VSME

EFRAG launched a second workstream on sustainability reporting standards for small, medium enterprises ('SMEs') in November 2022 namely VSME. The workstream is outside the CSRD mandate and it is triggered by market needs for a voluntary sustainability reporting standard for non-listed SMEs and micro-entities to support them in facing the ESG requests of banks or partners in their value chain.

Between November 2022 and February 2023, the EFRAG Secretariat established the methodology and general approach for the VSME per the guidance of EFRAG SR TEG and the SRB. Inputs were also received from the EFRAG SMEs Expert Working Group and the VSME Community.

During the summer of 2023, the EFRAG SRB and EFRAG SR TEG provided feedback on the voluntary reporting standard for non-listed SMEs (VSME ED). The building block approach links the two exposure drafts and allows reconciliation with the content of Set 1 ESRS. In addition, VMSE is built following a modular approach, that allows all SME undertakings from the micro-undertakings (with a voluntary minimum data set) to the small and medium companies to report their sustainability information (presented at EFRAG SR TEG meeting on 13 July 2023).

The EFRAG Secretariat received about 300 comments on VSME. In general, the EFRAG SRB and EFRAG SR TEG supported the simplification achieved in the VSME ED. There was a general agreement that the building block and the modular approach provide flexibility and address the concerns that exist on proportionality. Most of the detailed comments were taken on board by the EFRAG Secretariat (overview and summary here); the few that were not accepted are in contradiction with methodological approach agreed by EFRAG SR TEG and SRB or with CSRD provisions.

During the sessions for the Draft VSME ESRS, EFRAG SR TEG further clarified the 'building blocks' approach and approaches to simplifications namely, how to approach materiality and how to reduce complexity, for example regarding terminology and use of language. Furthermore, specific feedback for the topical requirements was also addressed. 

Meetings with stakeholders:

• Expert Working Group meetings:19 December, 19 January, 9 February, 8 March and 5 May
• VSME Community workshop: 31 January
  
• Vienna Initiative: 10 February, 14 March
  
• EEN and EFRAG on SMEs: 3 March
• EC European Enterprise Network Workshop SMEs: 27 March
• EFRAG – OECD: 17 April
• ESBG Accounts and Audit committee: 9 June
• REPARIS SMEs working group: 11 May
  

Outreach on VSME ED and second VSME community workshop

On 7 September 2023, the EFRAG Secretariat organised the second workshop of the VSME community to discuss the VSME ED. 73 VSME community members attended the closed session with a good representation of SMEs, banks, SMEs' accountants and other stakeholders. 92 attendees joined the public session. Prior to the workshop, VSME community members were asked to provide feedback on the draft VSME proposal. The results were presented and discussed in the workshop. There was general support for the architecture of the VSME ED and the modular system as it allows flexibility for micro, small, and medium sized undertakings outside of the scope of CSRD as an incentive to report. Two topics emerged as important – simplification of the materiality approach and simplification of language.

A key function of the VSME ED is to fulfil a market need for a common point of reference to be used by counterparties in the upstream value chain of SMEs and by lenders when they define their data requests from non-listed SMEs. The EFRAG Secretariat is also exploring initiatives of ESG data request of large corporates towards the supply chain. For this reason, in addition to the VSME Community workshop, the EFRAG Secretariat held outreaches (in a form of closed meetings) on VSME to gather feedback from associations of SMEs, banks across Europe and other relevant stakeholders as follows:

• EFRAG-OECD staff to staff Meeting – 29 August 2023;
• Vienna Initiative – OEKB Workshop with members– 30 August 2023;
• EFRAG session with European banks associations and banks – 1 September 2023;
• SME UNITED and EFRAG Secretariat workshop – 4 September 2023;
• Further sessions are planned with CSR Europe and Business Europe in October.