Streamlining Sustainability Reporting for SMEs

The past 16 months have been a turbulent time within the regulatory sphere for sustainability. The EU’s Omnibus amendment has stopped the clock on key directives and has drastically reduced their scope.
The two directives that were most impacted were the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The EU Taxonomy has also undergone a number of changes.
SIRO were originally in scope of the CSRD on account of our turnover and balance sheet. The Omnibus has increased these reporting thresholds, now only organisations with a headcount exceeding 1000 employees may be scoped into the directive depending on their financial indicators. This has reduced the number of entities in scope by roughly 80%.

While many organisations have welcomed the changes and simplification, others are worried this may result in a backslide on corporate sustainability obligations. With projections saying we may exceed 1.5C of warming within the next decade (UNEP, 2025) some feel as if we are decelerating from climate action during the most critical window of opportunity that we have to safeguard our future. We cannot stop the clock on climate change, so why are we stopping the clock on legislation. Many also worry that the slowdown will have adverse effects on human and labour rights in the value chain.

Like many organisations we were deep into our preparations for compliance with the directive when the Omnibus was announced. We had just commenced our Double Materiality Assessment (DMA), an essential prerequisite for CSRD reporting. We understood that we wanted to adapt our reporting efforts following the Omnibus amendment, not pause reporting efforts completely. One available option available was to pivot towards the VSME. This is the voluntary structure for SMEs, it has been designed by EFRAG, the author of the original ESRS standards included within the CSRD. The VSME offers an opportunity for organisations no longer in scope of the CSRD to continue with targeted reporting efforts aligned with the original directive to satisfy the increasing need for disclosure from banks, investors, customers and other supply chain actors. The VSME has since been formally recommended by the European Commission.

Since 2021 we have voluntarily produced an annual sustainability report which has been made publicly available on our company website. These reports highlight the actions we have taken to advance the UN Sustainable Development Goals which we have deemed applicable to our organisation and the industry we operate in. We have also used these reports to publish key ESG performance indicators including emissions, decarbonisation levers and gender pay information.

Our new reporting approach is extended to include the VSME disclosures within our existing sustainability report format. We have included disclosure for both the basic and comprehensive modules of the VSME within an appendix of our sustainability report. The remainder of the report has been structured around the original ESRS headings. We have also used the results of our DMA to target reporting efforts. The VSME does not require such assessment, instead it relies on an ‘if applicable’ approach to disclosures, while this gives greater concessions to reporting entities, it is vague and is not a standardised approach. The DMA provides a strong methodological approach to determine which sustainability topics have material risks, opportunities or impacts, using this as a basis for our VSME reporting ensures we are providing a comprehensive insight into material topics.

The VSME is not a regulatory requirement, but it is a strategic opportunity, it allows us to satisfy the needs of users of sustainability reports in a way that is both flexible and proportionate to internal resources and capacity. By incorporating the DMA within voluntary reporting frameworks, it has enabled us greater oversight of risks and opportunities, it also enables us to stay ahead of the regulatory curve. The EU has now released a draft of their new Voluntary Standard (VS) which seeks to update the VSME. Having just completed the public feedback stage it is now posed for commission adoption in the second half of 2026.

The Omnibus was a significant U-turn on EU sustainability policy; it has the potential to undermine the European Green Deal at a critical time when we should be mobilising as much support for the green transition as possible. Voluntary reporting standards can help to plug the gap that has been left in the wake of the Omnibus, while legislation may set the precedent, business ambition is stepping up to set the pace. The most adaptable businesses who are thinking about long term security and resilience will be moving ahead with sustainability efforts regardless of if there is mandatory obligation to do so or not.