Reporting Requirements in the Transition: From the ECG Framework to the ESRS VSME

Abstract

In the light of recent legal developments in sustainability reporting for small and medium sized enterprises (SMEs), the EFRAG Voluntary Sustainability Reporting Standard for non-listed SMEs (ESRS VSME) is emerging as a key element of the new European sustainability reporting regulation. With reporting requirements evolving, established frameworks, such as the Economy for the Common Good framework (ECGF), are challenged regarding their practical relevance within the new regulatory environment. This paper explores the differences and synergies between the ECGF and the ESRS VSME to support companies currently using the ECGF in transitioning to the VSME requirements. At the same time, it is laid out how the ECGF might offer benefits for organizations that will report under the ESRS VSME in the future. The study is grounded on a literature review and a coverage analysis, retrieving data from both frameworks and identifying common disclosures. European SMEs will most likely prioritize the ESRS VSME over the ECGF for compliance considerations. However, the ECGF remains a complementary tool either for preparatory guidance or as an extension to the ESRS VSME. Thus, ultimately, the increased relevance of the ESRS VSME offers the opportunity to gain in relevance for European SMEs, and this in market acceptance, if the current regulatory developments are embraced and relevant steps are taken to open up the ECGF to the new rationale and requirements of the ESRS VSME.