EFRAG's Sustainability Reporting Board (SRB) has approved today (13 November) the voluntary sustainability reporting standard for non-listed SMEs (VSME standard).
The VSME standard aims to support micro, small and medium-sized organisations in providing sustainability-related data to meet the information needs of large companies, lenders and investors
Chiara Del Prete, chair of EFRAG's Sustainability Reporting Technical Expert Group (TEG), explained that the "package is designed to be a replacement of [sustainability-related] questionnaires" sent to SMEs by their banks and corporate clients.
"[We are offering] a tool to SMEs to speak with counterparts that are primarily interested in managing their sustainability aspects and reporting on them," she added.
It covers the same topics as the full set of ESRS, but with significantly less data points and simplified disclosures to be more proportionate for the resources of smaller companies. The VSME standard is split into two sections: the 'basic module' and the 'comprehensive module'.
The 'basic module' is targeted at micro companies (see box out), and constitutes a minimum requirement for other undertakings that opt to report under the standard. This module is made up of two overarching disclosures on governance and policies (B1 and B2) and a series of basic metrics covering environmental, social and business conduct-related topics (B3-B11).
Micro undertakings (Article 3 of Directive 2013/34/EU)
Entities that do not exceed two of the following thresholds:
- €450,000 in balance sheet total
- €900,000 in net turnover
- 10 employees.
For example, on climate, B3 provides metrics on energy consumption, gross direct GHG emissions and GHG emissions intensity. Social data points in the basic module cover the general characteristics of the workforce (B8), health and safety (B9), and remuneration, collective bargaining and training (B10).
Meanwhile, the comprehensive module contains data points, to be reported in addition to B1-B11, which are likely to be included in data requests from lenders, investors and larger companies.
For example, the climate-related datapoints in the Comprehensive Module (C3-C4) cover GHG emissions reduction targets, transition plans, and climate risks. Additional data points on the characteristics of the module are also included in this module, as well as social data points relating to human rights policies and severe negative human rights incidents.
If a company opts to report under either module, they should comply with them in their entirety, however items of disclosure are only required if applicable to the SME's specific circumstances. The VSME standard also provides the flexibility for entities reporting under the basic module to select particular data points for disclosure from the comprehensive module.
Of the 22 SRB members, 21 voted to approve the standard. Following approval last month, this decision means the VSME standard will be submitted as EFRAG's final technical advice to the European Commission.
Cristina Saporetti, head of sustainability reporting at Eni, was the only SRB member to abstain on the vote.
She said: "It is not clear yet the feasibility for the smallest companies and in terms of costs for the micro enterprises. I understand that there will be guidance that will be developed but I'm not sure yet that they will be able to manage all this information."
Although they voted to approve the standard, three further SRB members - Marcello Bianchi, Monika Brom and Simon Braaksma - said they have reservations, arguing that further adjustments could be made to make it more applicable for the smallest companies.
SRB chair Patrick de Cambourg said the board approval "represents a major step forward". He clarified that the standard will now be subject to internal editorial review which, will likely take two or three weeks. EFRAG will then transfer the standard to the Commission by the end of the year.
As adoption is voluntary, the standard will not require a Delegated Act. It is expected that the European Commission will endorse the VSME standard under a recommendation.
Tom Dodd, sustainability reporting team leader at the European Commission, said that the EU body intends to follow the same consultation and approval process for the VSME standard as it would for a mandatory standard.
"That would include, amongst other things, consulting the eight different EU bodies that we are required to consult [with] for a delegated act," he said. "It would also include a further one-month period of public comment, not a full public consultation, on the final draft of the text before adoption by the commission."
