For economic processes, the publication of ESG information is crucial. However, for small and medium-sized enterprises (SMEs) in particular, providing such information is costly.

Sustainability is currently the focus in many areas. Crucial to this is the publication of ESG information. For small and medium-sized enterprises (SMEs) in particular, the provision of such data is costly.

To date, there has been no standardization procedure for SMEs in this respect. Guidelines are therefore intended to provide assistance, such as the ESG Guidelines for Corporate Schuldscheindarlehen of the German Insurance Association and the Association of German Public Sector Banks, which were recently published and are aimed at SMEs. However, such guidelines are non-binding and need to be adapted to future EU regulations, e.g. the Corporate Sustainability Reporting Directive (CSRD - Directive (EU) 2022/2464). The implementation of the CSRD into national law is already in full swing. On July 31, 2023, the Commission adopted a first set of reporting standards (European Sustainability Reporting Standards - ESRS). The second set of reporting standards, under which the SME standards also fall, must be adopted by the Commission by June 30, 2024, according to the CSRD.

The Commission adopts the standards as delegated acts on the recommendation of the European Financial Reporting Advisory Group (Efrag), a private association acting in the public interest. Efrag's participation as a body is enshrined in the CSRD.

It is expected that Efrag will submit a proposal of a reporting standard for SMEs to the Commission in the fall of 2023. Here, the CSRD states that the standards are to be simplified compared to the first set and adapted to the capacities and characteristics of SMEs. What exactly this adaptation will look like and whether it will really lead to a simplification of sustainability reporting for SMEs is not yet foreseeable. However, Efrag's first drafts from the Sustainability Reporting Technical Expert Group Meeting on February 21, 2023 suggest that the scope of the criteria catalog will be reduced and the mandatory disclosures will be reduced. However, Efrag also pointed out that there is a limit to the simplification where it concerns criteria and data that are also relevant for SMEs, such as information on the value chain. Finally, the final proposal to the Commission and the actual decision and enactment by the Commission must be awaited.

The consequence of the standardization of reporting will be that the consideration of ESG criteria and the assessment of associated risks will also be facilitated within corporate transactions. It is not foreseeable whether, beyond standardization, there will be a kind of ESG seal of approval that classifies companies differently across the ESG spectrum. At any rate, there is currently no legal provision for such a universally applicable test seal. A side effect of the emerging importance of ESG information in business transactions is also an increasing importance within the financial sector.

Green Finance describes the process of taking ESG criteria into account when making investment decisions. This concept plays a key role in the implementation of the so-called European Green Deal, according to which emissions are to be reduced by at least 55% by 2030 compared to 1990 levels and the EU is to be climate neutral by 2050. In this respect, it can be assumed that companies have a great interest in providing ESG information to customers and business partners. What exactly the reporting for SMEs will look like can probably only be foreseen once Efrag has presented the proposal for a reporting standard for SMEs.