VSME Explained: What SMEs Need to Know About Sustainability Reporting
Option A: Only report the Basic Module
Option B: Report the Basic Module and the Comprehensive Module
The Basic Module is the target approach for micro-undertakings and constitutes a minimum requirement for other undertakings. To align a company’s sustainability report with the VSME standard, it is recommended to report the Basic Module as comprehensively as possible. The Comprehensive Module provides disclosures that are expected to address comprehensive information needs by the undertaking’s business partners, such as investors, lenders and corporate clients. The disclosures in this module reflect the business partners’ respective obligations under relevant laws and regulations. We suggest that SMEs (excluding micros) report on both the Basic Module and the Comprehensive Module, thus minimizing the need for additional reporting in case the company’s business partners require information outside the scope of the Basic Module. Certain disclosures only apply to companies “if applicable”, e.g. in certain circumstances. In each case, the standard specifies such circumstances.Basic Module Structure
The Basic Module consists of 11 disclosures (B1-B11). Out of the 46 data points, 27 are mandatory for all companies, 15 should be disclosed if applicable while 4 are entirely voluntary. Listed below are all 11 disclosure requirements explained.
B1: Basis for preparation
The company is to disclose the format in which it reports, how the sustainability report has been prepared, the list of potential subsidiaries if it is a consolidated sustainability report and other basic company information. The company should also provide a description of sustainability-related certifications or labels it has obtained.
B2: Practices, policies and future initiatives for transitioning towards a more sustainable economy
The reporting company should briefly describe the practices, policies and future initiatives that it has in place for transitioning towards a more sustainable economy. These include what the company does to reduce its negative impacts and to enhance its positive impacts on the people and the environment. To streamline this disclosure for SMEs, the VSME standard offers a template prefilled with sustainability topics to consider.
B3: Energy and greenhouse gas emissions
The company shall report on its energy consumption, energy mix (renewable or non-renewable) and its Scope 1 & Scope 2 greenhouse gas (GHG) emissions. The Scope 2 emissions should be reported using the location-based methodology as per the GHG protocol. The company is also to disclose its GHG intensity (calculated by dividing total GHG emissions by turnover).
B4: Pollution of air, water and soil
If the company is required by law to report its emissions of pollutants to air, water or soil, or if it voluntarily reports on them according to an Environmental Management System, it shall disclose the same information in this disclosure requirement.
B5: Biodiversity
In the biodiversity section, the company has to disclose the number and area of sites that it owns, has leased, or manages in or near a biodiversity sensitive area. The company may also report other metrics on land-use related to the type of land.
B6: Water
The company has to disclose its total water withdrawal (the amount of water taken from external sources into the boundaries of the company). Further, the company shall also report the amount of water withdrawn at sites of high water-stress. In the case the company has production processes in place that consume a significant amount of water, the company shall also disclose the water consumption (the difference between water withdrawal and water discharge).
B7: Resource use, circular economy and waste management
In this disclosure requirement, the company is expected to disclose whether it applies circular economy principles and, if so, how the principles are applied. The company shall also report the annual generation of waste by type and the degree of recycling or reuse. For companies in sectors that have substantial material flows (manufacturing, construction etc.), the annual mass-flow of the materials should also be reported.
B8: Workforce – General characteristics
In this section, the company shall disclose the number of employees. The company shall also report the number of employees by type of employment contract (temporary/permanent), gender and by country if the company operates in several country. If the company has more than 50 employees, it shall also disclose the employee turnover rate.
B9: Workforce – Health and safety
The company is expected to report the number and rate of recordable work-related accidents and also whether work-related fatalities have occurred.
B10: Workforce – Remuneration, collective bargaining and training
This disclosure requirement stipulates that companies should report on whether the company has employees on national minimum wage law, the gender pay gap of the employees if the company has more than 150 employees, the percentage of employees that is covered by the collective bargaining agreements and the employee training hours per fiscal year.
B11: Convictions and fines for corruption and bribery
In case of convictions and fines during the fiscal period, the undertaking shall report the number of convictions, and the total amount of fines incurred for the violation of anti-corruption and antibribery laws.
Comprehensive Module Structure
C1 – Strategy: Business model and sustainability – related initiatives
In this disclosure the company shall describe the key elements of its business model and strategy such as: products, markets, business relationships and sustainability strategies.C2 – Description of practices, policies and future initiatives for transitioning towards a more sustainable economy
If the company has practices, policies, or future initiatives in place as defined in the Basic Module B2, it is expected to elaborate on and describe them further in this module.Comprehensive Module – Environmental Metrics
The Comprehensive Module further indicates that companies in sectors with high value chain impacts in relation to GHG emissions should consider reporting the Scope 3 emissions as well, as part of the B3 disclosure.C3 – GHG reduction targets and climate transition
If the company has set GHG emission reduction targets, it must disclose them in absolute values for Scope 1 and Scope 2 emissions. If Scope 3 reduction targets are included, the company must also provide details for significant Scope 3 emissions, including:- Target year and value
- Base year and value
- Units used for the targets
- Share of Scope 1, Scope 2, and (if applicable) Scope 3 emissions covered by the target
- Key actions planned to meet the targets
C4 – Climate risks
If the company has identified climate-related hazards or transition events that pose significant risks, it should:- Briefly describe these hazards and events.
- Explain how it assessed the exposure and sensitivity of its assets, activities, and value chain to these risks.
- Specify the timeframes for the identified hazards and events.
- Indicate whether it has implemented adaptation measures to address these risks.
C5 – Additional (general) workforce characteristics
For companies with 50 or more employees, they may choose to disclose:- The female-to-male ratio at the management level during the reporting period.
- The number of self-employed individuals working exclusively for the company and temporary workers supplied by employment service providers.
C6 – Additional own workforce information – Human rights policies and processes
In this disclosure the company shall expand on human rights policies for its own workforce and disclose whether the following areas are covered by the policies:- child labour
- forced labour
- human trafficking
- discrimination
- accident prevention
C7 – Severe negative human rights incidents
To further expand on the disclosure in C6, the company is also to report on whether there are any confirmed incidents relating to:- child labour
- forced labour
- human trafficking
- discrimination
C8 – Revenues from certain sectors and exclusion from EU reference benchmarks
If the company derives revenue from economic activities relating to controversial weapons, tobacco production, fossil fuels or chemical production (if the company is a manufacturer of pesticides or other agrochemical products), it shall disclose the revenue generated from these sectors.C9 – Gender diversity ratio in the governance body
The company is to report the gender diversity in its governance body. The governance body refers to the highest decision-making authority in a company, most often the board of directors.esgResilience Meets VSME Compliance Requirements
We are proud to announce that esgResilience is the first sustainability reporting service to fully comply with the new VSME standard. We have translated the above disclosures into easy-to-understand, business-relevant questions and metrics. In addition to integrating new standards, our platform continues to offer an emission and climate calculator (taxonomy) and sector-based benchmark analytics to help SMEs streamline their sustainability efforts.
Want to learn more? Contact us today to see how we can support your sustainability journey!
The author of this article, Filip Kaila is Co-Founder and CPO of esgResilience, driving our product development with his expertise in sustainability regulation, reporting, and analytics.
With a background in accounting and sustainability consulting, Filip is passionate about empowering SMEs by simplifying sustainability reporting and ensuring esgResilience content aligns with evolving standards.
The complete VSME standard document is available here.
