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News article29 February 2024Directorate-General for Environment7 min read

Public consultation on new Sustainability Reporting Standards for SMEs under the CSRD

EFRAG has published two Exposure Drafts on sustainability reporting standards for SMEs and invites feedback until May 21, 2024. EMAS stakeholders are encouraged to provide their input.

Photo by Ricardo Arce, unsplash

Within the framework of the Corporate Sustainability Reporting Directive (CSRD) subsequent reporting standards for small and medium-sized enterprises (SMEs) are now open for public consultation. While the already adopted European Sustainability Reporting Standards (ESRS) address large companies, the European Financial Reporting Advisory Group (EFRAG) is in the process of developing proportionate standards for listed SMEs (Listed SMEs) and voluntary standards for non-listed SMEs (VSMEs). The first exposure drafts were published on January 22, 2024. 

Stakeholders (both private companies but also public interested entities) can now provide feedback until May 21, 2024, through online consultation questionnaires. You can find all relevant documents here. 

The CSR Directive, effective from January 5, 2023, aims to enhance transparency in assessing a business's sustainability impact. It mandates sustainability reporting for all large public-interest companies with over 500 employees, starting from fiscal year 2024. In subsequent years, this reporting requirement will extend to large companies with fewer employees and proportionately to listed SMEs. 

EFRAG, a private association encouraged by the European Commission to serve public interest, is the responsible body for drafting the reporting requirements under the CSRD. On July 31st, 2023, the European Sustainability Reporting Standards (ESRS) for large listed companies, were officially adopted by the European Commission. The standards cover a wide range of environmental, social, and governance aspects, including climate change, biodiversity, and human rights. 

This January, EFRAG published the Exposure Draft ESRS for listed SMEs (ESRS LSME ED) and the Exposure Draft for the voluntary reporting standard for non-listed SMEs (VSME ED) for public consultation. The draft standards aim to ease SMEs into the sustainable economic transition. For EMAS, they hold special significance: the majority of EMAS organisations are SMEs (72.7%) and will subscribe to either one of the reporting standards. Therefore, ensuring compatibility with the EMAS requirements they already adhere to, becomes crucial. 

Save the Date: On April 9, the EMAS Helpdesk is planning a webinar on this public consultation and its importance for EMAS registered companies. Register here.

Exposure Draft: Mandatory Reporting Standards for Listed SMEs

The ESRS LSME ED addresses SMEs are classified as public-interest entities. This version of the ESRS is designed as a delegated act, set to become effective on January 1, 2026, with an additional two-year opt-out period. It aims to provide reporting requirements tailored to the scale and complexity of the activities of LSMEs, support them in gaining better access to finance and provide standardized sustainability information.

The exposure draft contains three references to EMAS.  

  • In 'Disclosure Requirements E4-1 – Impacts metrics related to biodiversity and ecosystems change' (AR 64), companies are allowed to disclose land-use impacts using EMAS guidance. 

  • In Chapter 4.2, 'Estimation using sector averages and proxies' (point 66), EMAS is acknowledged as a facilitator for gathering data from the value chain. It permits companies to utilize information from another company's EMAS sustainability statement within their value chain, provided that the information has the same level of assurance as the company's own sustainability statement. Additionally, if there are clear signs that material impacts and risks are inadequately addressed, further investigation into these specific impacts and risks in the value chain may be necessary. However, this additional requirement should not pose additional challenges, as addressing risks and opportunities is already a part of EMAS obligations. 

  • Chapter 8.1, 'Incorporation by reference' (point 113), states that required information can be included in a sustainability statement by referring to the company's report under the EMAS Regulation. However, the referenced information must be prepared using the same basis as ESRS, including consolidation scope and value chain treatment. This might be tricky for companies partially EMAS registered and the scopes between EMAS registration/verification and annual reporting on corporate level differ. Furthermore, point 112 lists a set of conditions   attached to the referencing.These conditions are:  a clear identification of the referenced information or datapoints in the ESRS report will be necessary. The disclosures must be published before or at the same time as the management report. This could be a challenge for EMAS companies as the cycles of EMAS and the annual ESRS reporting often do not concur. Both reports must be in the same language and have the same assurance level. The latter still needs clarification, as there is no limited assurance related to EMAS, the EMAS verification can always be considered as a check with sufficient certainty (reasonable assurance). Lastly, meeting digitalization requirements is also a challenge for EMAS, which is not yet digitalized.  

What do EMAS organisations think? Are these conditions easy to meet? How can you make sure that the verification done under EMAS will not be doubled by the assurance required under the CSRD?  

Exposure Draft: Voluntary Reporting Standards for Non-listed SMEs  

The VSME ED is a voluntary sustainability reporting standard designed for non-listed SMEs (VSME). While these standards are optional, their purpose is to assist SMEs in providing sustainability information upon request from business counterparts and to support their involvement in the shift towards a sustainable economy. The adoption of these standards can significantly impact a company's credibility within its value chains. Given that EMAS is also a voluntary tool, it is important that there is a recognition of what is done under EMAS. 

In the section 'Metric B 4 – Pollution of air, water, and soil,' there are various references to EMAS. For instance, it notes that an EMAS registered company can incorporate pollution data from its EMAS statement into the sustainability report. Additionally, akin to the ESRS LSME ED, the EMAS Regulation can serve as guidance for calculating and reporting land-use. 

EMAS registered SMEs, in addition to reporting on sustainable metrics, must conduct a materiality assessment and undergo third-party verification of their environmental report. For example, Step 4 of the environmental review, as per Annex 1 of the EMAS Regulation, involves identifying direct and indirect environmental aspects and determining their significance. This step can serve as a foundation for the materiality assessment when determining the impact's materiality.  

The challenge lies in avoiding double reporting between the EMAS environmental report and the disclosures required by the voluntary standards. How could the draft standards reinforce the recognition of these processes performed by SMEs as part of EMAS and consider them in the sustainability reporting? 

Why is the ongoing public consultation important for EMAS? 

The public consultation presents a crucial opportunity to enhance the alignment with EMAS in the two exposure drafts for sustainability reporting standards for SMEs. Both the mandatory ESRS LSME ED and the voluntary VSME ED are anticipated to become significant reporting standards. Ensuring coherence with EMAS is essential to prevent a double reporting burden. Especially organizations with a long history of EMAS implementation would benefit from a strengthened connection, minimizing the necessity for substantial changes to their established management and reporting systems.

For both exposure drafts, feedback is expected to be submitted through the respective online questionnaires (see below). In the questionnaire for the VSME, Question 15 (Q15) specifically addresses the potential for better alignment with other reporting schemes, such as EMAS.

We invite all EMAS stakeholders to carefully review the drafts and provide thoughtful comments with a specific focus on enhancing alignment with the proposed sustainability reporting standards:

Field test on the two SME draft standards 

EFRAG is also performing a field test where EMAS SMEs are encouraged to participate. The field test, announced in EFRAG's December 20, 2023, press release, invites preparers and users to shape future sustainability reporting standards. Preparers can contribute by preparing the disclosures contained in the exposure drafts by April 21, 2024, and providing feedback through the field test questionnaires (LSME ED – Field Test online Questionnaire and VSME ED – Field Test online Questionnaire). Users, including lenders and corporates with SMEs in their supply chain, can participate by offering feedback to the online questionnaires and joining workshops. Organizations managing platforms for SME sustainability information are also welcome. Workshops are scheduled for the final month of the consultation period. One webinar already took place on February 20, the recording can be found here. 

To express interest, email VSMEatEFRAG [dot] org (VSME[at]EFRAG[dot]org) and LSMEatEFRAG [dot] org (LSME[at]EFRAG[dot]org).  

Webinar: Shape the new European sustainability reporting standards for SMEs 

The webinar will take place on 9 April 2024, 10.00 – 12.00 (CEST) and is designed for all EMAS stakeholders that want to learn more about the public consultation and actively participating to strengthen the links to EMAS in these SME standards. You can register here.


Publication date
29 February 2024
Directorate-General for Environment