Exposure drafts for LSME and VSME

EFRAG launched on 22 January 2024 the public consultation on the Exposure Drafts ESRS for listed SMEs (ESRS LSME ED) and voluntary reporting standard for non-listed SMEs (VSME ED). The consultation will be open until 21 May 2024. Preparers and users can also participate in a field test with the the deadline to submit interest being 31 January 2024.

Links to the documents are available below

ESRS LSME ED

As part of the 'CSRD' that mandates EFRAG to provide technical advice to the European Commission ('EC') on European Sustainability Reporting Standards ('ESRS'), EFRAG has developed an exposure draft for are public-interest SMEs. These include those whose transferable securities (bonds, shares and other securities) are admitted to trading on a regulated market in the European Union, SNCIs (small and non-complex institutions) and captive insurers and reinsurers (together "LSME"). The ESRS LSME will be issued as delegated act with effective 1 January 2026 with an additional 2-year opt out. The purpose of ESRS LSME ED is to set reporting requirements that are proportionate and relevant to the scale and complexity of the activities, and to the capacities and characteristics of listed-SMEs. This is expected to support listed-SMEs in getting better access to finance and avoid discrimination against SMEs on the part of financial market participants, as it will make available to investors standardised sustainability information.

LSME EDs is one standard composed of three general sections: 

1. General requirements, 
2. General disclosures, 
3. Policies, actions and targets as well as three sections dedicated to metrics: 
4. Environment, 
5. Social and 
6. Business conduct.

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VSME ED 

EFRAG has also been asked to develop a voluntary sustainability reporting standard for non-listed SMEs (VSME). The EC SME Relief Package of September 2023 refers to VSME as a measure to support SMEs in accessing sustainable finance. This ED proposes a simple reporting tool to assist non-listed micro-, small- and medium-sized enterprises (non-listed SMEs) in responding to sustainability information requests that they receive from business counterparts (i.e. banks, investors, or larger companies for which SME are suppliers), in an efficient and proportionate manner, as well as to facilitate their participation in the transition to a sustainable economy. Based on market acceptance, VSME ED is expected to standardise the current multiple ESG data requests (representing a significant burden for SMEs), reducing the number of uncoordinated requests they receive. This is expected to support them in having better access to lenders, investors and clients.

The VSME ED is structured in a Basic module and in two additional optional modules:  Narrative-Policies Actions and Targets (PAT) module and Business Partners module.

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ESRS LSME ED and VSME ED Consultation package  

The public consultation is organised to receive feedback from constituents on key aspects of the EDs including: 

(i) the proposed architecture, 

(ii) the implementation of the CSRD requirements (for ESRS LSME ED); 

(iii) the relevance of the proposed disclosures, 

(iv) the main simplifications achieved, 

(v) the market acceptance (for VSME ED) with specific questions. 

The survey aims to capture users' and preparers' perspectives. Feedback from all interested constituents is welcome.

Feedback to be provided using the online questionnaires. Both questionnaires consist of Part 1, that contains the most critical questions that EFRAG encourages to answer fully, and Part 2 that contains additional and more detailed technical questions that EFRAG encourages to answer as much as possible. Detailed instructions are provided in the introduction part of the on-line questionnaires. Both also contains a section on the value chain cap.

EFRAG encourages the submission via the online questionnaires, rather than comment letters, to analyse responses in a structured and comparable way. For specific-aspects that are not covered by the questions in the on-line questionnaire, respondents may consider sending letters or other attachments, preferably by uploading them on the on-line questionnaire tool.

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ESRS LSME ED and VSME ED Field Test   

As announced in the EFRAG call for participation in the field test, released on 20 December 2023 with deadline to submit interest by 31 January 2024, participation in this field test is a unique opportunity to be part of the standard-setting process and help shape the future requirements, as well as to gain valuable insights into the new requirements. Preparers and users (including business counterparts, civil society, academics, etcetera) are invited to participate.

The field test focuses on feasibility, costs, challenges, benefits and usefulness of the individual disclosures and suggested improvements to the EDs.

For preparers, the field test consists of preparing by the 21 April 2024 (part of) the disclosures contained in the ED and on, that basis answering, the Field Test Questionnaire. It is possible to test selected disclosures. Companies will be invited to workshops or one-to-one interviews to share their experience in preparing the disclosures and illustrate their feedback. Those that are not able to commit to prepare the disclosures, may also participate to workshops, based on their analysis of the ED.

Users will be invited to dedicated workshops, after providing their feedback on the Field Test Questionnaire. Lenders, investors and listed and non-listed corporates that have SMEs in their supply chain are invited to participate as users.

Organizations that operate platforms or similar mechanisms for the collection of sustainability information from SMEs that is used by corporates in their supply chain management, or for the standardisation of data requests, are also invited to participate.

The workshops will take place in the last month of the consultation period.

Participants to the Field test are also expected to reply to the general public consultation questionnaire.  

Detailed instructions and online Field Test Questionnaires are available below.  To confirm your interest in the field test, please send an email to VSME@EFRAG.org and LSME@EFRAG.org.