New Perspectives on Sustainability Reporting
Europe is undergoing a transformation in terms of sustainability reporting, particularly with the postponement of the CSRD directive, the revision of ESRS standards, and the preparation of a voluntary reporting standard for SMEs, the VSME. Let’s take a closer look at the recent developments and their impact.
Postponement of the CSRD Directive: A Relief for SMEs
On April 3, the members of the European Parliament overwhelmingly voted in favor of a two-year postponement of the implementation of the CSRD (Corporate Sustainability Reporting Directive), known as Omnibus 1, for waves 2 and 3. The main goal of this postponement is to reduce the workload related to sustainability reporting and to limit the repercussions on small businesses.
Why this postponement?
The objective is to allow a simplification of obligations and to give more time to companies to adapt to the new requirements. With this postponement, approximately 80% of the companies initially concerned by the reporting obligation would now be exempt.
The main changes are as follows:
1- Large companies with up to 1,000 employees and listed SMEs would be excluded from the reporting obligation
2- Only large companies with more than 1,000 employees would be subject to the CSRD requirements. These companies must meet at least one of the following criteria
✅ Revenue exceeding 50 million euros.
✅ Balance sheet total exceeding 25 million euros.
Simplification of ESRS Standards: A Necessary Revision
The European Commission has requested that EFRAG (European Financial Reporting Advisory Group) review its approach regarding ESRS (European Sustainability Reporting Standards). The goal is to simplify the reporting process by reducing the number of mandatory data points, prioritizing quantitative information over narrative text, and clearly distinguishing mandatory data from optional data.
Priorities of the revision:
✅ Reduction of mandatory data: Eliminate information deemed less relevant to lighten the reporting burden.
✅ Quantitative vs. Narrative: Prioritize numerical data over detailed descriptions.
✅ Clarification of Materiality: Only collect significant information for the company and limit requirements for subcontractors and suppliers.
This revision request also aims to protect small businesses from excessive data demands from their clients, thereby reducing the impact on mobilized resources.
The VSME Standard: Toward Voluntary Reporting
Following the adoption of the postponement for companies with less than 1,000 employees, the European Commission plans to propose the VSME (Voluntary Sustainability Management and Evaluation) standard.
Why a voluntary standard?
Initially designed for unlisted SMEs and microenterprises, the VSME standard now targets all companies that will no longer be subject to CSRD requirements. This standard will be recommended by the Commission to become the reference for voluntary reporting.
Key points of the VSME standard:
✅ Expanded scope: All companies not covered by the CSRD.
✅ Flexible framework: A voluntary but structured reporting process to ensure transparency without imposing an excessive administrative burden.
✅ Voluntary verification: The possibility of having this report verified by an Independent Third-Party Body is being considered.
What Are the Implications for Companies?
With this postponement and the revision of standards, companies are granted additional time to better prepare for sustainability requirements. For large companies, the challenge remains to align with stricter criteria, while small businesses benefit from increased flexibility.
The VSME standard could offer a pragmatic alternative to demonstrate a commitment to sustainability without bearing the burden of CSRD obligations. This compromise could encourage a greater number of companies to integrate social responsibility into their strategies while limiting administrative constraints.
The ongoing adjustments allow companies to better anticipate their obligations regarding sustainable development. The implementation of the VSME standard and the simplification of the ESRS standards are positive developments, responding to the need to combine transparency, efficiency, and feasibility.