Understanding CSRD: A Guide for SMEs
The Corporate Sustainability Reporting Directive (CSRD) requires large and listed companies to be transparent about their sustainability risks and plans. It’s intended to enable investors and consumers to evaluate the sustainability performance of companies in a more consistent way, along with several other regulations in the EU Green Deal.
Who does it apply to?
Only large and listed companies must comply with the CSRD, but that doesn’t mean smaller businesses are off the hook. We explain it all here:
Who does CSRD directly apply to?
Between now and 2026, all listed companies must comply with CSRD. A “listed” company is publicly traded on a stock exchange like the New York Stock Exchange (NYSE) or London Stock Exchange.
Starting in 2025, all large companies must comply with CSRD. This includes private companies, such as founder-owned companies, family-owned companies, or others with private equity or other investors. Large companies meet 2 of the 3 criteria:
Over €40,000,000 annual revenue
Over €20,000,000 assets on balance sheet
Over 250 employees
For the vast array of smaller and medium sized businesses, CSRD would not directly apply. However, they may still be affected by customers who are impacted. Let’s investigate.
How does CSRD impact small & medium sized businesses?
As larger companies investigate their sustainability risks to comply with CSRD, many will look into impacts in their value chain. The value chain includes the full array of suppliers, the suppliers of the suppliers, down to the company that extracted and sold the raw materials. Generally, this would impact small & medium sized companies that sell products and services to other businesses such as agriculture and manufacturing.
What do large & listed businesses need to do?
To comply with CSRD, large and listed companies use the ESRS standards. There are 12 standards:
2 overarching standards that all companies under CSRD would need to follow
10 impact specific standards from specific issues like climate change or business conduct. The specific issues reported on are determined by a double materiality assessment: the issues that a business is both impacted by and contributes to. Most companies will report on only a subset of these 10 specific standards.
What do small & medium sized businesses need to do?
Small and medium sized businesses generally do not need to report sustainability under the CSRD, so you don’t need to worry about the ESRS standards. However, you may be inundated with data requests or questionnaires from customers who do need to comply with CSRD.
Having a proactive approach can help. When customers ask questions, you can share everything they need in a brief report, including most commonly requested information, such as:
Sustainability risk screenings - which issues matter most to your business, and which can you dismiss?
How your business controls sustainability risks
Data requests to support Life Cycle Assessments (LCA) or value chain reporting, with a practical approach
Pollution emissions, especially hazardous substances that you may already have permits for
Energy usage
Gathering this all on your own can be tough - we can help. We bring substantial experience in simplifying a complex regulatory landscape to create action from chaos. From our experience with the biggest companies, we deeply understand the pragmatic fraction of effort that creates the biggest results for the smallest, including the win-wins that can help businesses of all sizes thrive.
Ready to take the next step?
Get started with our Quick Sustainability Strategy & Assessment Report. This report can help assure your customers of your strong sustainability performance, in a practical, affordable way that creates value for your business. This report will also identify which issues may need deeper reporting, which we can help guide you through.
