With the new CSRD legislation, large companies will be forced to report more on their sustainability efforts and those of their chains. SMEs that are in the chains of CSRD-compliant companies are therefore also expected to do a lot in this area. This is where the Voluntary Sustainability Reporting Standard for SMEs (VSME) comes in.
We spoke with Empact consultant Derk Jan about how the VSME approach can not only help SME entrepreneurs meet obligations, but is also a powerful tool to get your business ready for the future.
“A well-formatted VSME report saves SME entrepreneurs an enormous amount of work.”
The VSME as a practical solution
“For SME entrepreneurs who want to report on sustainability, capacity and knowledge are particularly challenging,” says Derk Jan. “Although SMEs themselves are usually not CSRD-compliant, they still have to deal with data and information requests from their customers who do fall under CSRD legislation. When large customers request different types of sustainability information, it takes a lot of time to comply.”
The VSME standard provides a solution here. “This voluntary standard was developed specifically for SMEs so that entrepreneurs can provide information in a standardized way that meets the CSRD requirements of supply chain partners.”
This has immediate practical benefits. “With this approach, you not only satisfy customer A’s questions, but also those of B, C and D in one fell swoop. According to the CSRD standard, customers are not allowed to ask for more than what is actually required in the VSME report. So a properly formatted VSME report saves SME entrepreneurs an enormous amount of work.”
Early adopters reap the benefits
“We mentored Ducky Dons, a Dutch manufacturer of down comforters and pillows, which was one of the first to work with VSME,” says Derk Jan. “For them, VSME came at the perfect time. They already had a solid sustainability policy and saw VSME as a logical next step to formalize and communicate this more broadly.”
What began as an assignment for basic reporting quickly developed into a strategic journey. “The entrepreneur was so enthusiastic that they wanted to look beyond just the mandatory elements. We conducted a dual materiality analysis that sharpened their sustainability focus, followed by a complete recalibration of their ESG strategy and policy.”
“This entrepreneur competes with producers from China and other low-wage countries. Because they work primarily with down and feathers from the Netherlands, they have much better control over their supply chain – from working conditions to animal welfare. VSME now provides them with a structured framework to tell this story convincingly to customers and end consumers.”
The company also uses sustainability as an innovation driver. “They have developed a circular process that recycles down and feathers from old comforters. Although their products are slightly more expensive due to Dutch production, these sustainable innovations make them increasingly attractive to conscious consumers as well as to large retailers who have to meet stricter sustainability requirements themselves.”
“Resources, labor and finance are the three pillars for every SME. Sustainability means continuity – it’s really the same thing, only today we call it sustainability. The focus of most SME entrepreneurs is on continuity.”
From report to value
How do we ensure that sustainability reporting does not become just an administrative burden, but rather a strategic advantage? “Sustainability reporting should add value, not just take time,” stresses Derk Jan. “That’s why we offer three different VSME service packages that match what an entrepreneur needs.”
VSME Basis is for business owners who want to efficiently meet information needs from the supply chain. “You get clear reports with essential information that you can immediately share with customers. Fast, practical and without fuss.”
At VSME Deepening, you bring focus: “We conduct a dual materiality analysis according to the ESRS standard, which shows which sustainability topics are really important to your company. This gives direction to your efforts.”
VSME Strategic Impact transforms reporting into strategic advantage: “We develop a complete ESG strategy with concrete objectives and a communication approach, fully integrated into your business operations.”
“Many entrepreneurs start with the basic level but want to move on quickly,” concludes Derk Jan. “They see that sustainability helps them stand out from competitors in the marketplace. Once started, it becomes an integral part of your business operations that continues to add value continuously.”
Starting now is a strategic choice
Why should SME entrepreneurs start working on sustainability today, instead of waiting until it becomes a legal requirement? Derk Jan sees three critical challenges affecting SMEs right now.
“First there are raw materials. SME entrepreneurs are often first in the position of recipients of raw materials. Drought and other climate effects can make certain raw materials scarce. If you’re in textiles and notice that cotton is becoming increasingly difficult to obtain, that’s an immediate problem. By working with your supply chain to become more sustainable, you can better ensure continuity.”
A second crucial issue is access to capital. “Capital providers want to invest less and less in companies that belong to the ‘old economy.’ If you want to get financing as an SME in the future, a good sustainability policy is essential.”
Finally, there is the labor market. “The labor market is tight and will remain so for the foreseeable future. If you are not sustainable or offer poor working conditions, you will have problems finding and retaining staff.”
“Resources, labor and finance are the three pillars for every SME. Sustainability means continuity – it’s really the same thing, only today we call it sustainability.”
“Many entrepreneurs start with the basic level but want to move on quickly,” concludes Derk Jan. “They see that sustainability helps them stand out in the marketplace. Once started, it becomes an integral part of your business operations that continues to add value continuously.”
The impact of taking action together
“What we often hear is, ‘We are just a small player, what can we do?'” says Derk Jan. “That thought is understandable, but don’t forget that all SMEs together have an immense impact on the Dutch economy and society.”
While the individual influence of an SME may indeed seem limited, Derk Jan highlights two important ways smaller entrepreneurs can still make a difference: “You can offer perspective and inspiration to others by showing how things can be done. A practical example of sustainable business practices often speaks louder than a thousand words.”
He also points out the importance of organization: “By joining industry associations and making your voice heard collectively, you strengthen your position considerably. Together, SME entrepreneurs actually have enormous influence on how chains develop.”
Continuity as a core value
Derk Jan is optimistic about the future of sustainability in the SME sector. “I strongly believe that SME entrepreneurs will work with sustainability, partly because they are often family businesses that look further ahead. Profit is not the highest good for them; they are always looking at continuity.”
That mindset fits sustainability perfectly. “Actually, sustainability is already in the DNA of many SMEs, because they have always thought that way. They still want to exist in a hundred years, so they do everything they can to make the sustainability transition in all areas. Not because they have to, but because otherwise they see that their right to exist is disappearing.”
Want to know more about our VSME packages or how we can help your SME with sustainability? Just get in touch or read more about the VSME packages here.