Rethinking sustainability reporting for SMEs

Sustainability reporting is entering a new phase in Europe—one where expectations are rising across value chains, and transparency is becoming a business imperative. Yet for non-listed, micro, small, and medium-sized enterprises (SMEs), the path forward has often been unclear.

Many SMEs have been facing a fundamental challenge: how to engage meaningfully in the sustainability transition without disproportionate burden.

So, here is the good news for businesses: the recently adopted Voluntary SME Sustainability (VSME) Standard promises to support businesses with a practical and accessible sustainability reporting framework. It has been developed by the European Financial Reporting Advisory Group (EFRAG) upon the request of the European Commission. The EIF supported the work from the very beginning as an observer within the Group.

Rather than replicating the complexity of existing frameworks, the VSME Standard introduces a proportionate model built specifically for non-listed micro, small, and medium-sized enterprises. Its two-tier structure — a basic module and a comprehensive module — allows SMEs to engage at a level that matches both their capacity and stakeholder expectations.

• Basic module – ideal for SMEs just starting their sustainability journey.

• Comprehensive module – for those ready to provide more detailed disclosures.

This modular design allows businesses to choose the level of reporting that best aligns with their stakeholders’ expectations and their internal capabilities. It also reflects the broader recognition that sustainability transition will only be successful if it brings all actors along, no matter how large or small they are.

As sustainability becomes a priority across value chains, SMEs are increasingly asked by large companies, banks, and investors to provide sustainability data. However, these requests often vary in format and scope, creating unnecessary complexity.

The VSME Standard addresses these challenges by offering a single, consistent framework. Instead of responding to multiple, fragmented requests, SMEs can rely on one structured approach—saving time and reducing confusion.

Adopting the VSME Standard can deliver at least the following five tangible advantages:

• Efficiency gains, thanks to standardised reporting on sustainability.

• Informed decision-making and strategic insights, particularly around managing risks and identifying opportunities.

• Enhanced access to finance, as lenders and investors integrate ESG considerations.

• Flexible commitment, by demonstrate progress toward sustainability at your own pace.

• Overall greater credibility with customers, partners, regulators and broader stakeholders.

Importantly, this is achieved without imposing a one-size-fits-all approach. The VSME Standard has been kept intentionally lean and designed to support business growth without adding unnecessary administrative burden.

Unlike many existing sustainability reporting frameworks, the VSME Standard is tailored specifically to the realities of European SMEs. It is simple, easy to use and fully digital from day one. The new tool is:

• Proportionate — calibrated to the scale and resources of SMEs.

• Accessible — using clear language and practical guidance.

• Flexible — adaptable to different levels of experience and ambition.

And crucially, it stands as the only SME-focused sustainability reporting framework formally endorsed by the European Commission—providing a level of legitimacy and alignment that is critical in a rapidly evolving regulatory environment.

By contributing to its design from the very early phases, the EIF has helped ensure the framework remains practical, realistic, and truly adapted to SME needs. As an EU institution dedicated to fostering a sustainable and competitive economy, the EIF strongly supports this voluntary and proportionate approach.

Not least, our contribution has leveraged the EIF’s double view on policy priorities and the realities in the market, having supported several hundred thousand SMEs across the green transition and sustainability journey under flagship initiatives such as InvestEU and beyond.

Rethinking sustainability reporting for SMEs is therefore, not simply about simplification. It is about enabling impact at scale. The VSME Standard demonstrates that with the right approach, transparency and practicality can go hand in hand.

At the EIF, we are proud to have contributed to this important step forward, supporting both the sustainability transition and the businesses we are mandated to serve.

To explore guidance, tools, and practical resources, SMEs are encouraged to visit the EFRAG Knowledge Hub—your go-to destination for support throughout your sustainability journey.