Small businesses need funding and support to meet voluntary European sustainability standards

Sustainability standards for small businesses will only work if they are accepted by the market and enterprises have the skills and the resources to implement them.

Responding to a consultation by the European Financial Reporting Advisory Group (EFRAG), ACCA (the Association of Chartered Certified Accountants) says that as with all SME regulation, the EU voluntary reporting standards for non-listed SMEs (VSMEs) needs to be proportionate.

ACCA supports the objectives of voluntary sustainability reporting standards for small and medium-sized enterprises (SMEs) published by the European Financial Reporting Advisory Group (EFRAG). However Mike Suffield, ACCA's Director Policy and Insights, said: 'EFRAG must recognise that the success of VSME will depend on market acceptance by lenders, investors and other stakeholders. And part of that success depends on raising awareness of VSME among small businesses in the European Union of the standard and its benefits in relation to supply chain requests and wider reporting.'

ACCA praised the clear language and terminology used in the VSME which bolsters the objective of creating an open and accessible standard.

At the same time SMEs will need to undertake significant upskilling and will need a good deal of support and guidance. ACCA is calling on the European Parliament to help fund SMEs and finance professionals to acquire the necessary skills and knowledge to comply with the regulation, especially given the shortage of qualified audit professionals which will be exacerbated by increasing sustainability regulation.

ACCA is also calling on EFRAG to recognise the need for accessible guidance and examples. Jessica Bingham, ACCA's Regional Lead, Policy and Insights, said: 'SMEs are going to have to change the way they think about reporting to encompass these sustainability disclosures: for the finance function that means changing systems and processes. It is a big ask and will require a significant shift in mindsets and that requires EU funding to upskill businesses and their advisers.'

The European Green Deal - which aims to have no net emissions of greenhouse gases by 2050 - is creating a raft of legislation that looks set to create significant compliance and cost burdens, particularly for small businesses. The VSME standard broadly delivers on assisting SMEs in tackling these challenges.

Read the submission here