope 2 CO2 (tCO2e)	6.5	Grid emission factor

Note: If a disclosure does not apply to your business (e.g., you do not operate near a biodiversity-sensitive area), you may state “Not Applicable” under B1.

Conclusion: Empowering VSMEs Through Simplicity and Flexibility

VSMEs are the backbone of Europe’s supply chains. The VSME Standard acknowledges their diversity and provides a lightweight, modular reporting path. Unlike ESRS, which requires heavy systems and legal compliance, VSMEs can begin with spreadsheets, estimates, and available templates.

By adopting the VSME standard, small firms can:

• Build trust with customers, banks, and investors
• Prepare for future ESG regulations or supply chain requests
• Improve sustainability performance through basic metrics and policies

With proportional expectations, clear structure, and growing toolkits, the VSME Standard is an entry point for even the smallest firms to engage in credible ESG reporting.

Why Work with ASUENE Inc.?

Asuene is a key player in carbon accounting, offering a comprehensive platform that measures, reduces, and reports emissions, including Scope 1-3, with expertise in decarbonization. Asuene serves over 10,000 clients worldwide, providing an all-in-one solution that integrates GHG accounting, ESG supply chain management, LCA, and third-party verification.

ASUENE supports companies in achieving net-zero goals through advanced technology, consulting services, and an extensive network.