The VSME Standard: What is it and what are the benefits for SMEs?

In the current European scenario, where transparency and corporate sustainability are priority criteria for corporate governance, the VSME Standard (Voluntary Standard for non-listed Small- and Medium-sized Enterprises) becomes a valuable resource for small- and medium-sized enterprises (SMEs), which is why we at Way2Global also decided to readily adopt it.

Given the complexity and numerous doubts surrounding this new Standard, we would like to try to shed some light by drawing from our own experience with it.

In this article, we explore in detail what the VSME Standard is and outline the concrete benefits that SMEs can gain by adhering to this standard for reporting their ESG impact.

What is the VSME Standard?

The VSME Standard is a simplified standard drawn up specifically to help unlisted micro-, small- and medium-sized enterprises manage their voluntary reporting of sustainability information.

Although this standard pertains to the regulatory framework of the European Directive CSRD (Corporate Sustainability Reporting Directive), which aims at increasing the transparency and accountability of companies in the three areas of sustainability (ESG – Environmental, Social, Governance), it is in fact an initiative outside the framework of the Directive.

Developed by EFRAG (European Financial Reporting Advisory Group), the technical body that defines accounting standards internationally and, on behalf of the European Commission, the new Financial Reporting and Sustainability Reporting Standards, the VSME Standard is designed for micro-, small- and medium-sized unlisted companies that do not fall under the obligation to report according to the more complex ESRS standards.

The Standard provides a more accessible and appropriate method for SMEs that still wish to voluntarily collect, analyze and report data on their ESG impacts.

The VSME standard consists of three modules that each company can combine according to its specific needs and in relation to the maturity of its respective sustainability practices. The Basic Module serves as a prerequisite so that all companies meet at least the basic level of disclosure. SMEs with more advanced sustainability practices may also choose to comply with the PAT and BP modules to provide stakeholders with a more comprehensive view of their sustainability efforts.

• Basic Module. It identifies 12 disclosures through which the company must report on environmental, social and governance issues. Its completion is a prerequisite for the completion of the subsequent modules.
• Narrative module – policies, actions and goals (PAT). It includes 5 narrative-type disclosures that elaborate on policies, actions and goals, and that are added to the information provided in the basic module, only if the enterprise has such data.
• Business Partner Module. It requires the reporting of additional data, building on the information in the basic module.

The modular approach is designed to provide flexibility and scalability, allowing SMEs to start with basic disclosures and gradually supplement their reporting with more detail as their capabilities and needs evolve. It is a system that helps SMEs manage the transition to sustainable practices in a gradual way, preventing a traumatic and costly impact that could be demoralizing.

To date, the VSME Standard is being finalized. EFRAG has concluded an initial public consultation and field test, gathering the necessary feedback to formulate a final version that meets the needs of SMEs in diverse entrepreneurial settings.

What are the benefits of the VSME Standard for SMEs?

Micro-enterprises and unlisted SMEs are not required to prepare a Sustainability Statement, but adopting the VSME Standard is a strategic choice for any company aiming to thrive in the future.

Reporting according to the VSME Standard can bring multiple benefits to any company. Here are the main advantages:

• Increased transparency – By using a unified standard such as the VSME, SMEs can communicate their business practices more clearly and transparently, improving stakeholder perception.
• Strengthening the corporate reputation – By adopting the VSME Standard, SMEs demonstrate a concrete commitment to sustainability and transparency, two values increasingly appreciated in the marketplace.
• Increased opportunities to access financing – Banks and institutional investors tend to favor companies with transparent, sustainable reporting practices that attest to responsible, visionary business management, while also reducing the perception of risks associated with investment. Thus, SMEs that report according to the VSME Standard can benefit from more favorable financing terms and greater availability of capital.
• Compliance and future readiness – Adapting to the VSME Standard helps SMEs comply with current regulations and prepare for future regulatory changes, safeguarding business continuity.
• Operational efficiency – The reporting process based on the VSME Standard requires a thorough assessment of business practices that can help identify areas for improvement and develop more effective strategies, reducing costs and increasing operational efficiency and business resilience.
• Improved oversight of ESG risks- The framework provided by the VSME Standard helps identify and manage environmental, social, and governance risks, and enables SMEs to develop strategies to mitigate negative impacts and capitalize on sustainability-related opportunities, improving their ability to adapt to a changing marketplace and growing stakeholder expectations.
• Innovation and growth – Addressing ESG challenges drives SMEs to explore and adopt new technologies, processes and business models, stimulating innovation, growth and competitiveness, as well as providing them with a sustainable competitive advantage.

Added to these benefits is the positive impact generated on stakeholders and, in general, on the entire community. Reporting one’s ESG impact in a clear, transparent way also contributes to the realization of a more sustainable, inclusive economy.

Maximize your impact: translate your ESG Report with Way2Global

To maximize the benefits of your ESG reporting, translation is crucial.

An accurate professional translation enables companies to communicate engagement, performance and impacts to a global audience, broadening the scope of the advantages. It is therefore essential that the translation be done in a professional manner, respecting the linguistic, terminological, normative and cultural specificities of each target context.

For over 30 years, Way2Global has been defining excellence in financial document translation. We are a translation agency specializing in the financial sector, and financial statements are our strength. Constantly keeping abreast of regulatory developments enables us to ensure maximum compliance and accuracy in translation of reports and financial statements on behalf of our clients.

With more than 8,000 professional translators and a team of specialized Project Managers, we handle the most complex requests and translate more than 200 financial statements annually in more than 50 language combinations, ensuring quality and timeliness.

Contact us now to discover how we can help you communicate your sustainability commitment to the world.