The recently published VSME standards provide a valuable framework for unlisted SMEs to effectively report their ESG performance and consistently align with CSRD guidelines. The use of specialized software is crucial to efficiently collect and manage data, allowing companies to ensure both value chain collaboration and credible reporting.
“One goal of VSME is to replace the many uncoordinated questionnaires that banks and large companies currently send to their SME customers or suppliers.”
- Senior Technical Manager Sustainability, EFRAG
The VSME-standards (Voluntary Sustainability Reporting Standard for non-listed small and and medium-sized enterprises (SMEs)), recently published by EFRAG, provide a valuable framework for companies seeking to report and publish their ESG performance. Traditional CSR statements and CO₂ tables, as we still often encounter on websites, often illustrate the inner motivation of companies to proudly display their sustainability efforts. However, using the VSME standards allows companies to publish their business processes within the framework established by EFRAG. This eliminates the often outdated CSR and sustainability statements and allows companies to maintain their position as sustainable leaders.
The VSME standards have strong similarities to the CSRD (Corporate Sustainability Reporting Directive) frameworks. CSRD-regulated supply chain partners within the value chain of a non-CSRD-regulated company regularly request information from their supply chain partners. By reporting according to VSME standards, companies can ensure smooth and efficient data transfer with their stakeholders. This not only facilitates cooperation within the value chain, but also strengthens the credibility of the reported information. The basic module of the VSME provides an approachable way to get started with ESG reporting.This module includes practical guidelines and convenient agreements with the CSRD, allowing companies to adopt a consistent reporting approach.
To apply the VSME standards effectively, the use of specialized software is essential. This software helps companies collect, manage and report ESG data. It ensures greater efficiency, accuracy and consistency in reporting processes. Below is an introduction to the basic VSME module, with practical similarities to the CSRD.
VSME Structure
The VSME standard has a two-module structure: the basic module and the more extensive comprehensive module. If a company has identified a chapter as relevant, the company is required to report in accordance with the basic module. If the company wants to provide additional information to better match the data requests of banks, investors and corporate clients, the comprehensive module provides an additional framework for this. Below is an explanation of the requirements, obligations and results of the basic module.
Differences from the CSRD
The already well-known and mandatory dual materiality analysis (DMA) of the CSRD is not part of the VSME standard. Nevertheless, the reporting company must determine which chapters of the VSME standard are applicable. Since VSME reporting is voluntary and does not become part of the annual report to be audited by the auditor, no audit trail is mandatory either. For each chapter, an explanation of why it does or does not apply is sufficient. Verification of the chosen chapters in consultation with stakeholders is not required. Complying with the VSME standards is legally entirely voluntary, however, for the future-proofing of the company it is not optional. The market is already seeing a large increase in data requests to supply chain partners and suppliers. Sustainability is invariably at the top of inquiries and is here to stay.
What does the basic module entail?
The basic module of the VSME standard is divided into 11 chapters:
Section B1 could be seen as the DMA part of the VSME standard. It requires the company to provide insight into the choices made for reporting purposes. Is only the basic module reported or also the comprehensive? Is individual or consolidated reporting provided? Which companies are covered by consolidated reporting? In addition, it must provide relevant company information, such as total assets, revenue and number of employees.
Chapter B2 covers practices, policies and future initiatives toward a more sustainable economy. For example, this section deals with the steps the company aspires to take toward reducing energy consumption or GHG emissions (anthropogenic greenhouse gas emissions). These steps should be provided with goals, policies and outcomes.
Chapter B3 is the first chapter of environmental specific topics and deals with energy and greenhouse gas (GHG) emissions. The company reports on scope 1 and 2 emissions. This data is extremely relevant for CSRD mandatory companies (frequently a supply chain partner within the value chain), given that this is part of their scope 3 and almost every company reports on GHG emission reduction (ESRS chapter E1).
Chapter B4 includes the company's already existing reporting on air, water and soil pollution. The company reports the amount of pollutants released from its own operations.
Section B5 asks the company to report on the amount of land it owns, leases or manages that is in or near a biodiversity-sensitive area. For CSRD mandatory companies reporting on biodiversity impacts (ESRS Chapter E4), this is relevant data.
Chapter B6 includes the company's total water demand and total water use.
Chapter B7 is about applying circular principles in business operations, reporting the total amount of waste and how it is processed. This data is highly relevant for companies that report on circularity in the CSRD report (ESRS chapter E5).
Chapter B8 is the first chapter of the social topics and requires an explanation of the company's own staff. The number of FTEs per type of contract, per gender and per country where they operate. For companies that report on employees in the value chain in the CSRD report (ESRS chapter S2), this data is highly relevant.
Chapter B9 is about the health and safety of employees by reporting on the number of accidents and fatalities in the reporting year. For companies that report on employees in the value chain in the CSRD report (ESRS chapter S2), this data is also relevant.
Chapter B10 includes the wage gap, the percentage of employees covered by collective bargaining and the training opportunities of the company. For companies reporting on employees in the value chain in the CSRD report (ESRS chapter S2), this data is relevant.
B11 is the chapter of the topics on governance and business conduct of the company. The company reports the number of convictions and the total amount of fines for corruption or bribery. Companies reporting on prevention and detection of corruption or bribery in the CSRD report (ESRS chapter G1-3) will request this data.
Stainable software for VSME
Stainable offers a user-friendly and efficient software solution for companies that have to comply with the requirements of the CSRD or wish to report using the VSME standard. The software makes the process of drawing up a VSME report simple, fast and conclusive, allowing companies to focus on their sustainable initiatives and regular business processes instead of the administrative burden of reporting. By using software, companies can accurately monitor their sustainability performance, communicate transparently and minimize the administrative burden. This not only makes it easier to comply with legislation and regulations, but also enables companies to improve their sustainability performance, which increases the future-proofing of the company.
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