EUU, Alm.del - 2023-24 - Bilag 534: Notat om dansk høringssvar vedrørende EFRAG's SMV-standarder for bæredygtighedsrapportering

Europaudvalget 2023-24
EUU Alm.del Bilag 534
Offentligt

NOTAT

14 May 2024

2024 - 5579

MarRay

Response to EFRAG’s Public Consultation on Two Exposure Drafts

on Sustainability Reporting Standards for SMEs

The Danish Government would like to thank EFRAG for the work done on

two drafts on sustainability reporting standards for SMEs. The Danish Gov-

ernment supports the objectives of the Corporate Sustainability Reporting

Directive (CSRD), with the aim to enhance and standardize digital sustain-

ability reporting, contributing to the sustainable and digital transformation

of European businesses.

We see sustainability standards as an effective tool to ensure transparency

and comparability of sustainability reporting, thereby supporting the tran-

sition into a sustainable economy. It is essential to create transparency and

comparability regarding sustainability and make rules that are fit-for pur-

pose and add value for the reporting undertakings and the users of the data.

However, we can only fulfil this purpose if the standards are proportional,

value-creating and executable for businesses. The green and digital transi-

tion of European businesses is necessary to deliver on the global challenges

facing us. However, we will not achieve the important aim if companies

are unable to comply with the new requirements. This is particular relevant

for the corporate sustainability reporting. New estimates

–

carried out on

behalf of the Danish government

– show that businesses’ implementation

and annual costs related to the CSRD could prove more than five times

more costly than initially expected based on an extrapolation of the Com-

mission’s original estimates. We must direct particular attention towards

reducing these burdens or risk jeopardising support for the green transition

as well as confidence in European competitiveness.

To this end, it is vital that the standards do not exceed the mandate of the

CSRD.

The “report if you have-

approach” goes beyond the mandate of the

CSRD and could give the impression to listed

SME’s

that they need to dis-

close more information than required by the CSRD. We find that elements

not mandated by the CSRD should be abandoned, which we elaborate on

further below.

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The SME standards will be crucial as these set out the reporting obligations

for the SME’s which are

in scope of the CSRD. Moreover, they state the

extent of data that larger undertakings will need from SMEs in their supply

chain in order to fulfil their reporting requirements. It is therefore of utmost

importance that the SME standards become proportional in scope and quan-

tifiable in nature.

Qualitative disclosure requirements are important to provide context to the

quantitative calculations, allowing for comparisons across sectors and in-

dustries. However, too many qualitative disclosure requirements will risk

decreasing the value-added of the standards. Even more importantly, it

risks introducing requirements that can be difficult to underpin through

standardization and automation.

The Danish Government finds it very important that the SME-standards

support more automated sharing and handling of data, e.g. between an SME

providing sustainability information for a larger company. Ensuring that

the standards are fit for digital, structured and automated data sharing be-

tween businesses, will contribute to the reduction of the substantial admin-

istrative burdens associated with reporting in line with the European Sus-

tainability Reporting Standards. Automated sharing and handling of data

will thus preserve European business competitiveness.

Connection between the different reporting standards (European

Sustainability Reporting Standards 1, Listed SME and Voluntary

SME)

It is important that there is a coherent and proportional system of reporting

obligations. That will enable sustainability information to be shared effi-

ciently and seamlessly between large businesses

and SME’s and between

SME’s and their lenders, investors, and corporate clients. It is also im-

portant that the system of reporting obligations across the different report-

ing standards is aligned. This is to ensure that the businesses do not need

to provide additional sustainability information on an individual basis due

to individual data requests, which would undermine the purpose of the sus-

tainability standards as an effective tool to ensure transparency and com-

parability.

We support EFRAG’s approach to secure a coherent and proportional sys-

tem. We believe this is obtained by the Listed SME exposure draft being a

simplification of the European Sustainability Reporting Standards Set 1

and by developing the Voluntary SME exposure draft as a modular stand-

ard designed based on the frequently observed data request from lenders,

investors, and corporate clients of SME’s.

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Guidance

We welcome EFRAG's work in

preparing “implementation guidelines” and

the "Q&A platform". These are very important supporting measures in re-

lation to the undertakings work on sustainability reporting.

However, there is a need for a European guidance effort targeting the SMEs

- both the listed SMEs, which are directly covered by the LSME, and the

non-covered SMEs, who want to use the VSME on a voluntary basis. We

encourage EFRAG to take the lead and publish this guidance alongside the

approval of the SME standards. Large businesses and other business part-

ners could also benefit from this guidance when they seek information from

their value chain.

We suggest that the guidance also include an overview of how compliance

with the international ISO standards and environmental labels are related

to the disclosure requirements in the LSME and VSME.

The SMEs have no or limited experience with sustainability reporting.

Guidance should be tailored to these target groups and should be intuitive

and accompanied by, e.g., illustrations, videos, templates, and graphics. It

must be as easy as possible for the SMEs to get started. The smaller "large

undertakings" that are subject to reporting requirements according to ESRS

1 will also benefit from such guidance efforts.

Double materiality assessment is a central concept across the ESRS 1,

LSME and VSME. Given the limited resources in the SME segment there

is a strong need to define more explicitly what it means for SMEs to be

compliant with the concept of (double) materiality assessment. To ensure

the LSME and VSME to be efficient and proportionate we suggest a clear

description that sets out the expectation regarding SMEs (double) materi-

ality assessment in both the LSME and VSME.

Standards should be made ready for further processing in XBRL

The purpose of standardized sustainability information is to be able to

share, compare and aggregate data efficiently. For this purpose, XBRL-

taxonomies are in preparation for the ESRS set 1 and article 8 in the taxon-

omy regulation.

We expect that also the two draft SME-standards later will be supported by

XBRL-taxonomies, and hence we urge that this is reflected in the current

development of the standards. Therefore, the standards should be devel-

oped so XBRL-taxonomies support:

•

Valid and reliable data;

•

Identical human readable and machine readable reports;

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•

Simple XBRL-tagging rules, which are easy to use and do not require

specialized XBRL-skills in order to keep administrative burdens at a

minimum.

To this end, the standards should focus on information that can be struc-

tured and is aligned with requirements in the ESRS standard. Moreover, it

is important to start simple and with limited requirements, and rather grad-

ually extend requirements as experience increases and maturity develops.

This also in order to ensure competencies to handle the tagging, audit and

validation of data, and for the market to have trust in the sustainability data

provided.

Please refer to the Danish governments reply to the open consultation on

the Draft XBRL-taxonomy for ESRS Set 1 and Article 8 for further elabo-

ration on this topic.

Closing remarks

In the attached Annex 1 there are further specific comments to the listed

SME and the voluntary SME standards. We look forward to following the

future work on the standards. Should EFRAG need any clarification in re-

lation to our response please reach out. We are ready to elaborate on our

Danish points of view to ensure an effective market-driven transition to a

sustainable economy.