Voluntary ESG reporting can create new opportunities for SMEs

A joint article from Climaider and kompasbank.

Sustainability has become increasingly crucial for businesses in recent years, but until now, there has been no standard method for measuring and reporting it. SMEs have had to navigate a jungle of different and competing reporting frameworks.

That is now changing. The VSME standard has finally been adopted – one common standard for all SMEs in the EU.

VSME (Voluntary SME European Sustainability Reporting Standard) has been developed to make ESG reporting more accessible and user-friendly for the SME segment. Read here to learn what the new standard means for you, how it can create long-term benefits and strengthen your market position – and how to make the most of it.

We also present how Climaider and kompasbank can work together to help your company implement more sustainable reporting.

What is VSME?

As sustainability and environmental considerations become increasingly important for businesses, reporting requirements are also growing – even for small and medium-sized enterprises.

VSME is a voluntary standard that helps SMEs document their sustainability efforts clearly and practically. While the standard is not part of the EU's mandatory reporting requirements, it has been developed in response to a growing demand from banks, investors, and larger companies for consistent and reliable information on SMEs' sustainability efforts.

The goal is to make reporting on sustainability efforts easier without being overwhelmed by complex requirements. At the same time, the standard improves alignment with larger companies subject to stricter reporting regulations, which can strengthen both your market position and collaboration opportunities.

A user-friendly standard

After an extensive consultation, the standard has been revised to make it even more accessible for SMEs.

The previous modules have been combined and simplified to avoid unnecessary complexity. As a result, the reporting is now more manageable and easier to understand. It now consists of a maximum of two modules instead of the previous three, and the more text-heavy sections have been reduced. Therefore, the standard appears much more streamlined and straightforward than before.

Additionally, the requirement to conduct a detailed double materiality analysis has been removed, reducing the administrative burden while allowing you to provide relevant information.

Despite the simplification, EFRAG, which developed the standard, still emphasizes the benefits of using online tools. These are particularly useful in data collection, report structure, and calculating CO₂ emissions, ensuring complete data coverage and transparency in the calculations. This streamlines the process and ensures you get the most out of your efforts.

It can be beneficial to get an overview of the structure and find guides for the process on Virksomhedsguidens website.

Why is VSME useful?

Banks and larger companies today require consistency in reporting. VSME is designed to meet these requirements, so you don't have to create multiple reports for various purposes, saving time and money. The market is rapidly moving towards stricter requirements for sustainability data, and VSME reporting can give you an edge in maintaining competitiveness and securing better financial terms.

If you have already reported by the VSME, it may be a good idea to be proactive and share the report with the partners who will request data. This way, you provide the data in the format you already have, avoiding the need to fill out multiple different questionnaires.

Costs and benefits of VSME

An analysis conducted by EFRAG, which addresses costs and benefits, has shown that the investment in VSME can pay off in the long run – even though there is an initial setup cost.

Startup costs are typically higher for businesses that are required to report due to demands from business partners or financial institutions than those who report voluntarily. Businesses receiving data requests are more likely to use both the Basic Module and the Comprehensive Module and thus need to handle more data points. Over the coming years, approximately 20% of all SMEs in the EU are expected to use the VSME due to data requests, while an additional 15% will do so for voluntary reasons.

The voluntarily reporting companies choose to implement VSME reporting because they see direct benefits, such as strengthening their position in green markets or signaling a strong sustainability profile. For these companies, startup costs are typically slightly lower, as many will stick to the Basic Module. Additionally, these are typically companies that already focus on sustainability and thus often have existing resources and data in this area.

Costs

The same analysis from EFRAG concludes that companies with fewer than 20 employees can expect startup costs to be around DKK 30,000 in the first year. These costs include internal time and any assistance from external consultants and software. The costs will naturally be higher for larger SMEs, but experience shows that the relative burden decreases over time as the company learns to apply the standard.

After the startup year, annual costs decrease significantly as learning effects and automated solutions reduce the administrative burden.

Benefits

However, several benefits quickly become apparent:

Financial savings: More structured and reliable sustainability reporting can lead to lower financing costs, as banks often view companies with a solid ESG profile more positively, resulting in better loan terms.

Strengthened value chain: By following the standard, you get a tool that both banks, customers, and business partners trust. This can open the door to new business opportunities and strengthen your competitiveness. Specifically, this means you can expect to win more tenders, attract more customers, and retain skilled employees longer.

Future-proofing: Although the first few years may incur additional costs, the latest "cost-benefit analysis" conducted by EFRAG shows that the overall direct and indirect benefits will become positive from around 2027, provided that VSME is implemented in 2025. This means that the investment in VSME is considered a strategic bet that can deliver a clear profit over time.

Faster and cheaper: VSME reporting is significantly more straightforward to implement than the mandatory CSRD standard, as it requires less data and is less time-consuming. Smaller businesses can quickly start sustainability efforts without allocating significant resources to complex reporting requirements.

The collaboration between Climaider and kompasbank

At Climaider and kompasbank, we know that transitioning to more sustainable reporting can seem challenging – especially when, as an SME, you may not have the internal resources to take on the task. That’s why we’ve joined forces to make this process as smooth as possible for you:

• With Climaider's "one-stop-shop" for ESG reporting, you'll get help to gather all relevant data quickly. Using an integration with your accounting software, Climaider’s solution automates data collection and CO2 calculations. Afterward, you can generate reports in precisely the format you want. This ensures that your VSME reporting is efficient, transparent, and based on accurate data.

• As Denmark’s only dedicated SME bank, kompasbank helps you translate structured ESG reporting into tangible business benefits. Suppose you have control over your data and ESG reporting. In that case, it not only makes the process easier for us – it also lays the foundation for unlocking your full potential in terms of easier access to better financing terms, relevant advice, and faster processing times. The better your ESG data overview, the easier it is for us to tailor a financing solution for your business and help you run your company more efficiently.

Our collaboration allows you to receive the technical and financial support needed to make the transition to VSME as smooth and beneficial as possible.

Conclusion

VSME reporting represents an essential opportunity for SMEs that want to position themselves firmly in a world where sustainability is a focus. Although some investment is involved in getting started, analyses show that the long-term benefits – including better financing terms and enhanced competitiveness – clearly outweigh the initial costs.

Climaider and kompasbank are ready to help you realize these benefits. By combining our expertise in sustainability, financing, and banking services, we offer a comprehensive solution that makes the transition to VSME reporting simple and value-creating. Together, we ensure that your company meets the new requirements and takes advantage of the opportunities that come with modern and sustainable reporting.

In addition, on kompasbank's digital B2B marketplace, kompasbank navigator, you can get an overview of digital solutions that can help your business manage ESG data. Here, you can access tools that calculate your total CO2 footprint, engage employees in climate initiatives and CO2 reduction, and offer the possibility to offset the carbon footprint from business trips.

If you're interested in learning more, feel free to contact Climaider at oskar@climaider.com  or book a meeting with kompasbank here.

This article is based on the latest cost-benefit analysis of VSME. We hope our review can help clarify the standard's benefits and opportunities for SMEs.