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In recent years, the European Commission's focus on transparency in environmental, social, and governance matters has increased significantly. With Directive (EU) 2022/2464 (CSRD), the Commission introduced and updated corporate sustainability reporting obligations for large-sized enterprises and listed companies.
In this context, both financial institutions and parent companies often request sustainability-related information from SMEs, even though these entities are not, in themselves, subject to mandatory reporting requirements.
Therefore, with the aim of developing a coherent framework enabling SMEs to communicate ESG information, on 30 July 2025 the European Commission adopted Recommendation (C(2025) 4984), introducing a voluntary sustainability reporting standard targeted at SMEs and micro-enterprises, referred to as the VSME (Voluntary Sustainability Reporting Standard for Micro and Small Enterprises), structured into two modules.
The Basic Module contains a set of essential disclosures on environmental, social, and governance policies. Specifically, it includes:
- information regarding the company's policies and future initiatives for the transition towards a more sustainable economy;
- disclosures relating to air, water, and soil pollution generated by the company;
- information on the health and safety conditions of the workforce;
- data concerning employee remuneration; and
- disclosures on any convictions or sanctions imposed on employees for bribery or corruption.
The Comprehensive Module, adoption of which is optional, is designed to provide a higher level of transparency. It focuses in particular on information related to the SME's strategy and business model.
In any event, compared to the mandatory standards applicable to large-sized enterprises, the VSME does not require auditing or assurance and does not include reporting on the full value chain or on indirect impacts (value chain, third-party activities, supply chain), but instead focuses on the entity's direct operations.
The VSME therefore enables SMEs to meet growing ESG transparency expectations through a structured yet proportionate approach.
Adoption of the VSME also facilitates access to financial instruments dedicated to the sustainable development of SMEs under favorable conditions, as banking institutions tend to prefer companies that operate with sustainable business models.
Consequently, voluntarily adhering to the VSME may represent a smart strategic choice for SMEs and micro-enterprises seeking to strengthen their market position, as it enhances their ability to respond to requests from financial institutions and potential investors, attract additional financial resources, and reinforce their reputation at both national and European level.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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