LSME ESRS (ESRS for Listed SMEs)

EFRAG's first workstream on reporting standards for small, medium enterprises (‘SMEs’) aims at developing a simplified standard for listed SMEs, small banks and captive insurers (together "LSME" with the standard abbreviated as "ESRS LSME")

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. 

Publication of exposure draft (21 January 2024)

On 21 January 2024, EFRAG  published its exposure draft of LSME ESRS (LSME ESRS ED or ED). 

Its purpose 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.

Drafting the exposure draft (November 2022 onwards)

Between November 2022 and February 2023 EFRAG Secretariat established the methodology and general approach to both workstreams per the guidance of EFRAG SR TEG and the SRB. The EFRAG SMEs Expert Working Group and two newly established communities, the LSME Community and VSME Community also provided inputs.

During March and June 2023, the SRB and SR TEG discussed the first LSME draft working papers as a priority due to the requirements of CSRD. For LSME ESRS the goal is to achieve the maximum level of simplification while respecting the CSRD provisions. The standard also integrates the EU law datapoints (SFDR, Taxonomy, Benchmark and Pillar 3 regulations) and it acts as a "cap" for the sustainability information that EFRAG may require in the sector-agnostic standards from larger companies. 

The building block approach links the two EDs for SMEs and allows reconciliation with the content of Set 1 ESRS. In addition, the VMSE is built following a modular approach that allows all SME undertakings from the micro-undertakings (with a voluntary minimum data set) to the small and medium companies to report their sustainability information.

During the summer of 2023, the EFRAG SRB and SR TEG provided feedback on the exposure drafts for LSME (LSME ESRS ED) and voluntary reporting standard for non-listed SMEs (VSME ED). In general, the SR governing bodies supported the simplification achieved in LSME ED. There was a general agreement that the building block and the modular approach provide flexibility and address the concerns that exist on proportionality. The EFRAG Secretariat took most of the detailed comments on board (overview and summary here); the few not accepted contradicted the methodological approach agreed by EFRAG SR TEG and SRB or with CSRD provisions. A number of comments were further discussed either because of conflicting views, or there were new proposals compared to draft in the LSME ED. These included the value chain cap as well as the topical requirements.

Meetings with stakeholders

• Expert Working Group meetings:  19 December, 19 January, 9 February, 8 March and 5 May
• LSME Community workshops:
  27 January, 24 February with preparers, financial market participants and 26 June
• VSME Community workshop: 31 January
• European Issuers Smaller issuers committee:  9 May and 20 June
• Vienna Initiative: 10 February, 14 March
• EEN and EFRAG on SMEs: 3 March
• EC European Enterprise Network Workshop SMEs: 27 March
• EFRAG – OECD: 17 April
• ESBG Accounts and Audit committee: 9 June
• REPARIS SMEs working group: 11 May