The European Commission has unveiled a new voluntary sustainability reporting framework designed specifically for small and medium-sized enterprises (SMEs). This initiative aims to reduce the pressure on smaller businesses, making it easier for them to respond to the increasing sustainability data requests, particularly from larger companies and financial institutions.

Created by the European Financial Reporting Advisory Group (EFRAG), the voluntary standard for SMEs (VSME) targets businesses that fall outside the scope of the Corporate Sustainability Reporting Directive (CSRD). Despite being exempt from mandatory reporting, these SMEs are increasingly asked to disclose sustainability data. This new framework provides a streamlined and less complex method for these businesses to share crucial sustainability metrics, enhancing their access to sustainable finance and allowing them to better manage their environmental, social, and governance (ESG) performance.

The European Commission emphasizes that the VSME’s voluntary nature gives SMEs the flexibility they need to improve their sustainability practices without the added burden of mandatory reporting requirements. By adopting this framework, SMEs can boost their competitiveness, resilience, and align with sustainability goals according to their paces.

This recommendation serves as a temporary measure while the Commission works on a formal delegated act, which will be incorporated into the Omnibus I proposal. This proposal seeks to simplify reporting requirements, limiting mandatory CSRD reporting to larger companies with over 1,000 employees. The forthcoming framework will also prevent SMEs from excessive data requests from their business partners by introducing a “value-chain cap.”

With the Commission encouraging large companies and financial institutions to align their sustainability data requests with the new voluntary standard, the goal is to create a more balanced reporting environment. This approach ensures SMEs are not overburdened while still participating in the global sustainability movement.

While entirely voluntary, the VSME offers SMEs a straightforward path toward enhanced transparency, improved sustainability practices, and greater opportunities for investment, aligning with the EU’s broader sustainability objectives.

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https://esgnews.com/eu-commission-introduces-voluntary-sustainability-reporting-standard-for-smes/