The development of sustainable business practices is accelerating across Europe. An increasing number of companies, including micro, small and medium‑sized enterprises (SMEs), are wondering how to meet growing social and legal expectations related to ESG (Environmental, Social, Governance) reporting. However, for smaller non‑listed entities, existing guidelines can be too extensive and costly to implement. In response to these challenges, the Voluntary Standard for non‑listed SMEs (VSME) has been created, and is already gaining traction throughout the European Union.
Origin of VSME and Its Significance
New EU regulations, such as the Non‑Financial Reporting Directive (NFRD) and, more recently, the Corporate Sustainability Reporting Directive (CSRD), have led to the development of the European Sustainability Reporting Standards (ESRS). Their aim is to introduce transparent principles for reporting an organisation’s environmental and societal impacts. Many experts have noted, however, that these standards—even when simplified by the Omnibus package—may be too complex for smaller firms.
For this reason, the European Financial Reporting Advisory Group (EFRAG), with support from bodies such as the Polish Agency for Enterprise Development (PARP) and others, drafted the VSME (Voluntary Standard for non‑listed SMEs). The document was submitted to the European Commission in June 2023. Its core purpose is to enable small and medium‑sized enterprises to present key ESG data in a transparent yet flexible manner, taking into account their limited resources.
What Makes the Standard Voluntary?
As its name implies, VSME is voluntary. Non‑listed companies are not formally obliged to follow its guidelines. Nevertheless, the benefits of transparent non‑financial reporting are becoming increasingly apparent. Investors, customers and business partners place growing importance on responsible practices. Accordingly, many SMEs view the introduction of certain ESG reporting elements as an opportunity to enhance their competitiveness and build a strong market reputation.
VSME complements existing requirements and serves as a bridge between the comprehensive ESRS and the practical needs of smaller firms. It can also be a valuable tool for entrepreneurs planning future collaborations with larger corporations or financial institutions—which often expect coherent information on a company’s environmental and social impacts.
Key Areas of ESG Reporting under VSME
VSME identifies three core pillars, mirroring the ESRS framework:
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Environmental: Key topics include greenhouse gas emissions, energy consumption, waste management and efficient resource use. VSME emphasises simplicity in indicator selection—companies may choose the most material metrics for their sector.
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Social: Covers issues such as working conditions, respect for human rights, equal treatment and engagement with local communities. For SMEs, it is important to demonstrate that even small firms can foster a supportive and ethical workplace.
- Governance: Concerns aspects like organisational structure, transparency of decision‑making processes, adherence to ethical standards and anti‑corruption measures. VSME highlights the importance of clearly defined roles and responsibilities to mitigate risk and build stakeholder trust.
Why SMEs Should Consider Implementing VSME
Building Credibility
A reputation for environmental stewardship and community engagement leads to increased stakeholder trust. Clients, partners and suppliers increasingly scrutinise ethical and sustainability standards.
Easier Access to Financing
Financial institutions are making sustainability a key factor in investment risk assessments. Companies with reliable ESG data often gain leverage in negotiations with banks and investment funds, securing more favourable financing terms.
Adapting to Evolving Regulations
Although VSME is not mandatory, it offers significant preparation should future EU legislation extend ESG reporting obligations to a broader range of entities. Early adoption can prove a strategic investment.
Enhancing Management Efficiency
Reporting under VSME fosters systematic data collection. This, in turn, supports the identification and periodic evaluation of opportunities and risks, streamlining strategic decision‑making and planning.
How to Prepare for Reporting in Accordance with VSME
The first step is to analyse the company’s operations through the lens of environmental, social and governance aspects. Many SMEs start with a brief review of internal processes: materials consumption, waste management, employee and community relations. Based on this assessment, they can determine which VSME‑proposed indicators are most relevant to their business profile.
| Implementing ESG reporting need not entail prohibitive costs. A growing number of specialised tools and applications tailored to SMEs are becoming available—often at accessible prices and with simplified modules. When necessary, seeking advisory support (e.g., through consulting services) can accelerate the process and help avoid common pitfalls. |
Benefits for Polish Entrepreneurs
Initiatives such as the Voluntary Guidelines for ESG Reporting for SMEs (ESRS VSME), backed by the Ministry of Development and Technology, reflect increasing interest in business transparency in Poland. Polish SMEs play a significant role in the economy but frequently operate with limited human and financial resources. VSME addresses these challenges by offering a core set of indicators and recommendations adaptable to the scale of each enterprise.
Moreover, adopting VSME can strengthen competitive positioning in international markets. For businesses planning to export or collaborate with foreign partners, alignment with recognised European sustainability standards becomes a key advantage.
Challenges and the Future of VSME
Although VSME is gaining recognition, it is not without challenges. SMEs may be concerned about ambiguity in interpreting indicators or the additional costs of data collection. It is crucial, however, to approach reporting from a long‑term benefit perspective. Today’s market environment favours transparent, responsible companies—and VSME is a tool that supports this trend.
In the coming months and years, further refinements to the standard are likely. Stakeholder consultations and practical experiences from early adopters will play a vital role. Industry‑specific annexes or more detailed guidelines for particular sectors may emerge in the future.
The Importance of Starting Now
The Voluntary Standard for non‑listed SMEs (VSME) is a pivotal initiative that complements existing directives and ESRS‑driven trends. It enables smaller enterprises to report their ESG activities transparently and flexibly, thereby building trust and competitiveness. Although adoption is optional, an increasing number of organisations are recognising the tangible benefits of a transparent approach to environmental, social and governance issues. In an era of rapid economic change and rising social awareness, companies that embrace sustainable development stand to gain the most—both in Poland and across European markets.