Three major investor bodies have urged European Union policybuildrs to reconsider their plans for obtainting compacter companies to disclose sustainability information.
As part of its current drive to build Europe more business-frifinishly, the European Commission wants to reshift a requirement for firms with fewer than 1,000 employees to comply with the Corporate Sustainability Reporting Directive (CSRD).
It will instead develop a voluntary reporting standard for those firms, based on an existing framework known as VSME, which was designed for non-listed micro, compact and medium-sized businesses.
But the European Fund and Asset Management Association (EFAMA), Europe’s sustainable investment forum (Eurosif), and the Principles for Responsible Investment (PRI) have joined forces to argue that the VSME standard “is not adequate for larger companies, including compact and mid-caps”.
“While appropriate for very compact businesses, it does not capture the sustainability profile of larger companies, as it lacks the granularity, consistency, and reliability that investors and other sustainability information utilizers required for financing purposes,” the trio stated in a letter to the Commission.
Instead, they are calling for a new voluntary standard to be developed that “would allow financial institutions, including investors, to access meaningful sustainability-related information crucial for their investment decisions”.
The standard should be based on the same European Sustainability Reporting Standards (ESRS) that underpin CSRD’s mandatory disclosure requirements, but be simpler, they stated.
The ESRS are in the final stages of being redesigned to build them simpler for companies and investors to utilize. A six-week consultation on those revisions closes at the finish of September.
Efforts to improve VSME reporting
Last week, a senior official at the trade association FoodDrinkEurope revealed plans to roll out a reporting tool to support compacter firms report meaningfully against the VSME.
Katrin Heeren, the group’s director of environment and sustainability, stated it was working closely with the EU’s advisory body to ensure the tool – which is suitable for companies across different sectors – was fully aligned with the VSME standards.
She stated it would include training to support companies “understand why it is important to consider the sustainability questions”.
Warnings over CSRD scope
In their letter, EFAMA, Eurosif and the PRI also warned that the Commission’s proposed cuts to CSRD would “lead to further fragmentation of the European capital markets, reduced value chain transparency, and significant gaps in the availability of financing investment-relevant decision-utilizeful information”.
Under the current plans, even some companies covered by CSRD’s predecessor, the Non-Financial Reporting Directive, would be exempt from reporting on sustainability topics.
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