A Guide to Sustainability Reporting for SMEs
Sustainability reporting is becoming increasingly important for companies as stakeholders demand greater transparency on Environmental, Social and Governance (ESG) performance. To meet this demand, several frameworks have been established, such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD), among many others. These frameworks provide globally recognised standards for ESG reporting, helping companies to align with regulatory expectations and investor needs.
However, for small and medium-sized enterprises (SMEs), sustainability reporting can be challenging due to limited resources and complex requirements. To address this, EFRAG’s Voluntary Standard for Micro, Small and Medium-sized Enterprises (VSME) provides a simplified yet effective approach for SMEs. On the other hand, the European Sustainability Reporting Standards (ESRS) provide a comprehensive and mandatory framework for larger companies under the Corporate Sustainability Reporting Directive (CSRD).
In what ways are SMEs affected by sustainability reporting?
Sustainability reporting is becoming an important aspect for business growth. Investors, banks, consumers and clients now expect to see how well a company is performing in terms of ESG. Different reporting frameworks can help smaller and medium-sized businesses share information on sustainability in a way that is easy to understand and doesn’t add any unnecessary complexity.
Why is this important for your business?
- It builds trust and confidence with customers and partners – Sharing ESG initiatives reassures customers and enhances business ties, such as ethical sourcing or adequate compensation etc.
- It gives you a competitive advantage – Some clients prefer working with businesses that report on sustainability, which can help you stand out in partnerships.
- It prepares your business for future regulations – Sustainability reporting is now required by many major companies from their suppliers. Keeping track of ESG data early on will help you prepare for future regulations.
- It drives costs savings and efficiency – Tracking energy and water consumption and recycling waste are not only cost saving opportunities, but they are also indications of the company’s environmental responsibility.
A quick guide to finding the right framework for your business
| Aspects | Basic VSME | Comprehensive VSME | ESRS |
| Applicable For | SMEs, especially non-listed ones | SMEs needing detailed reports for banks or clients | Large companies, listed SMEs, and CSRD-covered entities |
| Scope of Reporting | Individual or consolidated | Requires consolidated reporting | Mandatory consolidated reporting for companies and supply chains |
| Flexibility | High—focus on relevant data | Moderate—structured but some flexibility | Low—strict compliance with CSRD, phased for listed SMEs |
| Focus Areas | Essential ESG (GHG emissions, workforce, anti-corruption) | More detailed (Scope 3 emissions, diversity, climate risks) | Comprehensive ESG (biodiversity, governance, human rights, climate plans) |
Key points SMEs need to pay attention to
Understanding the needs of your business — Not every business require the same level of reporting. SME’s should consider.
- Who will read your report? – Customers, investors, banks, or regulators
- What is your capacity for data collection? – Time, expertise, budget
- Are you legally required to report? – Only large companies and listed SMEs under CSRD are required.
Selecting the right framework
- Basic VSME – A simple, voluntary approach for SMEs wanting to share basic sustainability data
- Comprehensive VSME – For SMEs needing detailed reporting for stakeholders.
- ESRS – Mandatory for large companies and listed SMEs under CSRD.
Focus on the Most Relevant ESG Areas — SMEs should prioritise the most important aspects in their industry.
- Environmental: Track energy use and carbon footprint to identify cost-saving opportunities. Also disclose your waste management initiatives, particularly if your company operates in industries with medium / high environmental impact, such as manufacturing.
- Social: Ensure diversity, and a safe workplace to build employee and customer trust.
- Governance: Follow ethical business practices to strengthen credibility and prevent risks.
Step-by-step guide to implementing the right framework
- Assess your reporting requirements
- Determine if reporting is voluntary or mandatory under ESRS.
- Collect and Organize your data
- Leverage existing resources: HR records (for workforce data), utility bills (for energy use), financial reports (for governance compliance).
- Get Expert Support for Your Reporting
- Experts can help you choose the right framework that your business needs, they ensure compliance with the regulations
- Report and improve over time
- Set yearly ESG goals and track improvements over time.
Conclusion: Taking the Fist Step towards Sustainability Reporting
Sources:
- https://www.efrag.org/en/projects/voluntary-reporting-standard-for-smes-vsme/concluded
- https://www.efrag.org/sites/default/files/sites/webpublishing/SiteAssets/VSME%20Standard.pdf
