About VSME Framework

What is the VSME Framework?

The Basics

The VSME (Voluntary Standard for Small- and Medium-Sized Enterprises) is a sustainability reporting framework developed by EFRAG for SMEs that aren't listed on EU stock exchanges. Released in December 2024, it provides a structured way for smaller companies to report on their environmental, social, and governance (ESG) performance.

Unlike mandatory reporting requirements for large corporations, VSME is voluntary and designed to be manageable for companies with limited resources.

Why VSME Exists

Four main business pressures drove the creation of this framework:

1. Large customers demanding sustainability data from their suppliers
2. Banks and investors requiring ESG information for financing decisions
3. SMEs needing a structured approach to manage sustainability risks and opportunities
4. EU policy requiring broader participation in the sustainability transition

Who Needs to Use It

VSME applies to non-listed companies classified as micro, small, or medium enterprises under EU law:

Company Size	Balance Sheet	Annual Revenue	Employees	Must Not Exceed 2 of 3
Micro	€450,000	€900,000	10	✓
Small	€5 million	€10 million	50	✓
Medium	€25 million	€50 million	250	✓

Business Value of Implementation

For Supply Chain Relationships:

• Meet customer requirements without lengthy custom questionnaires
• Standardized reporting that works across multiple client relationships
• Competitive advantage in tenders and supplier selection processes

For Access to Finance:

• Satisfy bank requirements for ESG risk assessment
• Access to green financing options with better terms
• Meet investor due diligence requirements more efficiently

For Risk Management:

• Identify operational risks before they become costly problems
• Systematic approach to managing regulatory compliance
• Better preparedness for future regulatory requirements

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Need help determining if VSME is right for your business? Our experts can assess your situation and recommend the best approach. Explore our VSME solutions or contact our sustainability team.

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Choosing Your Module: Basic vs Comprehensive

The VSME offers two reporting levels. Your choice depends on what your stakeholders actually need from you.

Quick Decision Guide

Choose Basic Module if:

• Your customers are mostly other SMEs or individual consumers
• You use traditional bank financing without specific ESG requirements
• You're starting your sustainability journey
• You have limited time/resources for complex reporting
• You want to establish baseline sustainability practices

Choose Comprehensive Module if:

• You supply to large corporations (especially those under CSRD)
• You're seeking ESG-focused investment or green financing
• Your customers specifically request detailed sustainability information
• You operate in high-impact sectors (manufacturing, construction, energy)
• You have dedicated resources for sustainability management

What's Actually In Each Module

Basic Module Requirements

This covers the essential sustainability metrics most stakeholders care about:

Company Information (B1-B2):

• Basic company details and reporting approach
• Current sustainability practices and future plans

Environmental Data (B3-B7):

• Energy consumption and greenhouse gas emissions
• Pollution monitoring (if legally required)
• Land use and biodiversity impact
• Water usage (especially in water-stressed areas)
• Waste management and circular economy practices

Social Data (B8-B10):

• Workforce demographics and employment practices
• Health and safety performance
• Pay equity and training programs

Governance (B11):

• Corruption and bribery incidents/fines

Time Investment: Expect 10-20 hours for initial setup, 5-10 hours annually for updates.

Comprehensive Module Requirements

Includes everything in Basic Module, plus:

Strategic Information (C1-C2):

• Detailed business model description
• How sustainability integrates with business strategy
• Senior management accountability for sustainability

Advanced Environmental (C3-C4):

• Greenhouse gas reduction targets and transition plans
• Climate risk assessment and adaptation measures
• Value chain emissions (Scope 3) for relevant sectors

Extended Social (C5-C7):

• Management diversity metrics
• Human rights policies and grievance mechanisms
• Serious human rights incident reporting

Enhanced Governance (C8-C9):

• Revenue from controversial sectors
• Governance body diversity

Time Investment: Expect 40-80 hours for initial setup, 20-40 hours annually for updates.

Module Selection by Business Type

Manufacturing Companies

Basic Module Works If:

• You mostly sell to other SMEs
• Simple supply chains with local suppliers
• Traditional financing arrangements

Comprehensive Module Needed If:

• You supply to large multinational corporations
• You're seeking green financing or sustainability-focused investors
• You operate in energy-intensive or high-emission processes
• Your products go into highly regulated supply chains

Service Companies

Basic Module Usually Sufficient:

• Most service companies can start with Basic Module
• Lower environmental impact makes reporting simpler
• Focus on workforce and governance metrics

Comprehensive Module If:

• You serve large corporations as key supplier
• You're in professional services (consulting, engineering) where clients have detailed ESG requirements
• You're seeking significant investment or planning expansion

Construction and Real Estate

Comprehensive Module Often Required:

• High material consumption and waste generation
• Significant climate risk exposure
• Green building and certification requirements
• Large corporate clients with detailed sustainability requirements

Retail and Hospitality

Start with Basic:

• Begin with Basic Module to establish baseline
• Focus on energy, waste, and workforce metrics

Upgrade to Comprehensive If:

• Multiple locations with varied risk profiles
• Franchise or chain operations
• Seeking sustainability certifications or green financing

The Reality of Implementation

Basic Module Implementation

What You'll Actually Do:

1. Gather your utility bills and calculate total energy use
2. Estimate your greenhouse gas emissions (tools available to help)
3. Document your current environmental and social practices
4. Track basic workforce metrics you probably already have
5. Report on any pollution monitoring you're already required to do

Common Challenges:

• Data availability: Start with what you have, improve over time
• GHG calculations: Use free online calculators initially
• Time management: Assign someone specific to coordinate

Comprehensive Module Implementation

Additional Requirements:

1. Develop formal climate targets and transition planning
2. Assess climate risks to your business operations
3. Implement formal human rights policies
4. Track detailed diversity and management metrics
5. Consider value chain emissions if you're in manufacturing

When It's Worth the Extra Effort:

• Your customers are willing to pay premiums for verified sustainability
• You can access significantly better financing terms
• You're required to participate in customer sustainability programs
• You're planning to grow into markets with strict ESG requirements

Making the Practical Choice

Start Small, Scale Up

Most companies should:

1. Begin with Basic Module to understand the process and build capabilities
2. Assess stakeholder response after your first year of reporting
3. Upgrade to Comprehensive when business needs justify the additional effort

Consider Your Resources

Basic Module: Can usually be managed internally with part-time effort Comprehensive Module: Often requires either dedicated internal resources or external support

Cost-Benefit Reality Check:

• Basic Module costs are minimal and often pay for themselves through improved supplier relationships
• Comprehensive Module costs are higher but can unlock significant financing and business opportunities

tip

Not sure which module fits your situation? Our assessment tool can help you evaluate your stakeholder requirements and recommend the right approach. Get started with our VSME platform or speak with our experts for personalized guidance.

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Practical Implementation Steps

For Basic Module Implementation

Phase 1: Preparation (Month 1)

1. Designate a coordinator (doesn't need to be full-time)
2. Gather existing data: utility bills, HR records, any existing environmental permits
3. Identify gaps: what information you don't currently track
4. Set up simple tracking systems for missing data

Phase 2: Data Collection (Months 2-3)

1. Energy and emissions: Use your utility bills and free calculation tools
2. Workforce metrics: Extract from existing HR systems
3. Environmental practices: Document what you're already doing
4. Governance: Review any existing policies and incident records

Phase 3: Reporting (Month 4)

1. Compile your report using the VSME framework
2. Share with key stakeholders (customers, banks, etc.)
3. Gather feedback on what additional information they need
4. Plan improvements for next year

For Comprehensive Module Implementation

Phase 1: Strategic Planning (Months 1-2)

1. Assess stakeholder requirements in detail
2. Evaluate current capabilities and resource availability
3. Develop implementation timeline and budget
4. Consider external support for complex requirements

Phase 2: System Development (Months 3-6)

1. Implement data collection systems for all required metrics
2. Develop climate targets and transition planning
3. Create or update policies for human rights and governance
4. Train staff on new processes and requirements

Phase 3: Full Implementation (Months 7-12)

1. Collect and validate data across all disclosure areas
2. Conduct climate risk assessment for your operations
3. Prepare comprehensive report meeting all requirements
4. Establish ongoing monitoring and improvement processes

Common Implementation Challenges

Data Quality Issues

Problem: Inconsistent or missing data Solution: Start with estimates, improve accuracy over time. Document your methodology and be transparent about limitations.

Resource Constraints

Problem: Limited staff time for sustainability reporting Solution: Focus on high-impact metrics first. Consider using technology solutions to automate data collection.

Technical Complexity

Problem: GHG calculations and climate risk assessments seem overwhelming Solution: Use available tools and templates. Start simple and add sophistication as you gain experience.

Stakeholder Management

Problem: Different customers want different information Solution: VSME standardization helps here. Focus on the framework requirements and supplement with customer-specific details only when necessary.

Technology and Tools

Free Resources Available

• GHG Protocol calculators for emissions estimation
• SME Climate Hub tools for target setting
• EU Ecolabel databases for certification information
• Water stress mapping tools for geographic risk assessment

When to Invest in Technology

• Basic Module: Simple spreadsheets or basic software usually sufficient
• Comprehensive Module: Consider dedicated sustainability management platforms
• Multiple locations: Automated data collection becomes valuable
• Complex supply chains: Integration with procurement and ERP systems

tip

Looking for an integrated solution? Our platform automates much of the VSME data collection and reporting process, making both Basic and Comprehensive modules more manageable. Explore our solution and see how we can streamline your implementation.

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Return on Investment

Basic Module ROI

Typical Investment: €2,000-5,000 annually (internal time + basic tools)

Returns Usually Seen:

• Supplier relationship security: Avoid losing customers who implement ESG requirements
• Operational improvements: 5-15% energy cost reductions through systematic monitoring
• Risk reduction: Early identification of compliance issues before they become expensive

Payback Period: Usually 6-12 months through operational improvements alone

Comprehensive Module ROI

Typical Investment: €10,000-25,000 annually (including external support if needed)

Returns Often Achieved:

• Financing advantages: 0.25-1% interest rate improvements on loans
• New business opportunities: Access to tenders requiring detailed ESG reporting
• Investor access: Eligibility for ESG-focused investment funds
• Premium pricing: Some customers pay 2-5% premiums for verified sustainable suppliers

Payback Period: 12-24 months for most companies, faster for those accessing green financing

Making the Business Case

For Basic Module

• Low risk, low cost way to future-proof supplier relationships
• Operational benefits often exceed compliance costs
• Foundation for more advanced sustainability initiatives

For Comprehensive Module

• Essential if large customers are implementing CSRD requirements
• Competitive advantage in tenders and supplier selection
• Access to capital that's increasingly focused on ESG criteria

Long-term Considerations

Regulatory Evolution

• EU sustainability requirements are expanding, not contracting
• Early implementation provides learning curve advantages
• Voluntary adoption today may become mandatory tomorrow

Market Trends

• B2B customers increasingly expect sustainability transparency
• Supply chain due diligence requirements are strengthening
• ESG criteria in financing decisions are becoming standard

Competitive Positioning

• Early adopters often gain disproportionate advantages
• Standardized reporting becomes more valuable as adoption increases
• Sustainability leadership can differentiate in commodity markets

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Ready to start your VSME implementation? Whether you're choosing Basic or Comprehensive, our team can help you implement efficiently and maximize your return on investment. Contact our experts to develop your customized implementation plan.

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This guide provides educational information about the VSME framework. For implementation support, automated reporting tools, and expert guidance tailored to your specific situation, explore our VSME implementation platform or contact our sustainability specialists.