
CSRD
Given the super-fast development and introduction of the Corporate Sustainable Reporting Directive (CSRD), the ability of the first in-scope companies to comply with it is remarkable. While an accounting standard change is usually accompanied by a two-year implementation period, the CSRD only finalised its requirement for the collection of up to 1,100 data points six months into the first reporting year affected.
As a result of the significant compliance challenge presented by the CSRD, the Irish Auditing and Accounting Supervisory Authority (IAASA) is proposing that, in its supervision of sustainability disclosures, it identifies in the first year only those information issues giving rise to concern and not the information issuer. This will allow companies to learn from each other and adopt each other’s novel methods of clearly presenting those 1,100 data points in an understandable way. It also means individual companies’ shortcomings will not be called out in public.
IAASA’s proposals are open for public comment until 18 July 2025.
SME reporting
The Voluntary Sustainability Reporting Standard for SMEs (VSME), developed by the European Financial Reporting Advisory Group (EFRAG), is a streamlined framework for sustainability disclosure reporting by micro, small, and medium-sized enterprises.
The aim is for VSME to act as a single fixed-format report with EU customers and lenders not permitted to ask for any sustainability information beyond what it provides. VSME compliance will accordingly allow small businesses to avoid producing multiple sustainability reports in the often different formats required by banks and business customers as a condition of qualifying for a loan or being listed as an approved supplier.
Designed to simplify environmental, social and governance (ESG) reporting and facilitate SMEs’ access to sustainable finance, VSME offers two levels of disclosure:
- Basic. Designed for micro-enterprises, basic VSME covers 11 ESG data areas, including general information, environmental metrics (eg energy use, emissions, pollution), social metrics (eg workforce characteristics, health and safety), and governance metrics (eg anti-corruption measures).
- Comprehensive. For SMEs seeking more detailed reporting, comprehensive VSME extends disclosures to areas such as climate risks, human rights policies and governance diversity ratios.
VSME eliminates the need for a materiality assessment, adopting the ‘disclose if relevant’ principle. It employs clear language, predefined templates and checklists to facilitate reporting.
EFRAG has released the report and resources from its recent ‘VSME in Action: Empowering SMEs for a Sustainable Future’ event. Also available is a series of 10 educational videos focused on VSME reporting standards, along with the first version of the VSME digital template and accompanying XBRL taxonomy, and a report on a recent ‘Practical Considerations of Connecting Financial and Sustainability Reporting’ roundtable.
More information
Read the AB article Sustainability reporting changes for background on the Voluntary Sustainability Reporting Standard for SMEs