EFRAG Calls on EU Companies to Shape Voluntary Sustainability Reporting Standard

Targets EU companies with fewer than 1,000 employees or under €450 million ($490 million) in turnover, expanding ESG participation beyond mandatory CSRD scope
Reflects policy shift after Omnibus I Package reduced mandatory ESRS coverage, increasing reliance on voluntary disclosures
Signals growing demand for comparable sustainability data from investors, lenders, and business partners across Europe

Brussels Expands ESG Engagement Beyond Mandatory Reporting

Brussels is widening the reach of sustainability reporting across Europe, even as regulatory requirements narrow. The European Financial Reporting Advisory Group (EFRAG) has launched a call for expressions of interest aimed at companies and stakeholders willing to help shape a new voluntary sustainability reporting standard for firms outside the scope of the Corporate Sustainability Reporting Directive (CSRD).

The initiative targets a specific segment of the market: EU-based companies that are not classified as small and medium-sized enterprises but remain below key thresholds, namely fewer than 1,000 employees or annual turnover under €450 million ($490 million). These firms sit in a regulatory grey zone, large enough to influence supply chains and capital markets, yet no longer required to adopt the simplified European Sustainability Reporting Standards (ESRS) following recent policy changes.

EFRAG’s move reflects a broader recalibration in EU sustainability governance. The adoption of the Omnibus I Package has reduced the number of companies required to comply with mandatory ESRS reporting, shifting part of the burden toward voluntary frameworks.

Building a Voluntary Standard for Market Relevance

EFRAG is now seeking to test how a voluntary standard could function in practice. The organisation is inviting participation not only from eligible companies but also from auditors, investors, lenders, business associations, and other users of sustainability information.

“EFRAG is calling on companies and other stakeholders across the EU to take part in future engagement and research activities on the application of the upcoming Voluntary Standard (VS) by non-SME companies outside the scope of the CSRD.”

Planned activities include webinars, surveys, interviews, and stakeholder events designed to capture how sustainability reporting is evolving across different sectors and jurisdictions. The goal is to ensure that the voluntary framework aligns with market expectations while remaining practical for companies without regulatory obligations.

This consultation comes ahead of the European Commission’s expected release of the Voluntary Standard (VS) later this year as a Delegated Act. The framework will be available to companies that fall outside the CSRD’s scope, offering a structured pathway for voluntary ESG disclosure.

Anchored in SME Framework, Scaled for Broader Use

The upcoming voluntary standard builds on the Voluntary Standard for SMEs (VSME), issued by EFRAG in December 2024 and endorsed by the European Commission in July 2025 under Commission Recommendation 2025/4984. While originally designed for smaller enterprises, the framework is now being adapted to suit larger, non-listed companies that still operate below CSRD thresholds.

EFRAG has already maintained an ongoing dialogue with SMEs and their stakeholders. The new initiative extends that engagement to a different cohort of companies, many of which are increasingly exposed to ESG expectations through supply chains, financing conditions, and investor scrutiny.

“EFRAG has already in place a continuous dialogue with SMEs and the users of their reporting and is now willing to start a dialogue with non-SME companies that are outside the scope of the ESRS and may consider using the voluntary standard on a voluntary basis.”

Why It Matters for Executives and Investors

For corporate leaders, the shift toward voluntary standards introduces both flexibility and pressure. Without a legal mandate, companies can tailor disclosures to their operational realities. At the same time, expectations from investors, lenders, and business partners continue to rise, particularly around climate risk, governance practices, and supply chain transparency.

Financial institutions are already integrating ESG data into lending decisions, while large corporates are cascading reporting requirements down their value chains. Companies that opt out of structured reporting frameworks risk reduced access to capital or exclusion from preferred supplier networks.

For investors, the emergence of a voluntary standard offers a potential bridge in data consistency. While not legally binding, a widely adopted framework could improve comparability across mid-sized firms that currently report unevenly or not at all.

A Transitional Phase in EU Sustainability Policy

EFRAG’s call highlights a transitional phase in European sustainability policy. As mandatory reporting requirements narrow in scope, voluntary frameworks are stepping in to maintain momentum toward transparency and accountability.

The success of the initiative will depend on uptake. If companies engage and adopt the voluntary standard, it could evolve into a de facto market norm. If participation remains limited, gaps in ESG data across Europe’s mid-market segment may persist.

Either way, the direction is clear. Sustainability reporting in Europe is moving beyond compliance toward a broader ecosystem shaped by market forces, stakeholder expectations, and evolving governance priorities.

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