The European Commission has adopted a recommendation introducing a voluntary sustainability reporting standard tailored for small and medium-sized enterprises (SMEs). The initiative aims to support SMEs not covered by the Corporate Sustainability Reporting Directive (CSRD) in responding to increasing requests for sustainability information, particularly from larger companies and financial institutions.
Developed by EFRAG—the Commission’s technical advisor on sustainability reporting—the Voluntary Standard for SMEs (VSME) offers a simplified framework for disclosing sustainability-related data. While not legally binding, the Commission is encouraging large companies and investors to align their information requests with the VSME framework wherever possible, to reduce the reporting burden on smaller businesses.
The recommendation also highlights the potential benefits for SMEs that choose to report voluntarily. These include improved access to sustainable finance, greater insight into their environmental and social performance, and enhanced resilience and competitiveness in the long term.
This recommendation follows the Commission’s adoption of the Omnibus I simplification package on 26 February 2025. The package proposed restricting mandatory CSRD compliance to companies with over 1,000 employees, while companies below this threshold would report on a voluntary basis using a standard derived from today’s recommendation. The future delegated act will formalise this voluntary reporting framework and serve as a “value-chain cap,” limiting the extent to which smaller businesses are required to respond to sustainability-related data requests from upstream and downstream partners.
The current recommendation is intended as a transitional measure to meet market demands until the delegated act is officially adopted. The final content may differ based on the outcome of ongoing negotiations between the European Parliament and the Council on the Omnibus I proposal.
