Introduction
In a global context where sustainability and corporate social responsibility are becoming increasingly central, the European Financial Reporting Advisory Group (EFRAG) has introduced a significant breakthrough for small and medium-sized enterprises (SMEs), both listed and non-listed.
This initiative aims to simplify and standardize sustainability reporting, facilitating access to more advantageous financing and promoting greater transparency and accountability.
The public consultation on this theme will remain open until May 21, 2024, offering all interested parties the opportunity to contribute to the definition of these important standards.
📊 Listed SMEs: A New Horizon of Sustainability
For listed SMEs, the ESRS LSM ED project introduces a series of mandatory sustainability reporting requirements, coming into effect on January 1, 2026.
This initiative applies to those SMEs, excluding micro-enterprises, whose securities are traded on regulated markets of the European Union.
The main goal is to provide a clear and detailed framework for communicating sustainability-related information, covering environmental, social, and economic aspects.
This approach not only increases information transparency and fairness but also enhances access to better financing opportunities for SMEs.
🌱 Non-Listed SMEs: Towards Voluntary Standardization
For non-listed SMEs, EFRAG proposes a voluntary standard (VSMF ED), which, although not required by the CSRD Directive, aims to establish a common benchmark for sustainability reporting.
This standard is intended to meet the informational needs of external parties, such as banks, investors, and large companies, along the value chain.
The VSMF ED is organized into a basic model with two additional optional modules, thus providing a simple, effective, and innovative reporting tool.
📈 Reporting Modules
Basic Module: Primarily intended for micro SMEs, it uses simplified language, allowing for the production of the report without necessarily the aid of an accountant.
Narrative Module – Policies, Actions, and Objectives (PAT): Includes the analysis of financial and impact materiality, helping SMEs to identify relevant issues and interests for the business.
Business Partners Module: Focuses on the metrics required by financial market participants, in line with EU Financial Sustainability regulations.
💡 A Sustainable Future for SMEs
These developments represent a significant step forward in integrating sustainability into the business strategies of SMEs.
EFRAG's approach, with its emphasis on standardization, simplicity, and accessibility, not only increases awareness of sustainability but also simplifies reporting for SMEs, regardless of their listing status.
In conclusion, these standards represent an opportunity for SMEs to demonstrate their commitment to responsible and sustainable business management, while simultaneously accessing new financing opportunities and strengthening their market position.
What are the main EFRAG sustainability regulations for SMEs?
EFRAG's sustainability regulations introduce specific requirements for SMEs, divided into two categories: mandatory for listed SMEs and voluntary for non-listed SMEs.
These standards aim to simplify and standardize sustainability reporting, improving access to advantageous financing and promoting greater corporate transparency and accountability.
How can SMEs prepare for the new EFRAG sustainability regulations?
SMEs can prepare for the new EFRAG sustainability regulations by familiarizing themselves with the specific requirements of the standards, assessing their current reporting practices, and identifying areas for improvement.
It is essential to consider implementing the proposed reporting modules and evaluating the need for external assistance for compliance.
What benefits do EFRAG sustainability regulations offer to SMEs?
EFRAG's sustainability regulations offer SMEs significant benefits, including improved access to advantageous financing, greater transparency and accountability, and the opportunity to demonstrate their commitment to sustainable management.
These standards also facilitate the communication of sustainability information to stakeholders and investors, strengthening the market position of SMEs.