VSME Sustainability Reporting Standard

Overview

This lecture introduces the Voluntary Standard for non-listed Micro, Small, and Medium-sized Enterprises (VSME) for sustainability reporting, detailing its objective, scope, structure, principles for report preparation, and required disclosures.

Objective and Scope of the VSME Standard

• The VSME Standard helps micro, small, and medium undertakings provide sustainability data for large companies, banks, and investors.
• Supports management of environmental and social challenges to enhance competitiveness and resilience.
• Applies voluntarily to non-listed undertakings in the EU, based on size thresholds for micro (<€450k balance, <€900k turnover, <10 employees), small, and medium categories.
• Encourages use by undertakings outside the Corporate Sustainability Reporting Directive (CSRD).
• Standard is proportionate, reflecting the capacities of smaller undertakings.

Structure of the Standard

• Two main modules: Basic Module (required minimum, suitable for micro-enterprises) and Comprehensive Module (additional datapoints for broader stakeholder needs).
• Once a module is chosen, all required disclosures must be included if applicable.

Principles for Report Preparation

• Disclose positive/negative impacts on people/environment and how these affect financial outcomes.
• Information must be relevant, faithful, comparable, understandable, and verifiable.
• Additional sector-specific metrics/disclosures should be added as needed.
• Comparative data from previous year reported from the second year onward.
• Groups should consolidate reports; subsidiaries can be exempt.
• Report timing should align with financial statements or annual update needs.
• Sensitive/classified info may be omitted with disclosure.

Basic Module: Required Disclosures

• B1: State chosen reporting option, omitted disclosures, consolidation status, legal form, sector code, financial/employee data, locations, and certifications.
• B2: Describe sustainability practices, policies, future initiatives, and targets for environmental and social improvement.
• B3: Disclose energy consumption (renewable/non-renewable) and GHG emissions (Scope 1 & 2), plus GHG intensity (GHG per turnover).
• B4: If required, disclose air/water/soil pollutant emissions, or refer to public records.
• B5: Report number/area of sites in/near biodiversity-sensitive areas; optionally disclose land-use metrics.
• B6: Report total water withdrawal, withdrawals in high-stress areas, and—if relevant—net water consumption.
• B7: State if circular economy principles are applied; disclose waste by type and recycling/reuse, and, if significant, annual mass-flow of key materials.
• B8: Disclose workforce by contract type, gender, and country; if 50+ employees, disclose turnover rate.
• B9: Report recordable work-related accidents and fatalities.
• B10: State if minimum wage is met, gender pay gap (if ≥150 employees), collective bargaining coverage, and average training hours by gender.
• B11: Disclose convictions and fines for corruption/bribery.

Comprehensive Module: Additional Disclosures

• C1: Business model, strategy, markets, and main relationships, with sustainability focus.
• C2: Expanded description of sustainability initiatives; accountability levels.
• C3: GHG reduction targets (Scope 1, 2, 3), actions, and transition plans for high-impact sectors.
• C4: Climate risks—describe hazards, exposure, time horizons, adaptation actions, and financial impact.
• C5: Additional workforce info (gender ratio in management, self-employed/temporary worker data).
• C6: Human rights policies, coverage (e.g., child/forced labour, complaints mechanisms).
• C7: Disclose confirmed serious negative human rights incidents and response actions.
• C8: Revenues from controversial sectors (weapons, tobacco, fossil fuels, chemicals); exclusion from EU benchmarks.
• C9: Governance body gender diversity ratio.

Key Terms & Definitions

• Scope 1 GHG Emissions — Direct emissions from owned or controlled sources.
• Scope 2 GHG Emissions — Indirect emissions from purchased energy.
• Circular Economy Principles — Design and manage products for reuse, recycling, and minimizing waste.
• Collective Bargaining — Negotiations between employer(s) and worker representatives on working conditions.
• Recordable Work-Related Accident — Work event causing injury/illness, reportable if diagnosed by a professional.
• Hazardous Waste — Waste with properties posing risks to health/environment, as defined by EU law.

Action Items / Next Steps

• Review detailed guidance in the Standard for each disclosure.
• Use provided templates for reporting practices, policies, and metrics.
• Prepare comparative information for future reports.
• Check Appendix for sector-specific sustainability issues.
• Determine applicability of Comprehensive Module based on stakeholder requirements.