ESRS, VSME or nothing at all – that’s the question

Are you a 2nd wave CSRD in-scope company with less than 1000 employees, wondering what to do?

Some companies focus primarily on meeting reporting requirements, and now wonder where to concentrate their efforts, on ESRS or VSME? Or do nothing at all?

Other leading companies are already prepared and have discovered how structured sustainability reporting processes drive business value.

They use the ESRS standards as a tool to analyze their operations, identify risks and opportunities, and future-proof their business decisions and competitiveness.

The ESRS standards have been conceived to help you get future-ready.

That’s why they are based on your specific impacts, risks & business opportunities, and your plans to manage them.

VSME helps you share your sustainability information. It is an excellent choice for small companies to get started with a relevant and proportionate one-stop-shop report.

Your choice will be based on your specific circumstances, ambitions and possibilities.

⭕ Preparing with the ESRS standards – with a learning mind-set and based on your materiality assessment – is the best choice for you, if you

🌿 operate in a sector facing sustainability challenges (industry, real estate, transportation…) – chances are that demands from financial actors, business partners, customers and rating agencies will remain high for your company;

🌿 are more than 500 employees and up against listed 1st wave competitors – chances are that your competitors will come out on top if you are less prepared;

🌿 have already worked on your DMA – the difficult part is already done, and there are many phase-ins in ESRS, especially if you have less than 750 employees (no phase-ins exist in VSME – you will need to report on your own workforce from year one, for example).

⭕ If it’s your first time reporting on sustainability and you have not yet started your DMA,

🌿VSME is a good choice for 2025 – and a steppingstone to ESRS reporting should you choose to gear up in the future.

⭕ There is only one ‘wrong’ choice: to wait and do nothing at all.

The mega trend is a fact, and unless you choose to ignore the challenges of the future (already in motion), you need to get started – one way or the other.

If you wait, you will find yourself in the exact same position in two years, and chances are you will be way behind your competitors, and again struggling for time.

If you decide not to prepare, you are signaling to the market that you do not care about making sustainable business choices, or that you do not value transparency on these issues.  Either way, it will not be good for business.

⭕ Read more

👇 You can read more about a leading group that use ESRS to X-Ray and future-proof their business here >>>

And if you want to use our digital ESRS and VSME templates with built-in guidance 👉 you are welcome to contact us

#getCSRDready, #CSRD, #ESRS, #VSME

EUDR compliance – a guide to understanding deforestation due diligence obligations

ESRS E4, datapoints 24.d and 38.a, require companies to disclose adopted policies to address deforestation and relevant metrics.

EUDR, the EU Regulation on Deforestation-free Products (EU 2023/1115), introduces obligations relating to the placing or making available on the EU market, and exporting from the EU, of deforestation-related commodities and associated products.

The EU Commission has published a guide to help companies understand the level of due diligence required depending on the type of company, its position in the supply chain (first placing/downstream) and its size.

The document provides an overview of how the obligations apply illustrated through 11 supply chain scenarios.

You will find the document enclosed, and you can also download “EUDR compliance – a guide to understanding your position in beef, cocoa, coffee, palm oil, rubber, soy, and wood supply chains” here: https://data.europa.eu/doi/10.2779/4084343

In December 2024 the EU granted a 12-month additional phasing-in period, making the EUDR law applicable on 30 December 2025 for large and medium companies and 30 June 2026 for micro and small enterprises.

Traceability and transparency are at the heart of the system, to make the sustainability of supply chains a new standard.

Deforestation

Is defined as the conversion of forest to agricultural use, whether human-induced or not, which includes situations caused by natural disasters.

The assessment of whether the commodity has contributed to deforestation is conducted by looking backwards in time to see if the crop land was a ‘Forest’ at any time since the date specified in the Regulation (31 December 2020).

A forest that has experienced a fire and is then subsequently converted into agricultural land (after the cut-off date) would be considered deforestation under the Regulation.

In this specific case, an operator would be prohibited from sourcing commodities within the scope of the Regulation from that area (but not because of the forest fire).

Conversely, if the affected forest is allowed to regenerate, it would not be deemed deforestation, and an operator could source wood from that forest once it has regrown.

Forest degradation

Means structural changes to forest cover, taking the form of the conversion of:

🌿 primary forests or naturally regenerating forests into plantation forests or into other wooded land, or

🌿 primary forests into planted forests.

Wood products coming from such converted land cannot be placed on the market or exported.

Sustainable forest management systems can be employed and encouraged, provided they do not lead to a conversion that meets the degradation definition.

Which products are covered?

Palm oil, cattle, soy, coffee, cocoa, timber, rubber, and products derived from the listed commodities (such as beef, furniture, or chocolate)

See the full list of commodities in Annex I of the Regulation: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1115&qid=1687867231461#d1e32-243-1

 

Source: https://green-business.ec.europa.eu/deforestation-regulation-implementation_en

 

Stay tuned for more CSRD, ESRS and VSME insights on our LinkedIn page >>

A just clean, digital and social transition

From the European Competitiveness Compass published on 29/1 and the EU Commission’s work programme 2025 published on 11/2:

To become more prosperous, competitive and resilient, EU citizens and businesses must be protected from unfair competition, obstacles to accessing capital, high energy costs and the imminent danger of climate change.

Europe must act in unison and play to its strengths and quickly harness its own pathway to innovation-based productivity growth towards a climate-neutral future.

⭕ Close the innovation gap

Innovation must be at the heart of European renewal.

The Draghi report shows that productivity growth is the result of a combination of two forces: disruptive innovation brought about by new, dynamic start-ups challenging incumbents; and efficiency gains in mature traditional industries applying these innovations.

A dedicated EU Start-up and Scale-up Strategy will be created to close the innovation gap.

⭕ Digitalise to lift Europe’s productivity growth

Digitalisation and diffusion of advanced technologies across the European economy are the second necessary ingredient to lift Europe’s productivity growth.

Overall, 70% of the new value created in the global economy in the next 10 years will be digitally enabled.

Digitalisation will also go hand in hand with simplification to reduce the reporting burden.

We will accelerate our path to a digital regulatory environment, and will propose to remove inefficient requirements for paper formats.

⭕ Promote clean tech and new circular business models to meet the objective of becoming a decarbonised economy by 2050

The EU needs to develop lead markets and policies to reward early movers.

Energy intensive sectors (steel, metals, chemicals…) are among the most vulnerable in this phase of the transition. These industries are also the backbone of the European manufacturing system, and produce inputs vital for whole value chains.

To accompany their transition, tailor-made action plans will be presented following the Clean Industrial Deal.

Resource efficiency and boosting circular use of materials helps decarbonisation, competitiveness and economic security.

The European remanufacturing market’s circular potential is projected to create 500,000 new jobs by 2030.

A Circular Economy Act proposal will serve to catalyse investment in recycling capacity. This will be accompanied by the roll-out of Eco-design requirements on important product groups.

⭕ The security environment is a precondition for EU firms’ economic success and competitiveness

In a global economic system fractured by geopolitical competition and trade tensions, the EU must integrate more tightly security and open strategic autonomy considerations in its economic policies.

The Single Market is critical to build continental size in a world of giants. It is today the home market for 23 million companies, providing goods and services to almost 450 million Europeans.

Removing remaining intra-EU barriers and expanding the Single Market will help competitiveness, by providing bigger markets, lowering energy prices and enhancing access.

Security and resilience can also become a driver for competitiveness and innovation.

⭕ Supporting people, strengthening our societies and our social model

Europe’s unique and highly treasured social model constitutes both a societal cornerstone and a competitive edge.

However, recent crises have challenged it by impacting the cost of living, housing and inequalities. This is further exacerbated by the rapid technological shifts, demographic change and sectoral transitions now under way.

A key focus of this Commission will therefore be to strengthen social fairness.

By safeguarding our social model and ensuring fairness in a transforming economy, we can drive prosperity, seizing the opportunities offered by the green and digital transitions.

 

The European Competitiveness Compass can be downloaded here >>>

The EU Commission’s Work programme 2025 can be downloaded here >>>