On Wednesday 30 July, the European Commission presented a recommendation on a lighter ‘VSME’ standard for voluntary sustainability reporting by small and medium-sized enterprises (SMEs).
As intended by the ‘Omnibus I’ simplification package presented in February (see EUROPE 13588/4), this standard concerns SMEs with up to 1,000 employees, which are therefore not covered by the ‘CSRD’ directive on corporate sustainability reporting. It was drawn up by the European Financial Reporting Advisory Group (EFRAG), the Commission’s technical advisory body, and submitted to the European institution in December 2024.
Not only will the VSME provide a simplified information tool enabling SMEs to respond to requests for information from banks and large companies in their value chain, it will also serve to improve their access to sustainable finance. VSME will also help them to better understand and monitor their own sustainability performance, improving their resilience and competitiveness.
However, the ‘Omnibus’ simplification proposal extends and strengthens the “value chain cap”, which prohibits companies subject to the CSRD from requesting information from other companies in their value chain beyond the limit defined by the VSME.
The recommendation is accompanied by two annexes containing practical guidelines for applying the VSME. It comprises two modules: - a core module, which is the target approach for micro-businesses and a minimum requirement for other businesses; - a complete module, which adds additional datapoints that are likely to be requested by banks, investors and the company’s corporate clients. Although the number of datapoints is limited, they cover all three ESG criteria (environment, social and governance).
The Commission has made it clear that the content of the future VSME is likely to differ from the current recommendation, since the power to adopt it by means of a delegated act and the timetable for such adoption depend on the conclusion of the negotiations between the co-legislators on ‘Omnibus I’.
Read the recommendation: https://aeur.eu/f/I22
Annex I: https://aeur.eu/f/I24
Annex II: https://aeur.eu/f/i25 (Original version in French by Anne Damiani)