VSME and LSME Explained – The ESRS for SMEs
VSME: Voluntary Sustainability Reporting Standards for SMEs
VSME are voluntary sustainability reporting standards for small and medium-sized enterprises (SMEs). These standards help non-listed SMEs meet the increasing demand for sustainability data from their business partners across the value chain, demanded by the CSRD and ESRS. By establishing a unified standard, VSME aims to make it easier for non-listed SMEs to participate in sustainability reporting.
ESRS LSME: ESRS for Listed SMEs
EFRAG is developing simplified reporting standards for listed SMEs known as LSME (ESRS LSME). These standards align with the Corporate Sustainability Reporting Directive (CSRD) and aim to provide clear guidelines for sustainability reporting.
What is the Difference between VSME and LSME?
EFRAG is working on two types of sustainability reporting standards for SMEs: a mandatory one for listed SMEs: LSME ESRS and a voluntary one for non-listed SMEs: VSME.
The LSME ESRS aims to create reporting requirements suitable for the size and complexity of activities and the capacities and characteristics of public-interest SMEs. It is expected to improve access to finance, prevent discrimination by financial market participants, and facilitate the provision of standardised sustainability information.
The VSME will serve as a benchmark for all market participants to ensure reporting efforts are proportionate for both CSRD and non-CSRD entities.
When Will the VSME Apply?
On January 21, 2024, EFRAG released its exposure draft of VSME, inviting feedback from stakeholders until May 21, 2024 to refine the standards. The timeline for publication of the finalised VSME remains unannounced.
When Will the LSME Apply?
The ESRS LSME will become effective on January 1, 2026, with an additional two-year opt-out period.
A Digital Approach to VSME and ESRS
Advanced technologies such as automation, data analytics, and artificial intelligence can streamline the entire ESRS process, making it more efficient and accurate. These tools also aid the auditing process, providing the auditors with a more straightforward and organised look into the company’s reporting system.
Due to the complexity of the ESRS standards, it is optimal to apply electronic CSRD reporting from the beginning. Therefore, traditional reporting methods are no longer efficient or appropriate. The sustainability report must be submitted through national contact points to ESAP from January 2028 onwards, when the reporting data must meet the electronic marking standard (ESEF) requirements. The sustainability report must be prepared in XHTML format, and its information must be marked with an electronic XBRL tag. When implementing sustainability reporting under CSRD, the focus should be on the finish line. Enter Ecobio Manager: Your all-in-one solution for sustainability reporting.
