The EC recently put forward the ‘Sustainability Omnibus’ proposal, a significant initiative aimed at streamlining sustainability reporting across the EU.
According to Position Green, this proposal introduces the Voluntary Sustainability Reporting Standard for SMEs (VSME), set to redefine how small and medium-sized enterprises manage their ESG (Environmental, Social, and Governance) responsibilities. Positioned outside the broader Corporate Sustainability Reporting Directive (CSRD), VSME promises to simplify the compliance landscape for businesses not covered by the directive.
VSME offers a two-tier reporting framework designed to ease the ESG reporting burden on SMEs. The Basic Module serves as an entry point, covering essential ESG metrics across four key areas: General Information, Environmental Metrics, Social Metrics, and Governance Metrics.
This module simplifies sustainability disclosures, focusing on 11 fundamental aspects that provide a foundational understanding of a company’s sustainability efforts. For entities requiring deeper insights to satisfy stakeholders like banks and investors, the Comprehensive Module adds detailed disclosures on business models, strategies, and more intricate ESG matters such as Scope 3 GHG emissions and climate risks.
While the European Sustainability Reporting Standards (ESRS) cater to larger corporations with complex requirements, VSME offers a more accessible alternative for SMEs. It foregoes the mandatory Double Materiality Assessment required under ESRS, adopting an “if applicable” principle that allows businesses to tailor their reporting to reflect their specific operational realities.
This flexibility ensures that SMEs can meet stakeholder demands for ESG information without the onerous obligations faced by their larger counterparts.
The introduction of the ‘Sustainability Omnibus’ also signals potential shifts in the CSRD landscape. It proposes that only companies with over 1,000 employees and significant financial thresholds should adhere to mandatory sustainability reporting, potentially delaying the CSRD compliance timeline for smaller companies.
However, the expectation for ESG data from larger corporations remains, making it crucial for SMEs to align with the VSME to stay competitive and prepared for future regulatory demands.
Adopting the VSME not only positions SMEs ahead of regulatory changes but also empowers them to leverage ESG reporting as a strategic tool for internal decision-making and external stakeholder engagement. As Frida Stolpe, Senior Associate at Position Green, emphasizes, “VSME reporting offers multiple benefits—helping businesses improve internal decision-making, meet growing stakeholder expectations, and streamline ESG data management.”
In conclusion, while the ‘Sustainability Omnibus’ aims to reduce the complexity of sustainability reporting, it maintains rigorous standards through frameworks like VSME. For SMEs, starting with the Basic Module and progressively integrating more comprehensive reporting can establish a robust foundation for future regulatory requirements and enhance their overall sustainability profile.
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