Commission proposes voluntary eco-friendly accountability benchmark to ease financial strain on small businesses in Europe

The European Commission has taken a significant step towards promoting sustainability among Small and Medium-sized Enterprises (SMEs) by introducing a voluntary reporting standard known as the "Voluntary Sustainability Reporting Standard for Non-listed Small and Medium-sized Enterprises" (VSME standard).

Adopted on July 30, 2025, this recommendation serves as an interim solution until the formal adoption of a delegated act on a voluntary standard. The Commission aims to ease the burden on SMEs, providing them with a clear and manageable framework for sustainability reporting.

For companies with up to 1,000 employees, the Commission proposed this standard, to be adopted based on the recommendation of July 30, 2025. This move is part of the Omnibus I simplification package, adopted on February 26, 2025, which also limits the sustainability reporting obligation under the Corporate Sustainability Reporting Directive (CSRD) to large companies with more than 1,000 employees.

The VSME standard is intended to serve as an "upper limit for the value chain," protecting SMEs and other companies not subject to CSRD reporting obligations from excessive information requests from their business partners in the value chain.

The European Financial Reporting Advisory Group (EFRAG) developed the VSME standard, ensuring it is comprehensive and practical for SMEs. The standard can potentially enhance the competitiveness of SMEs by helping them better assess their own sustainability performance, improve their business resilience, and more easily access sustainable financing.

Moreover, the voluntary reporting can help SMEs demonstrate their commitment to sustainability to their clients, partners, and investors. By adopting the VSME standard, SMEs can potentially enhance their reputation and attract more business opportunities.

The Federal Ministry for Economic Affairs and Climate Action (BMWK) presented the recommendation paper on July 30, 2025, and the German Institute for Sustainability (Deutsches Nachhaltigkeitsinstitut) created the VSME standard. The Commission hopes that the VSME standard will encourage more SMEs to embrace sustainability, contributing to a more sustainable European economy.

The timing of the formal adoption depends on the negotiations on the Omnibus I proposal. The Commission aims to save more than €6 billion in administrative burden with the simplification of rules for sustainability reporting and EU investments.

In conclusion, the introduction of the VSME standard is a significant step towards promoting sustainability among SMEs in Europe. By adopting this standard, SMEs can potentially enhance their competitiveness, business resilience, and access to sustainable financing, while also contributing to a more sustainable European economy.

Commission proposes voluntary eco-friendly accountability benchmark to ease financial strain on small businesses in Europe