On 30 July 2025, the European Commission adopted a recommendation on a voluntary sustainability reporting standard (VSME) for small and medium-sized undertakings. Developed by EFRAG, the Commission’s technical advisory body, the VSME offers a simple, standardised framework to help non-listed SMEs and micro-undertakings respond more efficiently to requests for sustainability information from large companies and financial institutions subject to the Corporate Sustainability Reporting Directive (CSRD).

The standard is designed to mitigate the so-called trickle-down effect, where SMEs in the value chains of larger undertakings face increasing demands for sustainability data. By using the VSME, SMEs can streamline reporting, enhance their access to sustainable finance, and strengthen their resilience and competitiveness.

The VSME consists of a basic module—serving as the minimum requirement for SMEs and a target approach for micro-undertakings—and a comprehensive module for broader disclosures, supported by complementary guidance. The Commission recommends that companies requesting sustainability information from SMEs limit their demands to what is covered in the VSME, thereby reducing duplication and administrative burden.

Member States are encouraged to raise awareness, foster uptake, and support digital solutions to facilitate SME sustainability reporting, including through eInvoicing and national capacity-building initiatives. This recommendation forms part of the SME Relief Package and the Single Market Strategy, serving as an interim step until a delegated act on a voluntary reporting standard for undertakings with up to 1000 employees is adopted.