Statement
EFRAG Sustainability Reporting Board Exposure Draft
EFRAG Public Consultation – January 2024 - Questionnaire LSME
ESG-Reporting
Federation of German Industry (BDI)
Status: 31.05.2024
1. Do you agree with the approach adopted to develop LSME ED as a simplification of the content of ESRS Set 1?
Yes
Please explain your answer:
In principle, the BDI welcomes a reduced LSME ED in order to define reporting requirements for LSMEs that are appropriate and relevant to the scope and complexity of their activities as well as their capacities and characteristics. In particular, the function of the LSME ED as a value chain cap (upper limit for queries of the downstream value chain/ large companies to combat the trickle-down effect) is essential and will have a significant impact on the sustainability reporting of all companies.
However, the LSME ED does not sufficiently address the specific characteristics and needs of LSMEs with regard to sustainability reporting. Listed SMEs are usually structured as groups. They would therefore have to prepare their sustainability statement from the perspective of their group in order to meet the requirements of the users of their sustainability information. However, a consolidated sustainability statement would have to follow ESRS Set 1, as the scope of the LSME is only limited to the preparation and presentation of an individual sustainability statement in accordance with the CSRD. This counteracts the aim of reducing the burden on LSMEs, which have fewer financial and human resources and less complex structures. This could discourage LSMEs from participating in the capital markets rather than enabling them to do so.
In addition, despite the reduction compared to Set 1, the LSME ED is still too complex and comprehensive, so that it cannot effectively limit the requirements for LSME in the context of the planned value chain cap function through the requests for sustainability information by large companies. The LSME ED should therefore be redesigned so that it corresponds to the current VSME ED. The VSME ED represents a valuable and very good starting point for a generally accepted standard for harmonized sustainability information for SMEs. In particular, the basic module with its 'if applicable' approach instead of the materiality principle enables companies to effectively meet the sustainability information needs of their stakeholders.
In addition to the sustainability information from the three modules of the VSME, specific needs of capital market participants could be taken into account by including a few additional data points ('EU datapoints'). An abridged LSME ED based on the VSME ED could better reflect the sustainability reporting objectives of SMEs. In addition, the specific user needs of the current VSME ED should be reviewed and the standard should be redesigned to be clearly aligned with the different sustainability information needs of lenders or large
companies. While the basic module and some additional data points address the overall information needs of lenders for financing purposes, the information needs of large companies are more likely to be risks along the value chain, information on the management of these risks and sustainability information on purchased products. Overall, a significantly less complex but effective value chain cap in the form of an adapted VSME ED (extended to include the 'EU data points') could help to significantly limit the trickledown effect for LSME.
About BDI
The Federation of German Industries (BDI) communicates German industries’ interests to the political authorities concerned. She offers strong support for companies in global competition. The BDI has access to a widespread network both within Germany and Europe, to all the important markets and to international organizations. The BDI accompanies the capturing of international markets politically. Also, she offers information and politico-economic guidance on all issues relevant to industries. The BDI is the leading organization of German industries and related service providers. She represents 40 inter-trade organizations and more than 100.000 companies with their approximately 8 million employees. Membership is optional. 15 federal representations are advocating industries’ interests on a regional level.
Imprint
Bundesverband der Deutschen Industrie e.V. (BDI)
Breite Straße 29, 10178 Berlin
www.bdi.eu T: +49 30 2028-0
Lobby register number: R000534
Contact
Julian Winkler
Tax and Financial Policy Officer
Telephone: +49 15151840811
j.winkler@bdi.eu
BDI document number: D 1965