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ESRS standards for SMEs: What to expect from the CSRD directive if we are an SME?

Last December the EFRAG Board of Supervisors approved the exposure drafts (ED) of the ESRS standards for SMEs: two draft standards created specifically to facilitate the ESG reporting of small and medium-sized companies according to the new CSRD directive.

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There are two standards for SMEs. On the one hand, the LSME standard will be mandatory for listed SMEs from 2026, with the possibility of an additional 2-year exemption, and has the function of improving the availability of ESG (environmental, social and governance) data. required by the CSRD directive, on a reduced scale and adapted to small businesses.

In addition, EFRAG has developed a voluntary standard for unlisted SMEs (VSME). This standard is intended to be a simple reporting tool used by micro, small and medium-sized enterprises (SMEs) to monitor their sustainability performance and address the growing and diverse requests for ESG data from their stakeholders, whether banks, investors or client companies.

The importance of voluntary ESG reporting for SMEs.

The voluntary standard (VSME) covers the same sustainability issues as the European Sustainability Reporting Standards (ESRS) for large companies, but is based on the key concept of proportionality and therefore takes into account the fundamental characteristics of the small and medium-sized companies.

The VSME aims to support micro, small and medium-sized businesses in:

  • Contributing to a more sustainable and inclusive economy 🌱

  • Improving management of environmental and social issues for competitive growth and long-term resilience 📈

  • Providing information to meet data demand from credit providers and investors 💰

  • Satisfying the data needs of large corporate clients seeking sustainability information from their suppliers 📊

The VSME is voluntary and distinguishes three categories of companies based on their balance sheet, their net turnover and the average number of employees during the financial year.

The standard consists of 3 modules:

These two ESRS standards (LSME on December 15 and VSME on November 29, 2023) go out to public consultation in January 2024 for a period of 4 months. Participating in this field test is a unique opportunity to be part of the standards-setting process and help shape future requirements, as well as gain valuable information on new regulations.

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