CSRD: Opportunities of the EU directive for SMEs

The CSRD confronts firms with new challenges, requires time and resources, but also opens up numerous opportunities to promote sustainability within companies. In the following, EurA wants to provide more in-depth insights into this topic to point out which opportunities may also benefit your organization.

The CSRD and its significance for small and medium-sized enterprises

The CSRD (Corporate Sustainability Reporting Directive), which obliges companies to disclose their sustainability performance in a detailed and standardised manner, came into force on 1 January 2023. As a unified Europe-wide framework for sustainability reporting, it promotes the transparency, comparability and reliability of sustainability information. This facilitates informed decision-making for external stakeholders such as investors by providing them with social and environmental information in addition to financial aspects.

The directive will be implemented gradually and will thus also apply to listed small and medium-sized enterprises (SMEs) in the future. However, due to the trickle-down effect, the directive may also indirectly affect firms that are not obliged to report. For CSRD-compliant reports, companies require plenty of sustainability-related information from their value chain, which results in new demands for business partners and suppliers. This means that companies that are not formally subject to the CSRD must also collect sustainability information.

The VSME standard (Voluntary SME Standard) could provide relief for these indirectly affected SMEs. The EU presented an initial draft on 1 January 2024. It is a voluntary instrument designed to support SMEs in documenting sustainability information. The VSME standard could reduce the indirect burden on SMEs and at the same time enable them to provide the requested sustainability-related information.

In conclusion, in terms of a long-term perspective, which considers future corporate growth, the expansion of the reporting obligation and possible trickle-down effects, it is advisable for many companies to familiarise themselves with the CSRD. In addition, the CSRD can also be used as a springboard for the internal sustainability management. Below, we have compiled an overview of the possible benefits for you:

The heart of the CSRD: the double materiality analysis

In addition to the potential benefits for SMEs listed above, the double materiality analysis (DMA) for identifying key company-specific sustainability issues is worth a particular mention. It represents the first and one of the most important steps for CSRD compliance and also lays the foundation for successful corporate sustainability management. This is due to the following added values: based on the sustainability aspects determined as material for a company, the strategic orientation, allocation of resources, data management and measures to improve sustainability performance can be organised in a targeted manner. Hence, the materiality analysis provides orientation to consider sustainability holistically in the general business process and to identify meaningful potentials with key leverage effects. For these reasons, the DMA is also recommended for companies that are not subject to the CSRD Directive. The German Sustainability Code (DNK), which is gradually being adapted to the European Sustainability Reporting Standards (ESRS), provides initial support for the start of voluntary reporting.

A successful start thanks to funding possibilities

To some extent, there are various options available to small and medium-sized enterprises to support their sustainable endeavours – for example with regard to CSRD compliance. Whether you need help identifying suitable funding programmes or support with materiality analysis and CSRD compliance, please contact us. We will find a customised solution for you and your company!

 Text: Carolin Ridder