The European Union’s Corporate Sustainability Reporting Directive, published in December 2022, tasks EFRAG with providing technical advice to the European Commission on ESRSs. As part of this mandate, EFRAG has been asked to develop an ESRS for SMEs that are public-interest entities. These include entities whose transferable securities (bonds, shares and other securities) are admitted to trading on a regulated market in the European Union, small and non-complex institutions, and captive insurers and reinsurers.

The ESRS LSME will be issued as a delegated act and will be effective on 1 January 2026 with the option to opt out for an additional two years. According to the press release, the purpose of the ESRS LSME ED 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 public-interest SMEs. EFRAG expects that the standard will support these entities in getting better access to finance and avoid discrimination against them by financial market participants, as it will facilitate standardised sustainability information. 

The VSME ED (that has been published alongside the ESRS LSME ED) proposes a simple reporting tool to assist non-listed micro-, small- and medium-sized enterprises in responding to requests for sustainability information that they receive from business partners.

For more information, including access to the exposure drafts, how to respond to the exposure drafts and how to participate in a field test for preparers and users, please see the press release on the EFRAG website.

Note: EFRAG has published a series of webcasts on the exposure drafts. Please click the press release on the EFRAG website for more information and access to the videos. In addition, see our Need to know newsletter.