How to create a VSME sustainability report

The business world is changing. What used to be optional, demonstrating your commitment to the environment, people, and ethical management, is quickly becoming a requirement.

Not just because of regulations coming from Europe, but also because clients, suppliers, financial institutions, and even employees want to know more: what is your company doing for the planet, how does it treat people, and does it have a clear strategy for the future?

Until recently, small businesses were left out of this conversation. Sustainability seemed like a thing for large corporations. That has changed.

Today, SMEs can and should communicate what they are doing using a simple, accessible framework tailored to their needs: the VSME standard.

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What is the VSME standard?

VSME stands for Voluntary Sustainability Standard for Micro Enterprises and SMEs.

It is a voluntary sustainability standard specifically designed for micro, small, and medium-sized enterprises. EFRAG, the European body responsible for sustainability reporting standards, developed it as a simplified, proportionate version of the CSRD framework.

The main difference: it is not mandatory, and it is not designed for large listed companies. The goal is to allow any SME, regardless of sector or size, to create a clear, proportional, and useful sustainability report.

The standard includes questions, indicators, and thematic blocks, but also leaves room for flexibility so each company can speak from its own reality. Many SMEs use VSME as a first step before full ESRS reporting if CSRD scope expands later.

Why should an SME create a VSME report?

There are many reasons an SME might consider creating its first VSME report:

Access to green financing: Many banks and EU funds are starting to request ESG data, even from small businesses.
Competitive advantage: If you bid for public contracts or work with large clients, you will be asked about your social and environmental impact.
Reputation boost: Communicating your commitment strengthens your brand with both clients and employees.
Preparation: Although VSME is voluntary, it is a good first step if your sector becomes regulated in the future.
Internal decision-making: Measuring and organizing information helps identify inefficiencies, risks, and areas for improvement.

Large buyers increasingly request supplier data even when SMEs are not legally in scope for CSRD. VSME defines a proportionate baseline so you can respond without overbuilding a full corporate disclosure machine on day one.

The case of Ejemplo Sostenible S.L.

To show how a VSME report can be structured, let us follow the fictional case of Ejemplo Sostenible S.L., a textile company based in Spain.

With over a decade in operation and a solid team, they have decided to formalize and communicate their sustainability commitment. Not because of legal obligations, but because they believe the time is right to take that step.

How to structure a VSME report

The standard divides content into thematic blocks. You do not need to follow all of them or use technical language, but you are encouraged to clearly answer a few key questions. Here are the ten blocks most SMEs use:

1. Who we are and what we do

Every report should begin by explaining who the company is: what it does, what sector it operates in, its history, organizational structure, headquarters location, workforce size, and approximate scale of operations.

There is no need to share confidential figures, but context is important. This section can also include a brief vision statement on sustainability: why it matters to the business model, how it fits the company culture, and what the company hopes to achieve in the medium term.

2. Policies and commitments

This is where the company outlines its core sustainability principles and internal policies. This may include:

Commitments to environmental and labor compliance.
Statements on transparency and continuous improvement.
References to internal codes of conduct or ethical principles.
Declarations of intent, e.g., prioritizing eco-design, supporting gender equality, or promoting the local economy.

For Ejemplo Sostenible S.L., the focus is on reducing environmental impact, fostering a fair working environment, and maintaining ethical supplier relationships.

3. Actions taken

A good report goes beyond commitments. It should describe what is actually being done:

Process changes to improve efficiency.
Recycling, energy-saving, or waste reduction initiatives.
Internal training or health and safety programs.
Social impact activities in the local community.

In our fictional company, actions include upgrading machinery to cut energy use, launching an internal recycling program, and training staff in sustainable practices.

4. Improvement goals

Sustainability is a journey, not a destination. The VSME framework also asks about the future: what needs improvement and what goals have been set.

Examples include increasing use of recycled materials, obtaining an environmental certification, cutting emissions, improving team diversity, or digitizing supply chain traceability. The goal is not to promise the impossible, but to show real, achievable steps forward.

5. Environmental indicators

Exact figures are not always required, but relevant environmental data is encouraged. For example:

Energy consumption and use of renewable sources.
Water usage and saving measures.
Waste management: recycling, reuse, or reduction.
Impact on biodiversity: protected areas or projects.
Greenhouse gas emissions.

This section helps demonstrate, tangibly, the company’s environmental footprint and how it is being managed. Linking energy and emissions data to a basic carbon footprint calculation strengthens credibility with banks and large clients.

Beyond the environment, people matter. Key aspects include:

Workforce composition: gender balance, inclusion, average age.
Working conditions: wages, benefits, work-life balance.
Training and professional development.
Occupational health and safety.
Relations with unions or collective bargaining.

Ejemplo Sostenible, for instance, highlights that all employees have received sustainability training and that safety measures are in place to prevent workplace accidents.

7. Governance and ethics

This section covers governance: how decisions are made, which values are promoted, and what mechanisms prevent misconduct.

Is there a code of ethics?
Are there whistleblowing channels?
Are internal audits conducted?
Who makes up the leadership team?

You do not need to be a large corporation to have a basic ethical structure. Many SMEs already follow these practices informally. This block simply formalizes and makes them visible.

8. Sustainability in the value chain

An SME does not act in isolation. VSME encourages looking outward toward suppliers and partners. Possible actions:

Asking suppliers if they meet environmental or labor standards.
Favoring local or social economy companies.
Signing joint sustainability commitments.
Conducting basic sustainability surveys or audits.

Ejemplo Sostenible, for example, has begun working with its supplier network to ensure everyone meets a minimum sustainability standard.

9. Stakeholder engagement

It is not just about compliance, it is about listening. A VSME report can include how you engage with key stakeholders:

Customers: Are they informed clearly?
Employees: Are their needs heard?
Local community: Is there any relationship?
Investors or partners: What information is shared with them?

SMEs do not need massive forums. Sometimes regular meetings, anonymous surveys, or an active contact section on your website are enough.

10. Challenges and opportunities

To wrap up, many companies include a final reflection:

What was challenging in this process?
What risks have been identified?
Where do they see opportunities?

In the case of Ejemplo Sostenible, they highlight the challenge of measuring indirect supply chain impact, but also the potential of the circular economy and the competitive edge of being sustainable in a traditional sector.

Tip: Start with the blocks your stakeholders ask about most (often environmental indicators and value chain). You can add governance and social depth in year two without rebuilding your data model if you use structured [SME sustainability software](/blog/sme-sustainability-software) from the start.

What now?

A VSME report is not meant to sit in a drawer. You can:

Publish it on your website.
Attach it to proposals or bids.
Send it to banks or funds that request it.
Share it with employees or include it in internal training.

And since it is a voluntary framework, it can evolve each year, improving format and diving deeper into new topics. It is not about perfection on day one. It is about getting started.

Conclusion

Sustainability is no longer a luxury. It is a tool for competitiveness, talent attraction, differentiation, and long-term viability.

With the VSME framework, any SME can take that first step without overcomplicating things. You do not need to be a big company to make a big commitment. You just need the will, some structure, and the courage to tell your story well.

Why Dcycle supports VSME reporting for SMEs

Dcycle is a technology platform, not a consultant or auditor. We help SMEs collect environmental, social, and governance data once and map it to VSME outputs, carbon footprint metrics, and CSRD-ready structures when scope expands.

Automated data collection from utilities, travel, and operational sources reduces manual work, while evidence traceability keeps bank and buyer requests answerable without last-minute spreadsheet rebuilds.

Ready to build your first VSME report with data you can reuse for CSRD and carbon footprint reporting?

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Frequently asked questions (FAQs)

Is VSME reporting mandatory for SMEs?

No. VSME is voluntary. EFRAG designed it for micro, small, and medium enterprises that want a proportionate sustainability report without full CSRD obligations. Many SMEs still publish VSME reports because banks, buyers, and investors request ESG data.

What is the difference between VSME and CSRD?

CSRD is mandatory EU corporate sustainability reporting with ESRS datapoints for in-scope entities. VSME is a simplified voluntary standard for smaller companies. VSME is often a stepping stone: the same operational data can later map to CSRD if your company grows into scope.

Do I need exact figures for every VSME indicator?

Not always. VSME encourages relevant qualitative and quantitative information proportional to your size and resources. Environmental indicators such as energy and emissions benefit from basic numbers, but the standard allows flexibility so SMEs can start and improve year on year.

How long does it take to create a first VSME report?

Timeline depends on data readiness. SMEs with organized energy, HR, and supplier records can draft a first report in weeks. Teams starting from scattered spreadsheets should plan a phased rollout: core company profile and environmental indicators first, then social and governance depth.

Can I use VSME to respond to large customer questionnaires?

Yes. VSME defines a proportionate disclosure baseline that many large companies reference when requesting supplier sustainability data. Mapping your VSME blocks to customer questionnaires early reduces duplicate work across RFQs and audits.

Can Dcycle help with VSME reporting?

Yes. Dcycle supports VSME-style outputs alongside carbon footprint, CSRD, and other frameworks from one data model. It is a software platform; legal interpretation and external assurance still require your advisors where applicable.