Rationale for adding this project and CSRD content

EFRAG's LSME workstream on reporting standards for small, medium enterprises ('SMEs') aims at developing a simplified standard for listed SMEs, small banks and captive insurers (together "LSME" with the standard abbreviated as "ESRS LSME") according to the provisions set out in the CSRD (Article 19a 6).

Its purpose 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 the companies in scope and to support these entities in getting better access to finance and avoid discrimination against them by financial market participants.

The CSRD requires to issue this Standard as a delegated act and to be effective on 1 January 2026, with the option to opt out for an additional two years.


Drafting the exposure draft (November 2022 – January 2024)

Between November 2022 and February 2023 EFRAG Secretariat established the methodology and general approach, per the guidance of EFRAG SR TEG and the SRB, to define a simplified and proportionate standard for listed SMEs, small and non-complex institutions and captive insurance companies. The EFRAG SMEs Expert Working Group and two newly established LSME community also provided inputs.

During March and June 2023, the SRB and SR TEG discussed the first LSME draft working papers as a priority due to the requirements of CSRD. For ESRS LSME the goal is to achieve the maximum level of simplification while respecting the CSRD provisions. The ED also integrates the EU law datapoints (SFDR, Taxonomy, Benchmark and Pillar 3 regulations) and it acts as a "cap" for the sustainability information that EFRAG may require in the sector-agnostic standards from larger companies.

The draft standard also allows reconciliation with the content of Set 1 ESRS (for large companies).

During the summer of 2023, the EFRAG SRB and SR TEG provided feedback on the exposure drafts for LSME (ESRS LSME ED). In general, the SR governing bodies supported the simplification achieved in LSME ED. There was a general agreement that the achieved simplifications provided flexibility and addressed the concerns that existed on proportionality. The EFRAG Secretariat embedded the detailed comments in the draft and provided justification to the SR TEG and SRB on few that were not accepted as contradicting the agreed upon methodological approach or CSRD provisions. Comments of a more conflicting nature as well as new proposals were further discussed at public SR TEG and SRB meetings and contributed to the changes made in the early draft LSME ED. These discussions included topics such as the value chain cap and the topical requirements.

Publication of exposure draft (21 January 2024)

On 21 January 2024, EFRAG published its exposure draft of ESRS LSME (ESRS LSME ED or ED). The documents that formed the basis of the consultation is available below.Consultation package:

Responses received during the public consultation

LSME online survey responses: ESRS LSME ED online survey responses.xlsx

LSME comment letters:ESRS LSME ED comment letters.zip

The ESRS LSME ED successfully transitioned from the public consultation phase (and field test), where feedback was gathered and assessed, to the deliberation stage, where it was reviewed and evaluated by the SRB and SR TEG to determine the next steps and simplifications to be applied according to the feedback received during the public consultation and field test.

Considering the feedback received, the SR TEG and SRB decided to pursue further simplifications while keeping the minimum content defined in the CSRD and the objective to support the element of fair presentation. After several meetings with the EFRAG bodies and with external stakeholders (about 20 meetings in total), the draft ESRS LSME has been approved by a very large majority vote (23 positive votes, i.e. all in favour except one) of the SR TEG members as a technical recommendation to EFRAG SRB.

The version of the standard approved by SR TEG was discussed with SRB on 27 November. Pending political clarity on whether LSME will be a requirement in the CSRD after the Omnibus directive, the EFRAG SRB could not express a formal vote and finalise the standard for delivery to the EC. However, the majority of the 17 members did not express technical red flags on the content of the standard, in the hypothesis that it would have to be issued for use by companies in the original scope of the CSRD.

The following link provides the "stabilized" version of the [draft] ESRS LSME (last step of the process described above).