5 reasons why Irish SMEs should consider VSME

As environmental legislation, such as the EU Corporate Sustainability Reporting Directive (CSRD) and the Ecodesign for Sustainable Products Regulation (ESPR), begins to make a real impact on large corporates, SMEs in the supply chain are increasingly expected to show how they manage their environmental and social impact. While large companies face mandatory environmental reporting, SMEs not yet in scope are under growing pressure from customers, banks, and supply chain partners to demonstrate responsible practices.

Supporting in-scope customers and partners to comply with their regulatory requirements and seeking out opportunities for more favourable interest rates through sustainable finance will be critical to the long-term growth of SMEs. However, without having to adhere to specific regulations, EU Directives, or rules, how can SMEs approach sustainability reporting?

One such way is voluntarily accelerating sustainability reporting by adopting VSME, the Voluntary Sustainability Reporting Standards, introduced by EFRAG. There has been a noticeable increase in focus from Chartered Accountants Ireland and among our clients, who are becoming more interested in how to approach sustainability reporting.

What is VSME?

The Voluntary Sustainability Reporting Standard for SMEs (VSME) offers a flexible, more accessible way to ‘dip your toe’ in ESG reporting, without the legal obligations.

It is a voluntary framework designed to help unlisted SMEs report on sustainability progress. While not mandatory, it provides a standardised way for SMEs to respond to sustainability information requests from customers, investors, and supply chain partners – including tenders.

The framework is published by the European Financial Reporting Advisory Group (EFRAG) and is structured across two levels—Basic and Comprehensive. The distinction between Basic and Comprehensive enables businesses to adopt VSME in a way that suits their size, sector, and resources.

5 reasons why you should consider VSME for your SME

1. It’s Voluntary – The overarching benefit with VSME is that it is voluntary and not legally binding. It enables you to show your company’s commitment to sustainability without adding legal and compliance risks.

2. It Helps with Tendering and Supply Chains – It is now standard in tenders and procurement processes to request prospective companies to demonstrate their ESG credentials. Delays to the EU CSRD for smaller companies (if this comes to fruition) are unlikely to change this. Applying VSME gives you a credible, standardised way to do this—especially if you’re supplying to larger companies with their own reporting obligations.

3. Supports Access to More Affordable Finance – Banks and investors increasingly want to see ESG information when assessing business loans or investments. Having a VSME-aligned sustainability report may improve your position. A quick glance at the latest corporate rates from PTSB confirms this, as the green business loan rates come in over 2% lower than their standard corporate equivalent.

4. Prepares You for Future Regulation – While not currently mandatory, future EU regulation will certainly extend to SMEs, albeit it is not clear yet how this will progress. Starting now with VSME can prepare your business for what’s ahead.

5. Supports Growth – According to PwC’s 2024 Voice of the Consumer Survey, 80% of consumers are willing to pay more for sustainably produced or sourced goods, with an average premium of 9.7%. This is despite ongoing concerns about inflation and increased living costs – demonstrating the importance of green credentials in product-based businesses in particular.

Explore Green Grants and Supports

If you’re interested in improving your sustainability and reporting efforts, there are several supports available:

• GreenStart and GreenPlus (Enterprise Ireland): These offer funding to help businesses develop a basic environmental management system (GreenStart) or go further with advanced sustainability planning (GreenPlus), the latter being up to €50,000 in grant funding.
• SEAI SME Support Scheme for Energy Efficiency: Various grants available, from initial audit to the implementation of large-scale building fabric upgrades.
• Local Enterprise Office (LEO) Green for Micro: Tailored support for micro-enterprises to prepare for the low-carbon economy, including consultancy and funding advice.
• Climate Toolkit 4 Business: An online tool supported by the Government of Ireland to help SMEs assess their environmental impact and identify funding supports.

Find out more about what’s involved

Read the latest from EFRAG on VSME and how to progress adherence to VSME. In summary, the Basic module focuses on environmental metrics such as energy management, water usage, impacts on biodiversity, and waste management, as well as social aspects and governance, whereas the Comprehensive module focuses on policies and procedures implemented to address sustainability issues, targets, progress tracking, and long-term strategy. What’s more, SMEs can choose how they report under VSME as long as it is publicly accessible, free to access, and easy to navigate. This could be a PDF loaded to your website containing all your environmental information, specifying which module you’ve adhered to – Basic or Comprehensive.

Read more about VSME from EFRAG

Talk to our experts

At AAB, we help SMEs get started with sustainability planning and compliance. If you’d like to explore your green transition further, we’re here to help. Get in touch with Brian Dunne or your usual AAB contact.