In a recent EFRAG outreach event, the intended use and next steps for the voluntary European reporting standards were spelled out.
Photo credit: Photo by Scarlett Alt on Unsplash
During a recent EFRAG outreach event on the voluntary standard for non-listed micro-, small- and medium-sized undertakings (VSME), several clarifications were provided about the intended use of this standard and how it will (or rather will not) evolve with the outcome of the Omnibus simplification proposals.
Presentations certainly confirmed that the objective of the European Commission (EC)’s recently adopted recommendation on voluntary sustainability reporting for SMEs using the VSME is indeed to facilitate the flow of information up through the value chain specifically in the context of complying with the CSRD/ESRS, by establishing a common standard. The idea is for both companies and users of company information to adopt the standard *instead of* all the different bespoke, similar-but-not-quite-the same questionnaires currently being used.
In other words, it wants to reduce the administrative burden on SMEs needing to respond to requests for sustainability information from large companies and financial institutions that are subject to mandatory reporting under the Corporate Sustaianability Reporting Directive (CSRD) or the Sustainable Finance Disclosure Regulation (SFDR).
This EC recommendation is not a binding legislative tool but rather a strong suggestion to SMEs, those who request information from them, and Member States to start using the VSME now. As per the Omnibus I proposals, the EC intends to adopt this voluntary standard by delegated act.
Furthermore, contrary to what I – and perhaps others – had understood when reading this Omnibus I proposal, which stated that the EC would propose “a proportionate standard for voluntary use which would be based on the VSME” for all the companies that would fall out of scope of the CSRD, there will be no other voluntary standard developed. The current VSME is it. It was made abundantly clear during the webinar that there would be no substantive modifications to the VSME during final adoption.
Another development clarified during the webinar is the broad agreement for the concept of a ‘value chain cap’, i.e., placing limits on what companies or investors can ask of companies in their value chain. To this end, the EC intends to launch a process to establish this value chain cap through a(the) delegated act.
For greater clarity, the EC doesn’t want there to be several standards. There will be the mandatory ESRS for companies in scope of the CSRD, and the voluntary VSME for all other companies.
If you are an EU company and haven't checkout out the VSME yet, I strongly encourage you to do so here. EFRAG has been working very hard to produce useful tools to help with implementation, including an easy-to-use digital template.
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Hi, I’m MJ – I help individuals and companies navigate the changing corporate sustainability reporting landscape with clarity and confidence through either a membership-based program or advisory mandates.
