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

BILAG

14. maj 2024

2024 - 5579

seajaj

Annex 1

The LSME standard

The Danish Government support the methodological approach and general

principles used when drafting the ESRS LSME ED. We agree with the ap-

proach adopted by using the “decision tree” to develop LSME ED as a sim-

plification of the content of ESRS Set 1. We welcome the reduction of data-

points in the LSME ED compared to ESRS Set 1 by approximately 50%

while still maintaining the datapoints required by the SFDR etc. We find

that the LSME ED overall is proportional and ensures that the standard is

value-creating and executable for the reporting undertakings and the users

of the disclosures.

Furthermore, we agree with the approach taken by EFRAG when applying

the “value chain cap” where the LSME ED has been developed as a sim-

plified version of the content required in ESRS for large undertakings. We

support the priority to include only those requirements in the LSME ESRS

ED that correspond to the information needs of users of sustainability state-

ments of undertakings in scope of LSME.

However, we have two concerns that we would like to highlight regarding

ESRS LSME ED:

1) Report if you have-approach

First, we are concerned about the “report if you have”-approach

taken by

EFRAG. EFRAG has chosen a “report if you have “-approach

for several

reporting areas which is not mentioned in the CSRD when defining the

sustainability reporting requirements for LSME’s. This approach means

that a LSME shall disclose the related information if it has those elements

in place. EFRAG argues that the absence of these elements would impair

the relevance of the reporting information and would fail to meet the user's

needs. Even so, we do not support this approach taken by EFRAG.

This approach goes beyond the mandate of the CSRD and could give the

impression to LSME’s that they need to disclose

more information than

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required by the CSRD. This could lead to excessive administrative burdens

on the LSME’s. CSRD mandates the reporting requirements for the

LSME’s and those should be complied with.

Consequently, we propose that elements not mandated by the CSRD should

be abandoned.

2) Unclear scope of application

Secondly, following the CSRD article 19a(9) LSME’s are exempted from

carrying out individual sustainability reporting if they as a subsidiary to a

parent company are included in the

parent’s consolidated sustainability re-

porting.

If the LSME is the parent company of a large group, the LSME shall pro-

vide consolidated sustainability reporting following the ESRS Set 1 re-

quirements as set out in article 29a(1) of the CSRD. In this case the LSME

is also exempted from carrying out individual sustainability reporting ac-

cording to article 29a(7) of the CSRD.Thus, the LSME will fall into one of

the following three scenarios:

The LSME is a parent company of a large group and shall provide

consolidated sustainability reporting in accordance with ESRS Set

1 and is exempt from individual sustainability reporting.

The LSME is a subsidiary of a parent company and is included in

the parent’s consolidated sustainability reporting and is exempted

from individual sustainability reporting.

The LSME shall provide individual sustainability reporting only,

also if the LSME is the parent company in a small group.

In LSME ED section 1 “General requirements” in chapter 4.1 Reporting

undertaking and value chain, the approach is expanded to include the

LSME’s subsidiaries. We do not agree with this approach as this is beyond

the mandate of the CSRD.

In the LSME ED provided by EFRAG, we find that there are disclosure

requirements where this is not the case.

Examples include:

- Under Disclosure Requirement 5 (SBM-1)

–

Strategy, business

model and value chain, paragraph 28a (iii) that states:

The undertaking shall disclose the following information about the

key elements of its general strategy that relate to or affect sustain-

ability matters:

…

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iii) main countries of operation of the parent undertaking and of

the subsidiaries that are connected with material impacts or risks;

and

If the subsidiary of the LSME is to be treated as any other value chain actor,

we do not see the need for explicitly mention the subsidiary in the ESRS

LSME ED, as it can create confusion concerning the individual sustaina-

bility reporting versus the consolidated reporting.

We therefore propose that the subsidiaries of the LSME should not be men-

tioned explicitly, nor singled out as a special group, and the term “parent

company”, as used in the example above, should be changed to “the under-

taking” or “the LSME”.

If EFRAG disagrees with this proposal, we recommend that it is very

clearly explained that the LSME standard is to be treated as a stand-alone

standard, and that an LSME that is a parent company of a small group does

not have to make consolidated reporting. We believe that it is essential for

the LSME’s to understand which of the

above-mentioned scenarios apply

to them. Furthermore, we find it very important that it is clearly explained,

that subsidiaries of an LSME that is part of the LSME’s value chain, e.g.

as a vendor or business partner, should be treated no differently than any

other vendor or business partner in the LSME’s sustainability reporting.

The VSME standard

The Danish Government support the methodological approach and general

principles used when drafting the ESRS VSME ED. We agree with the ap-

proach adopted by using the modular-based structure and we find that the

VSME ED overall is proportional and that the standard can be value-creat-

ing and executable for the reporting undertakings and the users of the dis-

closures.

We support that the SMEs have the possibility to complement the metrics

in the Basic Module with additional metrics from the Narrative-Pat Module

and the Business Partners Module as refenced in VSME ED paragraph 19.

However, we have certain concerns that we would like to highlight regard-

ing the VSME ED:

1) Regarding “Principles of materiality” (paragraph 42-57)

The double materiality assessment in the ESRS 1 is a very complex and

comprehensive matter. There is a strong need to define more explicitly

what it means for SMEs to be compliant with the “principles of materiality”

(paragraph 42-57). The current description in paragraph 42-57 is very much

alike the one in the ESRS 1 which is developed for large undertakings with

a lot more resources than the SMEs in scope for the VSME. To ensure the

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VSME to be efficient and proportionate we suggest a clear description that

sets out the expectation regarding SMEs (double) materiality assessment.

The following could be considered when revisiting the “principles of ma-

teriality” (paragraph 42-57)

in the VSME:

•

“Principles of materiality” could potentially be narrowed down. It

could be restricted to only include A) ‘own operations’ (and not the

rest of the value chain) and B) the ‘negative impact’ perspective (and

thereby exclude the positive impact perspective).

•

In the Business Partner Module it could be considered to replace the

“Principles of materiality” with the concept from the Basic Module: ”if

applicable”.

•

It could be considered to make available a clear definition of the con-

cept “if applicable” in the Basic Module.

It seems that it could be a way

for SMEs to work with materiality in a simple and manageable manner.

•

Maybe SMEs would benefit from a new independent module focusing

only on the materiality assessment/“Principles of materiality”.

2) Regarding the Business Partner Module (paragraph 67-85)

We find that it is not clearly described why the undertaking needs to per-

form a materiality assessment as a prerequisite to comply with the Business

Partner Module. We suggest the connection between the two should be ex-

plained in more detail.

Given the fact that the benefits of the VSME standard to a wide extent is

based on market acceptance, and the voluntary concept of VSME, and the

often-limited resources of SMEs, the Business Partner Module should be

designed as accessible as possible. This is why we are considering what

could be the best way to structure the Business Partner Module for it to be

as efficient and proportionate as possible.

3) Regarding paragraph 2

We suggest excluding

paragraph 2

that defines when the size of an under-

taking is “micro”, “small”, or “medium”. The explicit definition in the

VSME-standard seems unnecessary since the definition of the size/cate-

gory of an undertaking is defined in other regulations

–

and may change

over time.

4) Regarding disclosure B 11 on due diligence (paragraph 37)

In order to minimize the administrative burden on the SMEs using the

standard we suggest excluding B11 (workers

in the value chain, affected

communities, consumers and end-users)

from the Basic Module. Consider-

ing the purpose and target group for the Basic Module it does not seem

proportionate to expect the undertaking to report on its due diligence pro-

cess. If undertakings using the VSME wish to report on the subject of B 11

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undertakings can do so using

Disclosure N 3

–

Management of material

sustainability matters.

5) Regarding disclosure BP 11

–

Number of apprentices (paragraph

85)

We suggest excluding BP11 (Number

of apprentices)

from the Business

Partner Module because the number of apprentices is not a generally

needed disclosure request from business partners (cf. EFRAG Basis for

Conclusions). To be efficient and proportionate the Business Partner Mod-

ule should only include the information that is generally needed by the un-

dertaking’s business

partners, investors and lenders. The number of appren-

tices is not among them.