The CSRD: the starting point for corporate sustainability

Sustainability is no longer a niche topic, but a key challenge for European companies of all sizes. Small and medium-sized enterprises (SMEs) have to adapt to new requirements from customers, partners and legislators. The Corporate Sustainability Reporting Directive (CSRD) in particular is currently causing unrest in the market: after capital market-oriented companies, it also obliges so-called large companies* to submit detailed reports on their corporate sustainability from 2025. As a result of the disclosure obligations described in the CSRD, affected companies are increasingly demanding detailed evidence of labor standards, environmental protection measures and human rights due diligence along their entire supply chains.

*fulfill at least two of three criteria: Balance sheet total > € 25 million; net sales > € 50 million; employees > 250 on an annual average‍

Current effects for SMEs

Even if the CSRD Regulation in 2025 only directly affects capital market-oriented and large companies, small and medium-sized enterprises (SMEs) as their suppliers are also under increasing indirect pressure to disclose their sustainability performance. As part of the value and supply chains of large companies, SMEs are currently receiving a large number of customer inquiries. These are often unstructured questionnaires and non-standardized processes that are used to request data.

This development presents SMEs with the major challenge of meeting the variously detailed and sometimes very extensive requirements of important customers. The so-called trickle-down effect describes how large companies that have to fulfill ESG reporting obligations are increasingly demanding relevant data from their suppliers, often SMEs, without having established structured processes for collecting such data. Non-compliance or non-compliance with these data requirements can have significant consequences for companies - from loss of reputation to market disadvantages.

VSME: A practical introduction to sustainability

In order to support small and medium-sized enterprises in the structured preparation of their sustainability disclosures, EFRAG began developing leaner voluntary sustainability reporting standards for SMEs in 2024. The final "Voluntary Sustainability Reporting Standards for non-listed SMEs" were published on December 17, 2024. They provide SMEs with a standardized basis for ESG reporting and facilitate compliance with CSRD requirements along the supply chain.

By implementing the VSME standards, SMEs should avoid being overburdened by large customers with inconsistent or excessive requests for sustainability reporting. The VSME standards create a uniform, transparent and generally recognized basis that protects SMEs from uncoordinated and excessive requirements. In addition, the application of the VSME standards offers further strategic advantages for SMEs:

1. improved access to the capital market

Financial institutions are increasingly evaluating companies on the basis of ESG data. Structured reporting in accordance with VSME makes it easier for SMEs to access better financing conditions as they can present their sustainability performance clearly and comprehensibly.‍

2. early adaptation to future regulations

What is still voluntary today could soon become mandatory. SMEs that adapt to the VSME standards at an early stage will benefit from better preparation and secure competitive advantages. This ensures compatibility with the CSRD requirements for suppliers and can lay the foundation for in-depth sustainability reporting.

The structure of the VSME standards

The VSME standard is divided into two modules that can be adapted to different needs and resources: The basic module and the comprehensive module:‍

The basic module: Basic data points for your own sustainability

The basic module of the VSME, which EFRAG classifies as necessary, provides an introduction to sustainability reporting and enables SMEs to collect key data with a manageable amount of effort. These are selected data points that are increasingly being requested by large companies as part of their CSRD reporting obligations, some of which are for the first time, and are therefore vital for maintaining customer relationships. This basic data helps SMEs to create initial transparency and demonstrate to their customers that they comply with the most important social and environmental standards.

Table 1 provides an overview of the sustainability topics (categories), relevant aspects (subcategories) and the number of qualitative and quantitative key figures requested:

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The comprehensive module: Meeting extended sustainability requirements

For companies that want to go beyond the basic requirements and further develop their sustainability strategy, the comprehensive module offers a structure for the more detailed collection of relevant data. As a voluntary, additional component of the VSME standard, companies can use the standard structure to expand their sustainability management and thus strengthen their own market position through an advanced sustainability strategy. Table 2 shows an overview of relevant sustainability topics and data points:

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Although both the basic module and the comprehensive module are structurally very similar to the ESRS with its overarching and sector-specific standards, the significantly smaller number of data points in the VSME standards is particularly striking. Here, EFRAG has taken on board the feedback from industry in its consultations and developed a comparatively pragmatic approach.‍

Seeing through diverse requirements: Why the VSME is the right approach

From our discussions with managers in SMEs, we know that the effort required to meet the increasing demands of customers and legislators sometimes exceeds existing capacities. This is where VSME offers a pragmatic solution and therefore numerous advantages for SMEs:

• Step-by-step introduction: With the basic module, SMEs can easily record their first data and familiarize themselves with the basic requirements.‍
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• Conserving resources: VSME is specially tailored to SMEs and avoids overly complex processes that could overwhelm small companies.‍
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• Long-term orientation: The data points of the comprehensive module help companies to develop a long-term sustainability strategy and be prepared for future requirements.‍
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• Gain time and flexibility: Early action gives companies the time they need to identify weaknesses in their supply chains or processes at an early stage and take targeted measures.‍
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• Multiple use of the collected data: The information collected by the VSME can also be used for sustainability ratings such as EcoVadis, certifications or other reports.‍

Benefit from funding: BAFA module 5 'Transformation concept'

A useful way to introduce the Voluntary SME Standards (VSME) is the Module 5 funding program of the Federal Office of Economics and Export Control (BAFA). Through Module 5 "Transformation Concept", companies can receive financial support in developing a strategic roadmap for transformation towards greater sustainability and climate neutrality. With the sustainability aspects B2 (greenhouse gas emissions) as well as C3 (reduction targets and climate transition) and C4 (climate risks), the 'Environment' area contains specific components of a transformation concept that are eligible for funding.

In this way, you can not only reduce costs, but also actively prepare for future market requirements (e.g. sustainability ratings such as Ecovadis ) in the long term.

You would like to implement the VSME standard in your organization or are considering implementing a transformation plan?‍

Get in touch with our experts for a non-binding non-binding initial consultation!

Conclusion: Be fit for the future with the VSME standard

The increasing requirements of the CSRD and the growing importance of sustainable supply chains make it essential for SMEs to take action. The Voluntary SME Standard (VSME) offers a practical and flexible way of meeting the growing requirements and strengthening your own market position at the same time.

By starting early with the introduction of VSME, SMEs create the basis for ensuring transparency, closing strategic gaps and building trust with customers and partners. Sustainability is not a short-term trend, but a strategic necessity. Companies that act now will not only secure their legitimacy in the market, but also their long-term competitiveness.