Introduction
Many small and growing businesses (SMEs) in Europe assume that sustainability reporting is “for big companies only.” While it’s true that the Corporate Sustainability Reporting Directive (CSRD) currently applies mainly to large and listed firms, the effects reach much further. You can get an overview in our explainer on CSRD reporting.
More large clients, banks, and public bodies now expect their suppliers to share environmental, social, and governance (ESG) data — even when they’re not legally required to. Voluntary reporting helps smaller firms stay competitive, visible, and trusted in a fast-changing market.
This article explains why voluntary ESG reporting is worth the effort for SMEs, showing how it pays off in new opportunities, stronger client relationships, and long-term business resilience.
1. The Changing Landscape: From Optional to Expected
The CSRD, in force since 2023, makes sustainability reporting mandatory for around 50,000 large companies across the EU. These firms must disclose not only their own impacts but also those of their value chains — meaning their suppliers.
That’s why many small businesses are now receiving sustainability questionnaires or audit requests. Being ready with ESG data can make the difference between keeping or losing a key client, especially when you follow guidance like handling sustainability data requests from large clients.
For SMEs, voluntary reporting using the VSME Standard — a simplified framework developed by EFRAG — offers an accessible, proportionate way to meet these new expectations without heavy costs or consultants.
2. The Return on Investment: Why It Pays to Report Early
Voluntary ESG reporting isn’t a box-ticking exercise — it’s a way to unlock tangible business value. Here’s how:
1. Access to Green and Linked Finance
Banks increasingly offer sustainability-linked loans with lower interest rates or better terms for businesses that disclose ESG data. A simple report on energy use, workforce safety, or diversity can help demonstrate eligibility.
Example: A 30-person logistics company in Belgium used VSME reporting to qualify for a €250,000 equipment loan at a reduced rate because it could show annual CO₂ tracking and employee safety improvements.
2. Winning and Retaining Clients
Large corporate buyers often use sustainability performance as a selection criterion. Being ready with standardised data — even at a basic level — builds credibility and helps SMEs stand out in tenders and supplier reviews.
3. Reducing Costs through Efficiency
Collecting environmental data highlights inefficiencies. Tracking energy or waste can lead to quick savings — often covering the time spent reporting within the first year. Use the tips in our budget-friendly CSRD compliance plan to keep costs in check.
4. Preparing for Future Regulation
SMEs that start now will have a smooth transition if they later cross CSRD thresholds or seek external investment. Early adopters won’t scramble to catch up when sustainability becomes mandatory for more companies.
5. Boosting Reputation and Attracting Talent
Transparent sustainability practices appeal to both customers and employees. Younger workers, in particular, are drawn to companies that act responsibly and share measurable results.
3. The Tools That Make It Simple
You don’t need specialist software to start reporting. The VSME Basic Module provides an easy-to-use structure covering key metrics such as the ones compared in VSME Basic vs Comprehensive Module:
- Energy use and GHG emissions
- Workforce safety and training
- Waste and recycling
- Anti-corruption and governance practices
For many SMEs, this can be done in a spreadsheet and updated once a year. Over time, data can be expanded to the Comprehensive Module, which adds optional disclosures like GHG targets or diversity ratios for clients and investors seeking deeper information.
4. Practical Mini Case Studies
Case 1: The Local Manufacturer
A 45-person packaging company in the Netherlands started reporting energy use and recycling data to meet customer requests. Within six months, they won a contract extension from a multinational client that now includes “supplier sustainability compliance” as a scoring factor.
Case 2: The Family-Owned Hotel Group
A small hospitality chain in France used voluntary ESG data to market its eco-friendly practices. Energy efficiency tracking led to a 12% cut in utility bills, and their “sustainability summary” now features on booking platforms, improving occupancy rates.
Case 3: The Tech Consultancy
An IT firm in Germany used VSME-aligned reporting to respond to investor queries. Their structured disclosure on workforce diversity and governance helped secure a €1 million innovation grant from a public funding body.
5. Steps to Start Voluntary ESG Reporting
- Choose a framework: Use the VSME Basic Module to stay consistent with EU expectations, and pair it with the CSRD requirements checklist for a ready-made task list.
- Collect what you already know: Start with energy bills, staff data, and waste figures.
- Set small goals: Reduce emissions, improve training, or introduce a code of conduct.
- Publish your results: Include them in client proposals or your annual business summary.
- Repeat annually: Track progress and refine as you grow.
It’s better to start with simple, honest data than to wait for perfect systems.
Frequently Asked Questions
Do small businesses need to publish ESG reports publicly?
No. Voluntary ESG reporting for SMEs is mainly about sharing data with clients, banks, or investors when requested. You can still publish it publicly if you want to strengthen transparency or marketing.
How much does it cost to start reporting?
For most SMEs, the main cost is time. Basic ESG reporting using internal data usually takes 10–15 hours per year. Some businesses later invest in digital tools once they expand data coverage.
Is voluntary reporting recognised by large companies?
Yes. The VSME Standard is designed by EFRAG, the same body that developed CSRD rules. Using it signals professionalism and compatibility with your clients’ reporting systems.
What’s the biggest mistake SMEs make?
Waiting too long. Early preparation saves stress later, especially when clients or lenders start asking for verified sustainability data.
Key Terms
- CSRD: Corporate Sustainability Reporting Directive — the EU law requiring large companies to report sustainability data.
- VSME: Voluntary Sustainability Reporting Standard for SMEs, a simplified framework created by EFRAG.
- ESG: Environmental, Social, and Governance — three pillars of sustainability reporting.
- EFRAG: European Financial Reporting Advisory Group — technical adviser to the European Commission on CSRD and VSME.
- Sustainability-linked Finance: Loans or funding with terms tied to measurable sustainability outcomes.
Conclusion
Voluntary ESG reporting isn’t bureaucracy — it’s business strategy. For SMEs, it opens doors to finance, contracts, and credibility while preparing for future regulation. Starting small, using practical frameworks like the VSME Standard, can help your business measure what matters and communicate it confidently.
With consistency and clarity, voluntary reporting becomes a competitive advantage rather than a compliance burden.