CLECAT — 2025-08-08
News from Brussels
On 30 July, the European Commission adopted a recommendation on voluntary sustainability reporting for small and medium-sized companies (SMEs). This voluntary standard provides a streamlined and accessible framework to help companies currently not covered by the Corporate Sustainability reporting Directive (CSRD) to respond to specific requests for sustainability information from large financial institutions and companies.
The VSME was developed by the European Financial Reporting Advisory Group (EFRAG) following a comprehensive process that included public consultation and field testing. This standard is expected to replace the numerous, often uncoordinated ESG data requests that SMEs currently face, thereby simplifying the reporting process and making it more efficient. The VSME allows SMEs to present their sustainability performance in a consistent manner, which can improve their competitiveness and attractiveness to investors and lenders. The Commission's recommendation also encourages Member States to promote the VSME and support its implementation, ensuring that SMEs can benefit from a more harmonised approach to sustainability reporting across the EU.
The recommendation could become the basis for a voluntary reporting standard through a delegated act, depending on the outcome of the negotiations on the Omnibus I Package: The Commission proposed to exclude companies up to 1000 employees from the scope of the CSRD, which could then use the VSME standard. This future voluntary reporting standard will also act as a “value-chain cap” to protect SMEs and other companies not subject to mandatory reporting under the CSRD from excessive information requests from their value chain partners.
In addition, EFRAG launched on 31st July a public consultation to gather feedback on the revised and simplified Exposure Drafts of the European Sustainability Reporting Standards (ESRS). Following the Commission’s request to EFRAG to deliver a critical simplification to the ESRS, the advisory group proposes to streamline the double materiality assessment, reduce overlaps across standards, clarifying language and structure, and removing all voluntary disclosures. New relief mechanisms have also been introduced, such as exemptions where reporting would cause undue cost or effort. In total, mandatory datapoints have been cut by 57%, and the full set of disclosures—mandatory and voluntary—reduced by 68%. The public consultation runs until 29 September 2025 and is available via this link. Stakeholders—including preparers, auditors, civil society, investors, and national authorities—are invited to review the revised drafts and share their views.