The European Financial Reporting Advisory Group (EFRAG) has launched a public consultation on two draft sustainability reporting standards for small and medium-sized enterprises (SMEs): the Exposure Draft ESRS for listed SMEs (ESRS LSME ED) and the Exposure Draft for the voluntary reporting standard for non-listed SMEs (VSME ED). The consultation will be open until May 21, 2024.

ESRS LSME ED for Listed SMEs:

• Developed in response to the Corporate Sustainability Reporting Directive (CSRD), this standard targets public-interest SMEs, including those listed on EU exchanges and certain financial institutions.
• Aims to set proportionate and relevant reporting requirements tailored to the size and complexity of these businesses.
• Expected to improve access to finance and reduce discrimination for LSMEs by providing standardized sustainability information.
• Structured in three general sections and three metric-specific sections covering environment, social aspects, and business conduct.

VSME ED for Non-listed SMEs:

• This voluntary standard offers a simple reporting tool for non-listed SMEs to respond to sustainability data requests from business partners.
• Aims to address the burden of multiple uncoordinated requests and facilitate SMEs’ participation in the sustainable economy transition.
• Consists of a Basic Module and two optional modules focusing on narrative policies, actions, and targets, and data relevant to business partners.

Public Consultation and Field Test:

• EFRAG invites all stakeholders to provide feedback through online questionnaires on the proposed architecture, relevance of disclosures, simplifications achieved, and market acceptance (for VSME ED).
• Preparers and users are also encouraged to participate in a field test to assess the feasibility, costs, and benefits of the individual disclosures.
• The deadline to submit interest for the field test is January 31, 2024.
• Detailed instructions and questionnaires are available on the EFRAG website.

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EFRAG emphasizes the importance of feedback from all stakeholders to ensure the effectiveness and practicality of these draft standards. Interested parties are encouraged to participate in the consultation and field test to shape the future of sustainability reporting for SMEs.

Patrick de Cambourg, the EFRAG SRB Chair, stated: ‘SMEs are a crucial part of the European economy. After the completion of the ESRS for large undertakings, EFRAG releases today these two proposed standards to support SMEs in being part of the transition to a more sustainable economy, getting appropriate access to finance and reducing the burden of dealing with uncoordinated data-requests while preparing decisions-useful information for all.’

Chiara Del Prete, the EFRAG SR TEG Chair, commented: ‘These two EDs respond to an effort to develop a set of sustainability information that is at the same time proportionate to SMEs and able to support the provision of the information that we already see – and more and more expect to see – requested by business counterparties. For the success of our voluntary standard for non-listed SMEs, market acceptance will be key. We expect this consultation to help us in the finalization of standards that will be able to meet the expectations of all interested parties.‘