There are two main ways of simplifying the EU framework for sustainable reporting:
- To reduce the number of enterprises obliged to report – and that is the main orientation of the Commission’s proposal for a modification of the CSRD (Corporate Sustainable Reporting Directive), which includes the raising of the threshold for companies subject to it from 250 employees to 1,000;
- To reduce the number and the complexity of the reporting obligations, notably the European Sustainable Reporting Standards (ESRS).
Two recent publications of the European Commission and EFRAG show that the second approach is making progress:
- On the 30th of July, the Commission accepted the Voluntary Standard for SMEs (VSME) proposed by EFRAG and published a recommendation to the Member States for the implementation of this standard;
- On the 31st of July, EFRAG (European Financial Reporting Advisory Group) published its proposal of simplification of the European Sustainable Reporting Standards, which is submitted to a public consultation.
This is to be welcome and could help revisit the first approach of simplification by reducing the number of enterprises, which could be detrimental to sustainable transparency.
1) The Voluntary Standard for SMEs
Sustainable reporting is a challenge for SMEs, as it is costly and sometimes complex.
But there will be no successful energy and environmental transition without the SMEs, at least those having a significant carbon footprint or a significant environmental impact. SMEs are pivotal to Europe’s sustainability transition, contributing over 50% of the EU’s GDP and more than 63% of enterprise CO2 and broader GHG emissions, according to the Commission.Furthermore, many SMEs are already asked by their counterparts (clients, banks, financial investors, local authorities) on their impact and a large part of the largest SMEs (especially listed SMEs) have started to publish core data and information on this impact.
For these reasons, it has always appeared to those interested in this crucial issue that the good solution was to help those SMEs having an impact on climate or on the environment to collect and publish key data and information, according to a simplified list. (cf my article “A major challenge for sustainable transition: we need to help SMEs collect and publish their main ESG data”, Europe Jacques Delors, November 2022). This should also protect them against too complicated questionnaires coming from large enterprises or financial investors.
The decision of the European Commission to accept the VSME proposed by EFRAG is a real progress. It offers to the SMEs a list of data and information to be published which is reduced and simpler than for the large enterprises.
The VSME standard, which has been proposed by EFRAG after a long preparatory work, including representatives of SMEs, is structured around two distinct modules:
· The Basic Module, intended as the entry-level for all SMEs, is the target module for micro undertakings (SMEs with less than 10 employees). This module comprises 11 disclosures and focuses on key sustainability indicators that are most required by value chain partners. It includes core disclosures on Greenhouse gas (GHG) emissions (Scope 1 and 2), environmental metrics, own-workforce, and anti-corruption.
The Comprehensive Module builds on the Basic Module and focuses on 9 additional disclosures often requested by banks, investors and value chain partners to SMEs undertakings. For example, this module covers a short description of ESG practices or future initiatives (disclosure C2), GHG reduction targets and transition plans (disclosure C3), confirmed value chain incidents (disclosure C7), and exclusion from EU reference benchmarks (disclosure C8). VSME does not require a materiality assessment and promotes flexibility and usability by allowing undertakings to apply only what is relevant to their operations – the “if applicable” conditionality
2) EFRAG proposals of simplification of the ESRS
EFRAG revised the 12 ESRS standards, notably those on climate, biodiversity and circular economy. It proposes a 57% reduction in mandatory data points and a 68% reduction in total publications and a number of clarifications on complex issues.
This major step follows the European Commission’s Omnibus initiative and its formal request to EFRAG in March 2025 to deliver a critical simplification to the ESRS adopted in 2023. The objective: make sustainability reporting under the Corporate Sustainability Reporting Directive (CSRD) more manageable while preserving its relevance and alignment with the European Green Deal. The proposals were notably based on an extensive feedback from companies which have reported under the CSRD for the first time in the first months of 2025. For most of them, the number of data points was excessive and the sustainable reports much too long.
These proposals are subject to public consultation until the end of September. The Commission wishes to be able to make its decision in November.
3) The interest of revisiting the reduction of the number of large enterprises subject to CSRD
Initially, CSRD was to be implemented by listed and large enterprises (more than 250 employees) in 2025 (for their 2024 accounts) and by non-listed and large enterprises in 2026.
In the Omnibus package, the Commission proposed first to delay the implementation of CSRD by the large enterprises from 2026 to 2028. This proposal has been quickly approved by the European and the Council.
The Commission also proposed to raise the threshold from 250 employees to 1.000.
This proposal was welcomed by most of the companies and their professional federations and could be approved by a majority in the Council and in Parliament, where there is a strong mobilization of the right and the extreme right. On the other hand, NGOs, many experts, certain public authorities and many companies well engaged in the sustainable transition criticised this proposal.
In an article published by Europe Jacques Delors in June 2025 [1], I also criticised this proposal mainly because this would result in a significant lack of data available to everyone. In 2023, according to Eurostat, just over 50,000 companies in the EU were considered large (with more than 250 employees). They employed 36% of the workforce (58 million people) and generated 51% of the turnover of all businesses. This is therefore a significant basis for sustainable information mapping, especially as many of these companies may have or estimate sustainable data from their customers or suppliers. Reducing the scope of the CSRD by raising the threshold to 1,000 employees would reduce the number of enterprises by 80% according to the Commission. There is no figure available for the part of the turnover which would be reduced, but the companies above 1.000 employees represent probably less than 1/3 of the turnover of all business. If this proposal is agreed, we would have a map of sustainable information full of holes and “terras incognitas” and the whole exercise could be delivering results far from reality.
It is especially inadequate when most of the companies of the “first wave” (listed companies with more than 250 employees) have already made the effort to apply the CSRD and published information and data on sustainability topics with their annual accounts in 2025. If we take the example of Denmark, the present Presidency, 74 companies have published sustainable data and information in the first months of 2025; if the proposal of the Commission is agreed, only 13 will have to reiterate the exercise in 2026.
The Commission also proposes that, under the threshold of 1.000 employees, companies could report on a voluntary basis and using the VSMEs. The problem with voluntary reporting is that “good pupils” (enterprises which are well engaged in the transition and which collect and publish sustainable data) will do it, but not the medium-large enterprises which are not so advanced and which are often located in sectors having a significant impact on climate and the environment. Moreover, VSMEs are appropriate for SMEs, but large enterprises should be asked to publish more information (Scope 3 for instance).
[1] « Omnibus directive and sustainable transparency: trimming the sails to stay on course? Or a complete sweep?”, Europe Jacques Delors, March 2025
4) The creation of VSMEs and the simplification of ESRS could help to revisit the reduction of the number of large enterprises subject to CSRD
The creation of VSMEs should contribute to solve the problem of the SMEs which have a significant impact on climate and the environment, especially as they have enough time to implement them progressively.
The simplification of ESRS, which should be finalised before the end of the year, should bring relief to large enterprises, reduce the burden of reporting and hopefully improve transparency by focusing on clearer and essential information.
These two important reforms should help to revisit the reduction of large enterprises subject to CSRD.
Listed and large enterprises which have already reported under the CSRD should continue to do so by using the simplified ESRS. And there is no clear argument not to have the same rule for the large and unlisted enterprises of the second wave, which have until 2028 to prepare sustainable reporting. At least, the smallest of these enterprises (between 250 and 500 employees) could report by using the VSMEs but on a mandatory basis.
Conclusion
The main objective of the EU sustainable transparency framework is to inform all stakeholders in the economy about companies' environmental and climate situation. For this information to be of real interest and in particular to allow monitoring of the transition of the economy, it should come from as many companies as possible and therefore from large companies on a mandatory basis, but also from SMEs having an impact on the climate and the environment on a voluntary basis and with simplified reporting. The publication of simplified sustainable standards for SMEs and EFRAG’s proposal to simplify standards for large enterprises provides the necessary tools for this production of essential climate and environmental information. Still, it is necessary that the number of large companies that must publish this information should not be restricted.