17 September , Brussels - The European Association of Cooperative Banks (EACB), together with the Federal Association of Cooperative Banks (BVR), the Genoverband and the German Accounting Standards Committee (ASCG), provided significant support to four member banks of the Genoverband participating in a field test aimed at assessing the sustainability reporting standard ED ESRS LSME (Exposure Draft – European Sustainability Reporting Standard for listed small and medium-sized enterprises).
The LSME standard, designed for capital market-oriented small and medium-sized enterprises, will also apply to small and non-complex institutions (SNCIs). By engaging in this field test, the four cooperative banks – all SNCIs – contributed valuable insights into evaluating the practicality and effectiveness of the standard. This marks an important milestone in preparing for the future sustainability reporting requirements these institutions will face.
The participating banks tested the ED ESRS LSME to assess its applicability, ease of implementation, and the effort required for compliance. The feedback gathered offers critical perspectives on the standard's usability and areas for improvement, helping to ensure it is fit for purpose while remaining aligned with the sustainability goals set by the European Union.
During the field test, a key question arose whether the LSME standard would be applicable to these SNCI at all, as these institutions primarily prepare individual financial statements and typically do not consolidate immaterial subsidiaries. Requiring a group sustainability report would have excluded them from using the ESRS LSME, which is intended for individual reporting. In the FAQs on the implementation of the EU corporate sustainability reporting rules published on 7 August 2024, the European Commission clarified that SNCIs are not required to prepare a group sustainability report if all subsidiaries are insignificant, enabling them to apply the simplified ESRS LSME standard instead of the more complex ESRS Set 1.
In April 2024, the four SNCIs submitted their detailed evaluations of the draft standard to EFRAG. A summary of the assessments from the participating banks can be accessed here, while the full detailed responses are available on the EFRAG website. These responses, along with feedback from other stakeholders, are being used to refine the draft standard, which is expected to be applied across the EU starting in 2026. The final version of the standard is anticipated to be completed by December 2024.
By supporting these four SNCIs, the EACB is actively contributing to the development of a sustainability reporting standard that aligns with the specific needs and capabilities of the cooperative banking sector.