VSME Sustainability Report: Mapping the material ESRS topics

The Corporate Sustainability Reporting Directive (CSRD) brings new requirements for sustainability reporting. While large companies are obliged to conduct a double materiality assessment, small and medium-sized enterprises (SMEs) face a different question: how can they sensibly align their sustainability strategy without the same level of resources? This is where the VSME sustainability report comes into play.

The VSME standard (Voluntary Standard for non-listed micro-, small- and medium-sized enterprises) offers a voluntary but practical solution for SMEs to address ESG-relevant issues. But how can the material topics on the ESRS AR 16 list be efficiently linked to the disclosure points in the VSME sustainability report?

In this article, we show you how to create a systematic mapping of the material topics for your VSME sustainability report. We explain which topics of the European Sustainability Reporting Standards (ESRS) are particularly relevant and how they can be assigned to the individual VSME report disclosures.

Overview of the ESRS VSME Sustainability Report

What is the VSME sustainability report?

The ESRS VSME sustainability report is based on EFRAG's voluntary VSME standard, which was developed specifically for unlisted small and medium-sized enterprises. The aim is to provide practical and simplified sustainability reporting that is based on the requirements of the European Sustainability Reporting Standards (ESRS) in order to establish a uniform standard.

Why should SMEs use the VSME sustainability report?

Even though the VSME standard is not a legal requirement, it offers clear advantages:

What is the structure of the VSME sustainability report?

The VSME standard divides the report into two modules:

1. Basic module (mandatory components for basic reporting)
   • General company information
   • Environmental metrics (e.g. energy consumption, CO2 emissions, waste management)
   • Social metrics (e.g. working conditions, equal rights)
   • Governance aspects (e.g. corruption prevention)
2. Comprehensive module (additional optional information for a detailed sustainability assessment)
   • Climate strategy and reduction targets
   • Risk management in relation to sustainability
   • Extended social and governance aspects

We have collected all the disclosure requirements of the voluntary reporting standard and prepared them in a VSME data point list so that all the relevant information is clearly presented and you can start collecting data straight away.

How are the VSME sustainability report and the materiality assessment related?

A double materiality assessment (DMA) is no longer mandatory after the VSME Update from December 2024. However, the materiality assessment can serve as a strategic tool and bring real benefits to organizations. Companies can assess which ESRS topics actually pose material opportunities and risks for their business model, both financially and from an ecological and social perspective.

Methodology of mapping the key topics

Why is mapping useful in the VSME sustainability report?

Although DMA is not mandatory under the ESRS VSME standard, it can help companies align their sustainability strategy in a targeted way. Mapping material topics enables SMEs to link relevant ESG topics from the ESRS standards with the disclosure requirements in the VSME standard. This allows you to:

Step-by-step instructions for mapping

A systematic mapping of the material topics in the VSME sustainability report follows these steps:

1) Identify topics from the ESRS topic list

The ESRS AR 16 list contains ESG topics that may also be relevant for the VSME sustainability report. These include:

• Climate change (ESRS E1): CO2 emissions, climate risks, energy consumption
• Pollution (ESRS E2): Air, water and soil pollution
• Water and marine resources (ESRS E3): Water consumption, marine ecosystems
• Biodiversity (ESRS E4): Biodiversity, ecosystem protection
• Circular economy (ESRS E5): Resource consumption, waste management
• Working conditions (ESRS S1-S2): Safety, remuneration, social standards
• Business conduct (ESRS G1): Corruption prevention, business ethics

After conducting an analysis according to the principle of double materiality, companies know which of these topics to focus on.

2) Prioritize key topics

Not every topic from the ESRS AR 16 list is relevant for every company. Prioritization is carried out through the structured recording and evaluation of IROs (Impacts, Risks, Opportunities). Helpful inputs include:

• Sector affiliation (e.g. for manufacturing companies: energy consumption and waste management)
• Regulatory requirements (e.g. Supply Chain Act for globally active companies)
• Stakeholder expectations (e.g. sustainability criteria of investors and banks)

3) Comparison with the VSME disclosure requirements

Once the relevant ESRS topics have been identified, they are assigned to the corresponding reporting requirements in the VSME sustainability report.

Download mapping table free of charge

4) Integration into VSME reporting

Once the mapping has been completed, you can:

• Define core indicators for the VSME sustainability report
• Close data gaps and optimize internal processes for ESG reporting
• Communicate material topics transparently in the sustainability report

Mapping of environmental topics (ESRS E1-E5) in the VSME sustainability report

A central element of the VSME sustainability report is the disclosure of environmental indicators. The ESRS environmental topics (E1-E5) play a key role here. Below we show how these topics can be assigned to the VSME disclosure requirements.

ESRS E1 - Climate change

Climate change has a direct impact on companies, from rising energy costs to physical risks from extreme weather events. Many companies also actively contribute to climate change through their emissions. The relevant reporting requirements in the VSME sustainability report are:

• B3 - Energy and greenhouse gas emissions: Recording of energy consumption and CO2 emissions.
• C3 - Climate targets and transition plans: If a company has specific climate strategies, these can be disclosed in the comprehensive module.
• C4 - Climate-related risks: Assessment of physical and transitory climate risks, including extreme weather events, regulatory changes and financial impacts on the business.

Practical example: A production company can state in the VSME sustainability report how much CO2 is generated by energy consumption and what measures are planned to reduce it.

ESRS E2 - Pollution

Air, water and soil pollution are key challenges in many industries. The VSME sustainability report covers these topics as follows:

• B4 - Air, water and soil pollution: Companies should indicate relevant emission values here.

Practical example: A printing company can explain in the report how solvent emissions are reduced and recycling techniques for waste water are used.

ESRS E3 - Water and marine resources

Water management is particularly relevant in water-intensive industries. The corresponding disclosure requirements in the VSME sustainability report are:

• B6 - Water consumption and water stress management: Companies indicate their water withdrawal, consumption and recycling here.

Practical example: A hotel can show in the report how it reduces consumption through water-saving technologies and integrates rainwater utilization.

ESRS E4 - Biodiversity and ecosystems

Companies operating in or near biodiversity-sensitive areas should consider their impacts. Important points in the VSME sustainability report:

• B5 - Land use and biodiversity measures: Information on sites in protected areas and measures to preserve biodiversity.

Practical example: An agricultural cooperative can demonstrate how it protects soil health through sustainable cultivation methods.

ESRS E5 - Circular economy

The use of resources and waste management are key issues in the circular economy. The VSME sustainability report includes:

• B7 - Resource utilization and waste avoidance: Disclosure of material flows and waste volumes as well as recycling rates.

Practical example: An electronics manufacturer can specify how it uses recyclable materials and avoids electronic waste.

Mapping of social aspects (ESRS S1-S4) in the VSME sustainability report

In addition to environmental factors, social sustainability issues play a central role in the VSME sustainability report. ESRS standards S1 to S4 cover various social aspects, including working conditions, human rights and consumer protection.

ESRS S1 - Own workforce

The protection and promotion of employees is essential for sustainable companies. In the VSME standard, these topics are covered by:

• B8 - Working conditions and employment structure: Information on the workforce, contract types and employee rights.
• B9 - Health and safety: Measures for accident prevention and workplace health promotion.
• B10 - Remuneration, collective agreements and further training: Wage transparency, further training opportunities and collective agreements.
• C5 - Additional (general) information on the workforce: Extended information on the employment structure, including contract types, working models and diversity indicators.
• C6 - Human rights policies and processes for own employees: Presentation of internal guidelines and measures to protect employee rights and human rights due diligence.
• C7 - Serious human rights abuses: Disclosure of potential or actual human rights abuses in own workforce, value chain and affected communities, and actions taken to prevent and remedy these.

Practical example: A production company could report that 80% of its employees are covered by collective agreements and that annual safety training is carried out.

ESRS S2 - Workforce in the value chain

Companies are increasingly responsible for the conditions in their supply chain. Relevant disclosure obligations in the VSME sustainability report:

• C7 - Serious human rights abuses: Disclosure of potential or actual human rights abuses in own workforce, value chain and affected communities, and actions taken to prevent and remedy these.

Practical example: A fashion company could state that 95% of its suppliers have been audited and comply with BSCI social standards.

Mapping of governance aspects (ESRS G1) in the VSME sustainability report

In addition to environmental and social issues, governance factors are a key component of sustainability reporting. The ESRS G1 standard covers aspects such as corporate ethics, corruption prevention and responsible business practices.

ESRS G1 - Business conduct

Compliance with ethical business practices strengthens the trust of investors, customers and stakeholders. The relevant reporting obligations in the VSME sustainability report are:

• B11 - Corruption and business ethics: Disclosure of measures to prevent corruption, whistleblower systems and ethical business practices.
• C8 - Sales and EU benchmark exclusions: Disclosure of sales in sensitive industries and possible exclusions from sustainability benchmarks.
• C9 - Gender diversity in management: Information on gender distribution in management and diversity measures.

Practical example: A company could report that all managers undergo annual anti-corruption training and that an internal whistleblower system is in place.

Governance and sustainability strategy

Governance structures also play a role in the strategic management of sustainability issues. In the VSME sustainability report, companies can explain how they manage sustainability:

B2 - Sustainability guidelines and future strategies: Presentation of internal ESG guidelines and sustainability targets.

Practical example: An SME could state that it has appointed a sustainability officer and conducts regular training for employees.

Challenges and solutions for SMEs

Although the VSME standard offers simplified reporting for SMEs, there are still implementation challenges. Small and medium-sized enterprises often have limited resources to develop a detailed sustainability strategy. Here are the typical challenges and practical solutions.

1) Lack of internal resources and know-how

Problem: Many SMEs do not have their own sustainability departments or ESG experts.

Solution:

• Use purpose-built tools such as the VSME sustainability report template for SMEs.
• Work with external CSRD consultancies or industry associations that offer reporting support.
• CSRD training for employees to build understanding of ESG requirements.

Practical tip: Many companies, chambers of commerce and industry associations offer free CSRD webinars.

2) Data collection and documentation

Problem: Companies have to record a large amount of ESG data that has not yet been systematically documented.

Solution:

• Introduce a simple ESG database to systematically collect relevant information.
• Use ERP systems or ESG reporting software that automatically evaluates ESG data.
• Integrate supplier surveys to document environmental and social standards in the value chain.

Practical tip: Use existing energy and financial reports as well as ISO certifications or EMAS as a basis for data collection to avoid duplicating work.

3) Lack of comparability with large companies

Problem: SMEs worry that their sustainability report cannot keep up with the comprehensive CSRD reports of large companies.

Solution:

• Focus on relevance rather than completeness. The VSME sustainability report lets you concentrate on the key issues.
• Use benchmark data from the industry to present comparable sustainability figures.
• Communicate your ESG strategy clearly to demonstrate credible progress.

Practical tip: Transparency counts for more than perfection. Even small companies benefit from a step-by-step ESG approach.

4) Lack of financial resources for sustainability measures

Problem: Investments in sustainability, such as CO2 reduction or the circular economy, can be cost-intensive.

Solution:

• Use funding programs and ESG financing specifically provided for SMEs.
• Integrate sustainable supply chain strategies to achieve long-term savings.
• Work with other companies and industry associations to jointly implement sustainability initiatives.

Practical tip: Banks are increasingly offering green loans with better conditions for sustainable investments.

Practical solutions for successful ESG integration

Despite these challenges, SMEs can successfully implement the VSME sustainability report.

Conclusion and recommendations for action

The VSME sustainability report gives SMEs a practical way to structure their ESG strategy and create transparency. Even though CSRD is not mandatory for SMEs, voluntary reporting brings competitive advantages, better financing conditions and more efficient use of resources.

Recommendations for simple implementation

With increasing ESG requirements from value-chain partners and financial institutions, the VSME sustainability report is becoming more relevant for SMEs every year. Those who integrate sustainability aspects early secure long-term competitive advantages and stay fit for the future.

Frequently asked questions about the VSME sustainability report