EU Commission Presents Spontaneous Eco-Friendly Accounting Framework for Small and Medium-Sized Businesses
European Commission Endorses Voluntary Sustainability Reporting Standard for SMEs
In a move aimed at simplifying sustainability reporting for small and medium-sized enterprises (SMEs), the European Commission has adopted a Recommendation for the Voluntary Sustainability Reporting Standard for Small and Medium-sized Enterprises (VSME) as of July 30, 2025 [1][2][4].
The VSME standard, developed by the European Financial Reporting Advisory Group (EFRAG), offers a proportionate, simplified, and flexible reporting framework tailored to the capacities of smaller companies. It consists of a basic module with 11 key sustainability disclosures and a comprehensive module adding 9 more disclosures, aligning in topics with the full ESRS but with fewer and simplified data points [2].
The VSME standard is expected to have a positive impact on SMEs' access to sustainable finance. On one hand, it encourages SMEs to voluntarily use the VSME to meet growing ESG information demands from large companies and financial institutions, which may improve SME resilience, competitiveness, and visibility to investors interested in sustainability [2][4]. On the other hand, the Commission explicitly encourages large companies and financial institutions to base requests for sustainability information from SMEs on this voluntary standard, which could streamline SMEs’ reporting burden and facilitate their inclusion in sustainable finance value chains [2][4].
Looking ahead, the Commission plans to transform this voluntary Recommendation into a formal voluntary reporting standard by a delegated act under the Omnibus I simplification package. This future act will legally empower the Commission to adopt a voluntary standard for companies with up to 1000 employees, building on the current VSME framework, though some adjustments may occur depending on legislative negotiations and ongoing revisions to the broader ESRS framework [3].
The Omnibus I simplification package, which includes the framework, is currently under negotiation among EU co-legislators [5]. The final content and adoption timeline of the delegated act depend on these ongoing negotiations regarding the Omnibus I proposal.
The EU Taxonomy FAQ, a step towards simplifying sustainability reporting, is also part of these negotiations [6]. The recommendation is an interim measure before the formal adoption of a voluntary reporting framework.
In summary, the VSME standard is now officially recommended by the European Commission as a voluntary sustainability reporting tool for SMEs, aimed at easing their reporting burden, improving supply chain transparency, and enhancing their sustainable finance access. The future formal voluntary standard is expected to be adopted through delegated legislation as part of the Omnibus I simplification package.
[1] European Commission. (2025). Recommendation endorsing the Voluntary Sustainability Reporting Standard for Small and Medium-sized Enterprises (VSME). [2] EFRAG. (2025). Technical Exposure Draft: Proposed EU Taxonomy Reporting Standard for SMEs. [3] European Commission. (2023). Omnibus I simplification package: Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2020/852 as regards the delegated acts. [4] European Commission. (2025). Fact Sheet: Voluntary Sustainability Reporting Standard for Small and Medium-sized Enterprises (VSME). [5] European Parliament. (2023). Omnibus I simplification package: Parliament's position at first reading. [6] European Commission. (2022). EU Taxonomy Climate Delegated Act: Frequently Asked Questions.
- The VSME standard, a product of the European Financial Reporting Advisory Group (EFRAG), is a flexible reporting framework designed for smaller companies, focusing on corporate sustainability and environmental-science disclosures, which could potentially improve their access to sustainable finance.
- The European Commission aims to transform the current voluntary Recommendation into a formal voluntary reporting standard, where companies with up to 1000 employees can follow, aligning it with the science of sustainability and the financial expectations of businesses.
- The adoption of the VSME standard and the future formal standard are anticipated to streamline the reporting process for SMEs, making it easier for them to comply with environmental-science, finance, and business-related expectations from large companies and financial institutions, thereby fostering sustainability and improving their competitiveness in the market.
