The voluntary reporting standard for non-CSRD mandatory companies.
On Dec. 17, the European Financial Reporting Advisory Group (EFRAG) announced the delivery of the technical advice for the voluntary reporting standard for SMEs (VSME). In short, the VSME provides a handbook for companies that want to report but do not meet the criteria of the CSRD. Small and medium-sized enterprises (SMEs) are companies that maintain revenues, assets or number of employees below a certain threshold. The criteria for reporting under the CSRD are; more than 250 employees (average FTE over a year), 50 million in annual revenue (euro) and a balance sheet total of more than 25 million (euro). If two of the three requirements are met for two consecutive fiscal years, a company must report under the CSRD. Please note that these requirements only apply to European companies. Non-EU companies that for two consecutive fiscal years have a (consolidated) turnover of more than 150 million (euro) in the EU and/or have an EU subsidiary that qualifies as large or is a medium or small listed company and/or have an EU branch with net turnover of more than 40 million (euro) for the previous fiscal year are also subject to the reporting requirement.
SME Enlightenment Package
EFRAG's work on the VSME is based on the European Commission's September 2023 SME Enlightenment Package, which specifically refers to this standard as an additional measure to support SMEs in accessing sustainable finance. As stated, EFRAG will develop a voluntary standard for unlisted SMEs. These companies can use the standard to standardize the sustainability information they wish to report, thereby creating better opportunities to obtain green financing and facilitating the transition to a sustainable economy. In short, the VSME provides a standard in which non CSRD-regulated companies can report.
Purpose during development of the VSME standards
EFRAG's objective during the development of the VSME standards has been to provide a simple guideline that offers a pragmatic and effective approach for companies outside the scope of the CSRD. A key difference from the CSRD is that the VSME does not involve a Dual Material Analysis (DMA). The VMSE consists of two modules; a Basic module (Basic) and an Extension module (Comprehensive). The Basic module consists of 11 topics, including simplified textual explanations and ESG thematic statistics. EFRAG describes that all of these topics are mandatory but if applicable, “if relevant” will suffice. The Extension module is effectively an extension/addition to the basic module. This module provides more extensive information requested by the stakeholders. For ESG management, the indicators are referred to are the data points for sustainable finance (Table 1 SFDR PAI, EBA Pillar 3, Benchmark Regulation). As with the basic module, the extension module also includes the option to opt for only 'if relevant'. In total, the extension module includes 9 disclosures. This brings the total number to 20 disclosures for the VSME. It is important to treat the extension module as an addition to the basic module.
The main principles of the VSME
Companies should include, where relevant, additional information not covered by the VSME. This may include sustainability issues that are sector- or company-specific, including Scope 3 emissions. In addition, starting with the second reporting year, companies must include comparative information for the previous year, except for newly reported metrics. Previously, the “if applicable” rule was mentioned. The EFRAG states that certain disclosures are required only under specific circumstances. The instructions accompanying each disclosure specify the circumstances and the information to be reported only if deemed “applicable” by the company. If a disclosure is omitted, it is considered not applicable. If companies wish to report according to the VSME, it is recommended that parent companies draft sustainability reports on a consolidated basis so that subsidiaries are exempt from separate reporting. The sustainability report should be prepared annually, simultaneously with the financial statements. Unchanged data points may be repeated or marked as unchanged.
Classified or sensitive information may be omitted, provided it is explicitly stated in the report. The content of the sustainability report should be consistent with the financial statements and provide clear links, such as through cross-referencing. These principles ensure that corporate sustainability reporting remains both useful and proportionate, while providing flexibility to meet specific business circumstances.
VSME: Two-module structure
The VSME has a two-module structure in which the extension module acts as an addition to the basic module. Below is a list containing the basic and expansion modules with a brief explanation for each disclosure.
Basic module
B1 - Basis for preparation.
Only the basic module and, if applicable, which topics from the extended module are requested by business partners.
B2 - Practices, policies and future initiatives for the transition to a more sustainable economy
A dropdown menu with the Yes/No choice to indicate whether these practices are present.
B3 - Energy and greenhouse gas emissions.
B4 - Pollution of air, water and soil
B5 - Biodiversity
Strategies and practices to protect and promote biodiversity.
B6 - Water
B7 - Resource consumption, circular economy and waste management.
B8 - General characteristics of the workforce.
Demographic data and workplace information such as number of employees, diversity, etc.
B9 - Health and safety in the workplace.
Information on health and safety measures, such as accident rates, health programs, etc.
B10 - Working conditions, collective bargaining and training.
Information related to wage structures, training opportunities and collective bargaining, among other things.
B11 - Convictions and fines for corruption and bribery.
Extension module (in addition to the basic module).
C1 - Strategy: business model and sustainability-related initiatives
Information on business models and strategic initiatives for sustainability.
C2 - Description of practices, policies and future initiatives for transitioning to a more sustainable economy.
Semi-narrative continuation of B2.
C3 - Greenhouse gas reduction and climate transition.
Strategies and measures to reduce greenhouse gases and transition to a more sustainable climate.
C4 - Climate risks.
Data and measures related to climate risks.
C5 - Additional workplace measure - Human rights policies and processes.
C7 - Incidents related to serious human rights violations.
C8 - Income from certain sectors and exclusion from EU reference frameworks
Data on corporate income
C9 - Gender diversity ratio.
Information on gender diversity within of the company.
Stainable software for VSME
Stainable offers an easy-to-use and efficient software solution for companies that both meet the requirements of the CSRD or wish to report through the VSME. The software makes the process of preparing a VSME report simple, fast and conclusive, allowing companies to focus on their sustainable initiatives and regular business processes rather than the red tape of reporting. By using the software, companies can accurately monitor their sustainability performance, communicate transparently with stakeholders and minimize the administrative burden. This not only makes it easier to comply with laws and regulations, but also enables companies to improve their sustainability performance, bringing both economic and social benefits.
Simply Comply!
コメント