EU set to adopt voluntary sustainability reporting standard for SMEs

The European Commission is set to adopt a voluntary sustainability reporting standards for SMEs of up to 1,000 employees, based on a recommendation approved this week.

The new standard, developed by EFRAG, forms part of the EU’s Omnibus package simplifying sustainability reporting for European firms. Under the current Omnibus draft, only companies of more than 1,000 employees will be included in the scope of the Corporate Sustainability Reporting Directive (CSRD), instead of the original 250-employee threshold.

To make up for the difference, and because large corporations will require sustainability information from their smaller suppliers, the Commission proposed the development of a simplified voluntary sustainability reporting standard that SMEs can use to disclose ESG-related data.

The recommendation adopted this week presents this voluntary standard, which aims to “make it easier for SMEs that are not covered by the Corporate Sustainability Reporting Directive (CSRD) to respond to specific requests for sustainability information from large financial institutions and companies”, according to a Commission statement.

What does the voluntary standard include?

EFRAG initially developed the voluntary standard, dubbed VSME, for non-listed SMEs, which were never going to be mandated to report their sustainability information under CSRD.

Released in December 2024, the standard includes a basic module and a comprehensive module, which are expected to cover a substantial part of requests that SMEs receive from banks, investors and large corporates.

For instance when it comes to energy and greenhouse gas emissions, VSME states that companies shall disclose their total energy consumption, broken down between renewable and non-renewable sources, as well as Scope 1 and Scope 2 location-based emissions and greenhouse gas intensity.

Upon releasing the standard, EFRAG Sustainability Reporting Board Chair Patrick de Cambourg said: “VSME is designed to support the availability of simple but relevant sustainability-related data. It aims at reducing the burden for SMEs currently confronted with multiple uncoordinated data requests and, when supported by the appropriate online platforms and tools, will offer new business and financing opportunities as well as additional management insight to the reporting companies.”

Omnibus status update

With European legislator now on summer break, Omnibus negotiations are only expected to resume in September – with the European Parliament still very divided.

Last month, nearly 200 large businesses and investors urged EU regulators to preserve the core of CSRD – and maintain its scope to cover companies with 500 or more employees.