Sustainability reporting is under the spotlight in Europe. In fact, the CSRD (Corporate Sustainability Reporting Directive) is debated because it redefines the rules of the game for transparency in sustainability. Even if only large companies are directly concerned, SMEs absolutely need to look into this issue. In reality, the effects of CSRD can spread rapidly throughout the value chain and thus affect the smallest businesses.

Faced with this challenge, a framework adapted to small structures was created: VSME (Voluntary Sustainability Reporting Standard for Non-Listed SMEs). Developed by EFRAG, this voluntary standard offers SMEs a simple and harmonized framework for structuring their ESG reporting.

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Why was the VSME standard created?

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Reminder of the regulatory context

Last February, the Omnibus Directive arrived to ease the reporting obligations on European companies. The objective was clear: to reduce the number of companies concerned and to simplify ESRS standards that were considered too complex.

At the same time, this summer The European Commission has announced officially recommending the VSME standard as a unique model for the transparency of companies not subject to the CSRD. This standard meets a flagship measure introduced by the European Union to reduce the risks of administrative and financial overload for small structures: the Value Chain Cap.

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What is the Value Chain Cap?

The Value Chain Cap is a measure that sets a strict regulatory limit on the quantity and type of ESG information that large companies can ask for from their smaller suppliers. In other words, thanks to the Value Chain Cap, SMEs and VSEs cannot be forced to provide more information than that provided for in the VSME framework to their customers, investors...

This device aims to prevent the CSRD from creating a reporting cascade, where each large group would multiply personalized requests for its smaller partners.

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What is the impact of the Value Chain Cap for SMEs and VSEs?

The Value Chain Cap is profoundly transforming relationships within the value chain.

1. End of multiple requests : thanks to harmonization, an SME can now provide a single standardized report based on the VSME standard to all its contractors.
2. Regulatory protection : no large company can require a level of detail greater than that of the VSME standard.
3. Valuation in the value chain : by adopting VSME, an SME demonstrates its compliance with the European framework and becomes an attractive partner for large groups.

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What is a voluntary sustainability report under VSME?

Now that you know the origins of the VSME standard, we can get to the heart of the matter. What is this standard?

The VSME standard is the answer to a concrete problem: how to enable small and medium-sized businesses to integrate sustainability into their strategy without being overwhelmed by the complexity of CSRD?

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What is the structure of this standard?

This voluntary reporting framework is based on the three pillars of the CSRD: Environmental, Social and Governance (ESG). Unlike the CSRD, the VSME standard does not require double materiality analysis, leaving each company the freedom to choose the issues on which it will communicate. This repository is therefore more accessible, and is divided into two distinct modules:

• One basic module, which constitutes the minimum base and covers key information (energy, GHG emissions, workforce, security, governance).
• One comprehensive module, which is aimed at companies with a higher level of maturity.

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The 4 advantages of producing a VSME report

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1. Structuring your CSR approach in a coherent way: by collecting and monitoring ESG indicators, an SME clarifies its priorities: reducing energy consumption, improving working conditions, preventing ethical or social risks... This structure reinforces credibility and facilitates communication with partners, customers and investors.
2. Responding effectively to the demands of the value chain: large companies, subject to the CSRD, must publish information on their environmental and social impacts including those related to their suppliers. This involves a massive collection of data from their partners, often SMEs. VSME provides a harmonized and recognized format, which makes it possible to respond to all requests.
3. Improving access to finance: Financial players are now systematically integrating ESG criteria into their decisions. A report structured according to the VSME standard proves the seriousness and responsibility of the company.
4. Anticipating future European obligations: By adopting this standard now, SMEs can get a head start, become familiar with reporting practices and reduce compliance efforts when new obligations come into force.

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The 4 steps to prepare a VSME report

Are you convinced by the approach and want to involve your company in the preparation of a voluntary sustainability report? Here is the essential roadmap to build, step by step, your sustainability report in accordance with the VSME standard:

1. Choosing the right level of reporting
2. Identify available data
3. Equip yourself with a reliable tool
4. Publish and manage over time

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Step 1: Choosing the right level of reporting

Depending on your size, your CSR maturity and the expectations of your customers, opt for the basic module and/or the comprehensive module. The first is often enough to get started, the second allows you to deepen your approach and show your commitment.

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Step 2: Identify available data

It is a question of taking stock of the situation: what ESG data are already being followed? The data is very different and covers a variety of topics: energy consumption, GHG emissions, workplace accidents, parity, anti-corruption policies... This mapping makes it possible to target the missing information and to identify the holders of the information internally.

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Step 3: Equip yourself with a reliable tool

Manually managing an ESG reporting exercise using Excel files can quickly seem like an obstacle course. In addition to being time-consuming, the risk of errors is higher. Dedicated software, such as Kiosk, automate data collection, guide the structuring of the report and ensure compliance with VSME standards. No more going back and forth between files across all teams!

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Step 4: Publish and manage over time

Reporting should not be a one-off exercise, but a continuous management tool. Update your indicators every year, measure your progress, and adjust your action plans. Your credibility will be all the more strengthened and this will transform compliance into a performance driver and competitive advantage.

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Conclusion

The VSME standard, whose importance has been reinforced thanks to the Value Chain Cap, represents a major advance for European SMEs and VSEs. Based on a standard recognized and harmonized, small businesses can finally effectively meet the expectations of their stakeholders in terms of ESG information.

This standard is a genuine strategic opportunity because it will allow you to structure your CSR approach, strengthen your competitiveness, improve your image and anticipate future obligations.

So what are you waiting for?

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