EU introduces voluntary sustainability reporting standard aimed at streamlining bureaucracy for Small and Medium-Sized Enterprises (SMEs)
Small and medium-sized enterprises (SMEs) across Europe now have a new tool to enhance their competitiveness and resilience: the Voluntary Sustainability Reporting Standard (VSME Standard). This standard, developed by the European Financial Reporting Advisory Group (EFRAG), encourages SMEs to voluntarily report their sustainability information.
The VSME Standard, recommended by the European Commission on July 30, 2025, is designed to help SMEs better understand and monitor their own sustainability performance. By providing transparency on their environmental, social, and governance (ESG) practices, SMEs can improve their resilience and competitiveness.
One of the key benefits of voluntary sustainability reporting is improved access to sustainable finance. Large companies and financial institutions often base their sustainability information requests to SMEs on the voluntary standard. By complying with the VSME Standard, SMEs can demonstrate their commitment to sustainability, making them more attractive to investors who prioritise ESG factors.
SMEs that voluntarily report their sustainability information can also gain a better understanding of their own performance. This self-assessment can lead to improvements in sustainability practices, which in turn can enhance resilience. By showing a commitment to sustainability, SMEs can not only attract investors but also build trust with customers and stakeholders.
The Commission encourages large companies and financial institutions to base their sustainability information requests to SMEs on the voluntary standard. This move is expected to promote a culture of sustainability among SMEs, helping to level the playing field and ensuring that all businesses are accountable for their ESG impact.
In conclusion, the VSME Standard offers a valuable opportunity for SMEs to improve their competitiveness, resilience, and access to sustainable finance. By voluntarily reporting their sustainability information, SMEs can demonstrate their commitment to sustainability, build trust with stakeholders, and attract investors who prioritise ESG factors. The adoption of the VSME Standard is a significant step towards a more sustainable and resilient European economy.
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