Why is sustainability important to SMEs, too?
Sustainability is no longer an optional extra in SME business – it is rapidly becoming part of competitiveness, financing terms and basic requirements for customer relationships.
The EU Sustainability Reporting Directive (CSRD) will further expand sustainability reporting. What was previously voluntary and only done by large listed companies will now be required by law and will apply to an expanding group of companies. The expansion of CSRD reporting by company size creates a need for companies to analyze their own value chains from a sustainability perspective and collect information about them. This will also expand sustainability reporting to include SMEs operating in industrial subcontracting chains.
What does sustainability reporting mean for SMEs?
The size of the company affects the scope of mandatory reporting. SMEs do not immediately need to prepare a report that is hundreds of pages long, but can start by, for example, following the reporting framework according to the VSME standard (Voluntary Sustainability Reporting Standards for non-listed SMEs).
Regardless of the reporting framework chosen, from the company’s perspective, sustainability reporting is a way to structure the impacts of its operations on the environment and the surrounding society. The overarching principle is transparency. Despite the legislation, it is not just about reporting for the sake of reporting, but rather about a genuine opportunity for companies to understand the impacts of their operations more broadly. This is particularly emphasized for companies in the early stages of reporting.
What information does an SME’s sustainability report typically include?
For companies new to sustainability reporting, it is primarily a tool to identify the key impacts of their operations and secondarily a way to communicate them transparently to stakeholders. An ESG report (Environmental, Social, Governance) typically includes information on:
- The company’s climate emissions (carbon footprint)
- The use of materials and energy
- HR policies, employee well-being, and equality
- Ethical guidelines and corporate governance structures
The report is not just a mandatory formality – it is a way to communicate values, risk management, and readiness to operate in future business environments.
How does sustainability reporting relate to an SME’s strategy?
The strategic dimension of sustainability reporting is often overlooked. It enables the identification of risks related to the company’s operations and environment and allows for proactive responses. In addition to risks, it helps identify new opportunities relevant to the business. Together, these improve the company’s resilience.
Newly identified opportunities can help grow the business and attract new customers. Preparing for identified risks ensures business continuity despite unexpected events. This enhances the company’s ability to stand out from competitors and strengthens its position in industrial supply chains.
It is also worth reading our previous blog on the voluntary VSME standard: What is voluntary sustainability reporting?
How does sustainability reporting affect SMEs?
Although the CSRD initially targets large and listed companies, its effects are already visible in SMEs – directly or indirectly:
- Many large companies require sustainability data from their subcontractors and partners.
- The public sector emphasizes sustainability in procurement.
- Banks and investors assess financing terms based on sustainability criteria.
The public sector emphasizes GPP (Green Public Procurement) sustainability criteria in its procurements. An SME that is well-prepared and can demonstrate the sustainability of its operations, products, and services is well-positioned in demanding public tenders.
Requirements for verifying sustainability may also apply to SMEs as part of public procurement subcontracting chains. When an SME can provide a sustainability report, environmental data, carbon footprint information, product life cycle assessments (LCA), or material origin data, it can compete not only on price but also on sustainability credentials.
What is the goal of sustainability reporting?
As of 2025, not all SMEs are legally required to report on sustainability. The CSRD’s mandatory application initially applies to large companies. Over time, more companies operating in the EU will fall under mandatory reporting. The reporting obligation depends on turnover, balance sheet total, and number of employees. According to the EU Omnibus Regulation, the transition is delayed by two years for the second and third waves of companies. Based on current information, SMEs will likely be required to report closer to the turn of the 2030s.
Even though reporting is currently voluntary, not doing it may close doors. That’s why it’s wise to start as soon as possible. While it’s still voluntary, companies can proactively collect sustainability data and practice reporting. These companies will be well-positioned when mandatory sustainability reporting begins.
Green Advisors helps SMEs build sustainability reporting in a smart and business-oriented way – whether it’s about taking the first steps or preparing for CSRD compliance.
Do you want to know how sustainability can become your competitive advantage? Contact us – let’s talk.
Related links:
Voluntary Sustainability Reporting Standards for non-listed SMEs
