The European Union’s new Voluntary Standard (VS) is replacing the previous VSME approach and is designed to draw a clearer line between proportionate sustainability information and excessive corporate data demands. It gives smaller and mid-sized businesses a common framework for responding to customers, banks and other stakeholders without being drawn into reporting requirements designed for much larger organisations. It is still voluntary, and the uptake is well reported as very low – but there is a change. And an important one at that.
A safer framework for suppliers
The standard is intended for businesses with up to 1,000 employees that are outside mandatory sustainability reporting requirements under the Corporate Sustainability Reporting Directive (CSRD). The difference is that Its importance extends beyond reporting. and smaller businesses increasingly face extensive ESG questionnaires from major customers seeking information about their supply chains. The new approach is intended to limit this burden by establishing a recognised set of sustainability information that businesses can provide rather than responding to multiple, inconsistent requests.
This creates greater protection and certainty for suppliers while helping larger businesses obtain more consistent and comparable information across their value chains. There is merit here and the law makes it clear that businesses cannot request more information above this standard – the downside is, the business may no longer then be able to supply the corporate if they stick to their agenda.
A proportionate two-tier approach
The framework provides two levels of reporting.
- The Basic Module (B1–B11) provides a relatively straightforward route for businesses needing to respond to routine sustainability requests. Information covers areas including energy, greenhouse gas emissions, water, workforce matters, remuneration, training and anti-corruption measures.
- The Comprehensive Module (C1–C9) allows businesses to provide additional sustainability information where this is commercially useful. For more ambitious businesses, this could help demonstrate sustainability credentials to customers, lenders and investors and strengthen their position in procurement processes.
The underlying principle is proportionality: businesses should be able to provide credible sustainability information without adopting the reporting infrastructure expected of a major listed group.
Reducing greenwashing risk
This comes alongside a much tougher European approach to environmental claims. Directive (EU) 2024/825, the Empowering Consumers for the Green Transition Directive, strengthens controls over misleading environmental claims and sustainability labels. Businesses will therefore need stronger evidence behind statements concerning environmental performance, carbon reduction and sustainability. If you are making statements that are not backed up by evidence, you can be fined significantly. That makes reliable underlying data increasingly important.
Sustainability information is no longer simply a reporting exercise. Poorly substantiated claims can create regulatory, reputational and commercial risk. In short: less reporting for reporting’s sake, but greater discipline around the sustainability information that businesses choose to disclose. In the right way.
