Sustainability reporting – what applies and why consider a voluntary report under VSME?

An increasing number of companies are facing growing demands from customers, investors and other stakeholders for transparency regarding their sustainability work. At the same time, not all companies are subject to statutory sustainability reporting. Moreover, the group of companies required to report has been significantly reduced as a result of the simplification proposals presented within the framework of the so-called “Omnibus packages”, and for those companies still in scope, the reporting timeline has been postponed.

In Sweden, the Annual Accounts Act (1995:554) determines which companies are subject to the requirement for sustainability reporting. With the introduction of “Omnibus 1”, which amended the timeline for when the reporting obligation takes effect, companies that have not yet prepared a sustainability report in accordance with CSRD and ESRS will prepare their first report for the financial year 2027.

At the end of April, an interim report was published as part of a government inquiry (SOU 2026:27) on easing the requirements for sustainability reporting. In line with EU directives, it proposes that the thresholds be raised to more than 1,000 employees and turnover exceeding SEK 4.9 billion (both conditions must be met for two approved financial years). If the proposal is adopted, even more companies than today will be exempt from the requirement to prepare a sustainability report.

Voluntary reporting – is it an option?

For companies that are not subject to a statutory requirement, a voluntary sustainability report prepared in accordance with VSME (Voluntary Sustainability Reporting Standard for SMEs¹) can be a valuable tool.

VSME has been developed by EFRAG (www.efrag.org), and the European Commission has issued a recommendation that VSME should be used as the standard for voluntary sustainability reporting for small and medium-sized enterprises. It is also worth noting that, in early May, the European Commission presented a draft regulation on a voluntary sustainability reporting standard based on VSME, which would give the standard a “higher status” as a regulation. The regulation is expected to be adopted later in 2026.

What we now know as VSME is designed for small and medium-sized enterprises and offers a simplified and proportionate structure for reporting on environmental, social and governance (ESG) matters. By using VSME, companies can describe their sustainability efforts in a systematic way without having to manage the complexity of more comprehensive regulatory frameworks.

A key benefit of preparing a voluntary VSME report is to strengthen a company’s credibility. Companies that can demonstrate transparency in their impact and objectives are often perceived as more trustworthy, which in turn can strengthen relationships with customers and business partners. It can also become a competitive advantage in procurement processes where sustainability requirements carry increasing weight.

Furthermore, a structured report can contribute to improved internal governance. By mapping and monitoring sustainability-related key performance indicators, management gains a clearer basis for decision-making and can identify risks and opportunities linked to the business. This creates the conditions for more long-term and sustainable value creation.

It should also be noted that the above-mentioned government inquiry proposes a new legal provision that limits what information companies subject to statutory sustainability reporting requirements may request from smaller companies in their value chain (customers and suppliers). According to the proposal, these companies should not be able to require more information than what VSME specifies a company should need to disclose.

In summary, a voluntary sustainability report in accordance with VSME provides companies with an opportunity to meet increasing information demands, strengthen their brand, and at the same time develop their internal governance—without having to take the step into full-scale statutory reporting. Do not forget that, ultimately, it is the concrete sustainability work that shapes a company’s future impact and makes a real difference, both in securing its own business value and in contributing to a better world.

The article is based on currently available information and our interpretations of it.

Do you have questions about sustainability reporting and what applies to your company, or about how we at Azets can help? Please feel free to contact us, we would be happy to tell you more about how we can support you.