By: Impact Europe, the Global Alliance of Impact Lawyers, and Euclid Network – the European Social Enterprise Network, July 2024

Impact Europe, the Global Alliance of Impact Lawyers, and Euclid Network – the European Social Enterprise Network, along with other signatories, welcome EFRAG’s Exposure Draft for a Voluntary Sustainability Reporting Standard (VSME ED). This draft represents a key advancement towards ESG reporting standardisation, benefiting SMEs, stakeholders, larger companies, and investors.

We appreciate the draft’s modular and gradual approach tailored to SMEs’ varying maturity levels and data needs. The value chain cap principle is particularly noteworthy for clarifying data requests from business partners.

Impact and social enterprises, mainly non-listed SMEs, are leaders in sustainability, focusing on generating measurable positive impacts. To maximise the uptake of the VSME in this sector, we believe that EFRAG could implement the following recommendations:

  1. Create clear avenues for voluntary positive impact reporting: Integrate voluntary disclosures to highlight positive contributions, boosting standardisation and comparability, and attracting impact finance.
  2. Include a supplementary module for impact enterprises: Develop a specific standard for impact enterprises to differentiate and better meet the needs of impact investors, reducing social and greenwashing.
  3. Safeguard the value chain cap and balance data user needs in SME Reporting: Streamline reporting and provide guidance for proportionate data requests.
  4. Strengthen the governance aspect in ESG reporting within the Basic Module: Include governance aspects in the Basic Module to enhance investment appeal and credibility.
  5. Strengthen the governance aspect in ESG reporting within the Basic Module: Include governance aspects in the Basic Module to enhance investment appeal and credibility.
  6. Offer a centralised, user-friendly digital tool to simplify the reporting process, consolidating reported information, pre-populating sector-relevant data, and automating calculations.

We commend EFRAG’s efforts and advocate for clearer pathways for positive impact disclosures. This will support Europe’s transition to a sustainable economy, addressing social and environmental challenges, and promoting the growth of the impact and social economy sectors.

For detailed recommendations, read the full Joint Statement below

Read the Statement