In light of the February 2025 “Omnibus” proposals and enacted delays to reduce the sustainability reporting obligation for undertakings with less than 1000 employees, a number of companies (which fall beneath the new reporting threshold) might still determine to report sustainability information in a manner that is aligned with European norms. The European Commission recommended that all undertakings which are not obliged to report ESRS Set 1, should report voluntarily following the Voluntary ESRS for SMEs (VSME).

1. Context and background

The VSME was drafted by EFRAG and is targeted at non-listed micro, small, and medium enterprises with 1 to 250 employees. EFRAG recently confirmed that the VSME is not a suitable reporting standard for undertakings with more than 250 employees (online conference “VSME in action: Empowering SMEs for a Sustainable Future”, 7 April 2025).

Subsequent to discussions with many companies who are no longer required to mandatory report according to the ESRS, Code Gaia has learned that there remains an interest in reporting, but an opinion that the VSME standard is too basic. Requests for a voluntarily adapted and reduced scope of the full ESRS have been requested. In order to assist such companies with their reporting, Code Gaia proposed an exercise in reporting scope reduction that is based on the full ESRS and not the VSME. Code Gaia has completed this exercise now, and formally offers an “ESRS-light” reporting scope (subject to materiality) which aligns with this need. The proposal is integrated as a modular option in our sustainability reporting and materiality software.

2. Proposal

The proposed solution is a reduced scope of the Set 1 ESRS which covers all necessary datapoints suitable for medium to large companies (250 to 1000 employees) but excludes highly complicated or irrelevant datapoints. This allows companies to report with a realistic but manageable scope without risking a too simplified VSME report.

Code Gaia’s Sustainability experts have exercised their own professional judgement to present a reduced-scope ESRS, which is (in our opinion) more tailored to the needs of these medium-sized companies. In the absence of any current guidance, this scope reduction did not rely on any specific official publication by EFRAG or the EU Commission, or any Member State body. The reduced scope represents around 65% of the total reporting inputs (Datapoints/ DRs/ ARs) of the Set 1 ESRS. However, it should be noted that this does not represent 65% of the reporting burden. Not all requirements carry the same effort/ burden to report.

Furthermore, the reduced scope is not a substitute for a materiality assessment. The concept of materiality should still apply, and a materiality assessment will likely result in many of the reduce-scoped requirements to be considered not-relevant for the reporting company (this acting as a further de facto scope reduction). 

3. Approach

The following general approach was used to determine which reporting requirements should remain within the reduced scope.

Requirements were favoured for inclusion in the reduced scope where the following were considered to apply:

• The requirement asks for most-commonly requested ESG information (i.e. that which is common in other frameworks and is also included in the VSME).
• The requirement is considered to ask for metrics which most companies will likely have access (energy consumption, water consumption, number of employees etc).
• The metrics are considered relatively easy to calculate.
• The requirement is considered to be highly informative value for typical stakeholders.
• Where there are both qualitative and quantitative datapoints asking for similar information, the included requirement should be the quantitative one.

Requirements were favoured for exclusion in the reduced scope where the following were considered to apply:

• Requirements which asked for financial KPIs relating to IRO management.
• Requirements were considered to duplicate information between ESRS 2 and the topical standards. 
• The requirement seeks disclosure of data which is considered hard to access or collate or is a metric which is difficult to calculate.
• The requirements are considered to have limited or little use case (information does not seem relevant to a wide range of typical stakeholders).
• The requirements are considered very ESRS-specific and not commonly requested by other reporting frameworks. 
• Minimum Disclosure Requirements (MDRs) are considered as helpful guidance rather than necessary datapoints.
  

4. Table of included requirements (subject to materiality)