European Commission Introduces Voluntary Sustainability Reporting Standard for SMEs

On 30 July 2025, the European Commission adopted a recommendation on voluntary sustainability reporting for small and medium-sized enterprises (SMEs). The goal of this recommendation is to reduce the reporting burden for SMEs that are not subject to the Corporate Sustainability Reporting Directive (CSRD) but are increasingly facing requests for sustainability-related information from larger companies and financial institutions.

What Does the New Standard Offer?

The recommendation introduces a Voluntary Sustainability Reporting Standard for SMEs (VSME), developed by EFRAG, the Commission’s technical advisory body for sustainability reporting. This standard is intended to provide SMEs with a simpler and more structured way of disclosing key sustainability information – whether to respond to external requests or for internal performance monitoring.

The Commission encourages large companies and financial institutions to rely on this voluntary standard, as much as possible, when seeking sustainability information from SMEs. This approach is expected to reduce the administrative burden on SMEs and improve data comparability.

Why Is This Important?

Although SMEs are not required to report under the CSRD, they often face pressure from value chain partners to provide sustainability data. By adopting a common voluntary standard, SMEs can:

• gain better access to sustainable finance,
• enhance their resilience and competitiveness,
• improve understanding and monitoring of their sustainability performance,
• more easily integrate into sustainability-focused value chains.

Linked to the CSRD Reform

The new voluntary standard is part of the broader Omnibus I simplification package, presented by the Commission in February 2025. This package proposes limiting mandatory sustainability reporting to large companies with over 1,000 employees. For companies below this threshold, the Commission advocates a voluntary approach, using a single, harmonized standard developed based on the current recommendation.

Once formally adopted as a delegated act, the voluntary standard will also serve as a “value chain cap”, helping to protect SMEs from excessive or inconsistent information requests from business partners.

What’s Next?

The recommendation adopted now serves as an interim solution to address market needs until the delegated act on the voluntary standard is finalized. The final content of the standard may differ depending on the outcome of negotiations between EU co-legislators on the Omnibus I package.

Source: European Commission