Companies have a growing responsibility to improve their impact on the environment, people, and the territory. It's not just about reducing negative effects, but also about generating positive value for the community.
A concrete first step in this direction is the preparation of a sustainability report: a tool that allows organizations to measure their environmental, social and governance (ESG) impact and communicate it clearly and transparently to stakeholders.
Today, this is no longer a task reserved for large companies subject to regulatory obligations: more and more organizations, including small and medium-sized ones, decide to draft sustainability reports on a voluntary basis, recognizing their strategic value.
A sustainability report, usually published annually, doesn't just document environmental, social and governance initiatives already undertaken, but presents the commitments the company intends to carry out in the short and long term to improve its sustainability performance.
However, starting a reporting process can seem complex and burdensome, especially for SMEs that don't have an internal sustainability team or have limited dedicated resources.
Why should your SME prepare a sustainability report?
Most SMEs are not currently subject to mandatory sustainability reporting requirements. In Europe, the Corporate Sustainability Reporting Directive (CSRD) primarily targets large enterprises, banks, insurance companies, and publicly listed SMEs.
However, even in the absence of regulatory obligations, many SMEs choose to prepare a sustainability report on a voluntary basis. Here are 5 advantages that have driven them to make this choice:
- Anticipation of future regulatory obligations: Even if not required today, SMEs may have to comply with more stringent requirements in the future. By beginning this process now, companies can prepare proactively and avoid potential compliance challenges down the road;
- Response to market expectations: Customers, investors, suppliers and business partners increasingly ask for information about the sustainability practices of companies they work with. A clear and well-structured report allows your SME to effectively communicate ESG performance and future commitments, strengthening trust and consolidating business relationships;
- Competitive advantage in the market: SMEs that integrate sustainability into their corporate identity differentiate themselves from competitors, building an image of responsibility and foresight. This positioning can attract new customer segments, facilitate access to dedicated grants and funding, and open collaborations with partners who share similar values;
- Enhanced strategic decision-making: The process of collecting and analyzing sustainability data helps companies identify key impacts, risks, and opportunities that extend beyond reputation to directly affect financial performance. This comprehensive assessment provides valuable insights that enable more informed and strategic business decisions.
Sustainability reporting standards for SMEs: which one to choose?
For SMEs looking to develop a sustainability report, selecting the right reporting standard is a strategic decision. While there is no single, universal approach to sustainability reporting, several recognized standards provide structured guidelines for collecting, organizing, and communicating data in a clear, consistent, and comparable manner.
These standards define principles, indicators, and recommendations that help companies organize information transparently and uniformly, facilitating comparison of ESG performance between companies by customers, investors, and other stakeholders.
For non-listed SMEs, particularly those with limited resources or those approaching sustainability reporting for the first time, the new VSME (Voluntary Sustainability Reporting Standards for Non-Listed SMEs) standard represents a streamlined and accessible solution. Published on December 17, 2024 by the European Financial Reporting Advisory Group (EFRAG), VSME proposes a modular and simplified approach, designed to adapt to SMEs' operational capabilities and facilitate sustainability reporting.
How to prepare a sustainability report with VSME?
The VSME adopts a modular structure that allows SMEs to adapt the information to include in the report based on their needs and stakeholder expectations.
- Basic Module
The first level of reporting provided by VSME is the Basic Module, designed to provide an overview of the company's ESG performance.
This module requires a minimum set of information, including general company data, some environmental indicators (such as greenhouse gas emissions and water consumption), social aspects (such as personnel structure, health and safety policies in the workplace, and training management) and governance (such as any sanctions or convictions related to corruption).
- Comprehensive Module
For organizations requiring more detailed reporting — such as those responding to detailed information requests from customers, financial partners, or investors — the VSME offers an advanced option: the Comprehensive Module.
This module must be used alongside the Basic Module and enables companies to include supplementary information such as their business model, ESG policies, decarbonization targets, climate risk assessments, and enhanced social data with a focus on human rights and gender diversity.
How Kyklos can support your company in ESG Reporting
Kyklos helps you navigate every phase of the process: from data collection, to drafting a sustainability report, to defining a targeted strategy to improve your environmental, social and governance impact.
Contact us if you want to create a customized sustainability report for your company.
Sustainability reporting for small and medium-sized enterprises