Background - Growing environmental, social, and governance (ESG) expectations have increased the importance of sustainability reporting. Following the introduction of CSRD, ESRS, and VSME, organisations face greater demands for sustainability-related disclosures. With the recent Omnibus update reducing the scope of CSRD, VSME has emerged as an important reporting framework for SMEs, despite limited research on its implementation and impact. 

Purpose - The purpose of this study is to investigate how the VSME framework can support sustainability reporting in SMEs and to explore the major differences between CSRD and VSME. In addition, the study aims to identify the challenges associated with the adoption of sustainability reporting. 

Methodology - The study adopted a qualitative research approach based on the Design Research Methodology (DRM) framework. A single case study was conducted at a Swedish plastic manufacturing SME. Data collection included a preliminary literature review, document studies, semi-structured interviews with sustainability experts and organisations experienced in CSRD or VSME, interviews with employees at the case company, a questionnaire, and a workshop. 

Findings - The findings indicated that VSME provides SMEs with a simplified and more flexible sustainability reporting framework than CSRD, supporting transparency and sustainability communication while reducing administrative complexity. However, implementation is challenged by limited resources, insufficient sustainability knowledge, regulatory uncertainty, and difficulties related to data collection and standardisation. 

Practical Implications - The study demonstrates that VSME can serve as a practical sustainability reporting framework for SMEs by reducing reporting complexity while supporting transparency and stakeholder communication. To realise these benefits, organisations need sufficient resources, sustainability competencies, effective data management processes, organisational commitment, employee involvement, clear communication, and the integration of sustainability practices into daily operations. 

Theoretical Implications - This study contributes to the limited body of research on the practical application of the VSME framework and its relationship to CSRD. It provides empirical insights into the opportunities and challenges associated with sustainability reporting in SMEs and expands current knowledge regarding how simplified sustainability reporting frameworks can support organisational sustainability management and regulatory preparedness.