What Irish SMEs Need to Know About the New Voluntary EFRAG Standards
In late December the European Financial Reporting Advisory Group (EFRAG) launched a set of voluntary sustainability reporting standards tailored specifically for small and medium-sized enterprises (SMEs) writes ifac’s Dr. Rosie O’Neill. These guidelines are designed to help SMEs navigate the increasingly important world of environmental, social, and governance (ESG) reporting, without getting bogged down by the complexities that larger corporations face. The aim is to make it easier for SMEs to talk about what they are already doing well and build from there. This will help them to align with those larger companies that may be in their supply chain and are in the threshold of the Corporate Sustainability Reporting Directive (CSRD).
Dr Rosie O'Neill, Director of Sustainability
What are the EFRAG Voluntary Standards?
The voluntary standards are a simplified framework that help SMEs report on their sustainability efforts in a way that is manageable and relevant to their size. While they are not mandatory, they offer a helpful starting point for businesses wanting to showcase their ESG practices, which can be key to building stronger relationships with customers, investors, and partners.
For businesses feeling overwhelmed by the market's demands for sustainability, the message is simple: start small and build from there. You are likely already engaging in sustainable practices - whether it's reducing waste, improving energy efficiency, or minimising resource use. The trick is to learn how to talk about these efforts clearly and effectively without greenwashing.
Key takeaways: start small, do it well
Just start
Don’t get bogged down by the broader sustainability landscape. Take the first step by looking at what you're already doing and build from that. Start with small, achievable goals.
Sustainability is efficiency
At its core, sustainability is about running your business as efficiently as possible. Chances are, you’re already taking steps to reduce waste, save energy, and streamline processes. The EFRAG standards help you communicate this as well as factoring in further considerations around social and governance metrics.
Focus on win-win benefits
Start by implementing changes that benefit your business directly. For example, installing solar panels not only helps the environment but also cuts your electricity costs - a clear win-win. Reporting on these initiatives can enhance your reputation while showcasing your commitment to ESG.
Do what's right for you
The new standards offer flexibility, but it’s important to ensure that any reporting or certification you pursue fits your company’s size and resources. Consider the costs of ecolabels or accreditations, both in terms of money and personnel. If you commit to sustainability reporting, it’s a long-term task, so make sure it's right for your business.
Why should Irish SMEs care?
Enhancing your place in the supply chain: With larger businesses facing mandatory ESG requirements, SMEs that adopt these voluntary standards early will find it easier to integrate into sustainable supply chains. This can open doors to new business opportunities and partnerships.
You’re probably already doing it: Many Irish SMEs are already taking steps to run their businesses more efficiently. The EFRAG standards help you tell that story in a way that matters to stakeholders, without overwhelming you with additional work.
Building trust with consumers: Sustainability is increasingly important to Irish consumers. By showing how your business is making a positive impact, you can build trust and gain a competitive edge.
Attracting investment and funding: Investors are increasingly looking for businesses with strong ESG credentials. Voluntary reporting can position your SME as a forward-thinking, responsible investment opportunity. Additionally, it can help you access grant funding and support schemes focused on sustainable business.
Future-proofing: While the standards are voluntary for now, sustainability reporting could become more widespread or mandatory in the future. By starting now, you can future-proof your business, making it easier to comply with any new regulations that may emerge.
Key considerations
Before diving into sustainability reporting, it's crucial to consider the costs - both financial and in terms of staff time. Certifications and ecolabels can be pricey, and annual reporting requires ongoing commitment. However, if implemented correctly, the benefits are clear: improving your position in the value chain, attracting eco-conscious customers and skilled employees, and unlocking funding or grant opportunities.
Opting for established frameworks like EcoVadis or Sedex can offer a structured approach, providing scores and highlighting areas for improvement - potentially offering a simpler solution to developing your own report. It's important to choose the best fit for your business and consider what’s recognised in your supply chain or industry. Engaging with stakeholders to understand the industry perspective can also guide your decision.
Conclusion: nice to have to need to do?
In short, adopting the EFRAG voluntary standard or a similar framework is a valuable opportunity for Irish SMEs to showcase their commitment to sustainability and gain a competitive edge. While these standards are voluntary now, pressure is mounting from larger companies governed by the Corporate Sustainability Reporting Directive (CSRD), who require transparency and cooperation from their supply chains. Many are setting ambitious net-zero targets and expect their suppliers to support these efforts. In fact, some have made it clear they cannot engage with suppliers lacking emissions reduction strategies, as they must decarbonise and ensure responsible governance across all tiers of their operations.
Whether legally required or not, SMEs risk being outcompeted if they don’t embrace sustainability. The key is to start small, build on existing practices, and ensure your initiatives are suited to your company’s size and resources. When managed well, the rewards - both in reputation and financial performance - can be significant.
So, don’t be overwhelmed - just start. Small steps can lead to big gains when it comes to sustainability.
If you would like to discuss further, please reach out to Dr. Rosie O’Neill at rosieoneill@ifac.ie. Rosie is ifac’s Director of Sustainability, with a PhD in greenhouse gas emissions and previous experience as Sustainability Manager at An Post.