EFRAG launches today the public consultation on 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 21 May 2024.
EFRAG invites preparers and users to participate in a field test and reminds them that the deadline to submit interest for participation in the field test is 31 January 2024.
EFRAG is pleased to announce its public consultation on the two Exposure Drafts on sustainability reporting standards for SMEs. The consultation period will run until 21 May 2024, and EFRAG invites all stakeholders to provide comments through the online consultation questionnaires. Interested parties are also invited to participate in the field test that will be run in parallel to the public consultation. The call for participation in the field test was released on 20 December 2023 with the deadline to submit interest set to 31 January 2024. Instructions for the field test are now published.
As part of its mandate granted by the Corporate Sustainability Reporting Directive (‘CSRD’) to provide technical advice to the European Commission (‘EC’) on European Sustainability Reporting Standards (‘ESRS’), EFRAG has been mandated to develop the standard for SMEs that are public-interest entities. These include those whose transferable securities (bonds, shares and other securities) are admitted to trading on a regulated market in the European Union, small and non-complex institutions (SNCIs) and captive insurers and reinsurers (together ‘LSMEs’). The ESRS LSME will be issued as delegated act and will be effective on 1 January 2026 with an additional two-year opt out. The purpose of the ESRS LSME ED is to set reporting requirements that are proportionate and relevant to the scale and complexity of the activities and to the capacities and characteristics of LSMEs. This is expected to support LSMEs in getting better access to finance and avoid discrimination against them on the part of financial market participants, as it will enable availability of standardised sustainability information.
The LSME ED is one standard composed of three general sections, ‘1. General requirements’, ‘2. General disclosures’ and ‘3. Policies, actions and targets’, and three sections dedicated to metrics, ‘4. Environment’, ‘5. Social ‘ and ‘6. Business conduct’.
EFRAG has also developed a voluntary sustainability reporting standard for non-listed SMEs (VSME). The EC SME Relief Package of September 2023 refers to VSME as a measure to support SMEs in accessing sustainable finance. This Exposure Draft proposes a simple reporting tool to assist non-listed micro-, small- and medium-sized enterprises (non-listed SMEs) in responding to requests for sustainability information that they receive from business counterparts (i.e., banks, investors or larger companies for which non-listed SMEs are suppliers) in an efficient and proportionate manner as well as to facilitate their participation in the transition to a sustainable economy. Based on market acceptance, the VSME ED is expected to standardise the current multiple ESG data requests (which represent a significant burden on non-listed SMEs), by reducing the number of uncoordinated requests they receive. This is expected to support them in having better access to lenders, investors and clients.
The VSME ED is structured in a Basic Module and in two additional optional modules, a Narrative-Policies, Actions and Targets (PAT) Module and a Business Partners Module.
The current public consultation is designed to receive feedback from constituents on key aspects of the EDs, including (i) the proposed architecture; (ii) the implementation of the CSRD requirements (for ESRS LSME ED), including the role of the LSME ED in setting the value chain cap for information to be reported by large undertakings; (iii) the relevance of the proposed disclosures; (iv) the simplifications achieved; and (v) the market acceptance (for the VSME ED). The questionnaires aim to capture users’ and preparers’ perspectives. Feedback from all interested constituents is welcome.
Respondents should provide their responses to the public consultation questions by using the online questionnaires (please click here for the link to the ESRS LSME ED questionnaire and here for the link to the VSME ED questionnaire). Both questionnaires consist of two parts: Part 1 (the most critical questions that EFRAG encourages to answer in full) and Part 2 (additional and more detailed technical questions that EFRAG encourages to answer as much as possible). Detailed instructions are provided in the introduction part of the online questionnaires.
EFRAG encourages submission via the online questionnaire rather than comment letters for responses to be analysed in a structured and comparable way. For specific aspects not covered in questions from the online questionnaires, respondents may attach a letter or another document to their responses in the online questionnaires.
As announced in EFRAG’s Call for participation in the field test press release dated 20 December 2023, in which the deadline to submit interest is set to 31 January 2024, participation in this field test is a unique opportunity to be part of the standard-setting process and help shape future requirements as well as to gain valuable insights into the new requirements. Preparers and users (including business counterparts, civil society, academics, etcetera) are invited to participate.
The field test focuses on feasibility, costs, challenges, benefits and usefulness of the individual disclosures and suggested improvements to the EDs.
For preparers, the field test consists of preparing by 21 April 2024 (part of) the disclosures contained in the ED and, on that basis, answering the VSME Field Test Questionnaire (click here) and the LSME Field Test Questionnaire (click here). It is not necessary to test the entire standard, i.e., it will be possible to test selected disclosures. Companies will be invited to workshops or one-to-one interviews to share their experience in preparing the disclosures and to illustrate their feedback. Those that are not able to commit to preparing the disclosures may also participate in the workshops based on their analysis of the Exposure Drafts.
Users will be invited to dedicated workshops after providing their feedback on the Field Test Questionnaire. Lenders, investors and listed and non-listed corporates that have SMEs in their supply chain are invited to participate as users.
Organisations that operate platforms or similar mechanisms for the collection of sustainability information from SMEs, which is used by corporates in their supply chain management or for the standardisation of data requests, are also invited to participate.
The workshops will take place in the last month of the consultation period.
Participants of the field test are also expected to respond to the consultation online questionnaires.
To confirm your interest in the field test, please send an email to VSME@EFRAG.org and LSME@EFRAG.org.
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.’
Fuente: EFRAG