BRINGING TRADITION AND REGULATION: FAMILY BUSINESS ADAPTATION THE VSME REPORTING STANDARD

Abstract

Background and Objective: This paper explores the growing importance of ESG (Environmental, Social, Governance) principles and non-financial reporting for SMEs, with a focus on family-owned businesses in Poland. It assesses their readiness to adopt ESG reporting aligned with voluntary standards and identifies key factors influencing their engagement in sustainable practices.

Study Design/Materials and Methods: Given the limited academic research on the VSME (Voluntary SME) standard, the study relies on secondary data. It draws from industry reports by firms like KPMG and PwC, with a key source being Sustainable Development of Family Businesses: Current State and Determinants (Domańska et al., 2024). The analysis is qualitative, focusing on trends in ESG implementation. An AI-driven, large-language-model compliance-mapping approach was employed to align the report’s averaged survey findings with the VSME standard set by EFRAG.

Results: Polish family businesses are in the early stages of ESG adoption. While awareness is increasing, significant gaps remain, especially in formalising non-financial reporting and integrating ESG into strategic decisions.

Practical implications: The paper provides actionable insights for family business managers and consultants preparing for ESG obligations, emphasising the benefits of early adoption. Promoting ESG in family SMEs can support broader social goals, including environmental care, social inclusion, and responsible governance.

Conclusion and summary: Family businesses show a solid overall readiness to adopt VSME EFRAG indicators—especially regarding strategic sustainability, gender diversity and health-and-safety—yet still face notable gaps in regard to biodiversity, water, anti-corruption and severe-incident reporting. Addressing these weaknesses through standardised frameworks, external assurance and richer data will be essential for family businesses to achieve full alignment and unlock their long-term potential for sustainable development.