What the Heck is CSRD, and Why Should SMEs Care?

As we kick off 2025, small and medium enterprises (SMEs) across Europe are waking up to a big change: the Corporate Sustainability Reporting Directive (CSRD). If you're running an SME, this might sound like just another acronym to keep you awake at night. But before you groan and reach for another cup of coffee, let’s unpack this game-changing regulation and, spoiler alert, it’s not all doom and gloom! Beneath the corporate sustainability jargon lies an opportunity for businesses of all sizes to embrace sustainability, reduce their operating costs, attract good talent and gain competitive advantage in a busy market.

The CSRD is a European Union directive aimed at making sustainability reporting a standard practice (now you know why we’ve been talking about ESG reporting for what feels like forever!). This means new rules, new responsibilities, and, if you play your cards right, new opportunities.

It’s time to get ahead of the curve and understand what the CSRD is all about, what it requires, and how you can tackle it like the sustainability superstar you are.

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What Is the CSRD? Unpacking the Essentials

The CSRD sets a new benchmark for sustainability reporting, ensuring companies disclose their ESG performance through consistent, comparable, and reliable metrics. Expanding upon its predecessor, the Non-Financial Reporting Directive (NFRD), the CSRD aims to include over 50,000 organisations, many of which are SMEs.

If your business meets two of the following criteria, then you too are a part of the CSRD club:

• More than 250 employees.

• A turnover exceeding €40 million.

• A balance sheet total above €20 million.

Even if you’re not currently required to report, there’s a strong likelihood that if you are a supplier of a larger company, they will soon (if not already) start asking for your own reporting of emissions.

Larger corporations subject to CSRD will expect SMEs in their supply chain to report ESG data, effectively making compliance non-negotiable for SMEs.

 For example, the international tech company Microsoft, have already contacted all their suppliers and resellers requesting that by mid-2025, they have disclosed their emissions and reduction plans. This is a big move for Microsoft, but a necessary one, as they will need to report their Scope 3 emissions which include emissions from the products they buy and sale.

In summary, as an SME you are not required to report by law, but your clients might start very soon asking you to report. Sustainability reporting is no longer the nice thing to do, it is the smart thing to do for business owners.

EFRAG, the European Financial Reporting Advisory Group, have developed a voluntary reporting standards for SMEs  

Now, here are the good news for SMEs. If your clients require you to report on your emissions, for them to be able to measure their supply chain emissions, all you need to report are Scopes 1 & 2, which are relatively easy to measure, compared to Scope 3. Keep reading we will delve more into this topic!

Why CSRD Is a Game-Changer for SMEs

While compliance may feel like a headache, the CSRD also brings opportunities.

For too long, sustainability reporting has been a who’s who of inconsistent methodologies. The CSRD introduces clear, standardised guidelines, allowing SMEs to communicate their impact credibly and effectively.

Sustainability isn’t just the right thing to do, it’s the secret sauce that sets your business apart. A PwC study revealed that 80% of investors consider ESG criteria when making decisions. Transparent reporting can attract not only investors but also customers who value eco-friendly practices.

As consumer preferences shift toward sustainability, businesses that don’t adapt will risk falling behind. By aligning with CSRD, SMEs can stay ahead of regulatory and market changes, building resilience for the long haul.

How to Navigate CSRD Like a Pro

Adapting to CSRD isn’t easy, but it’s manageable with the right strategies. Here’s how SMEs can prepare:

1. Conduct a Baseline Assessment

Before diving into ESG reports, evaluate your current practices and impact. Where are your biggest sustainability gaps? How does your organisation impact the environment? Who are your stakeholders and how much do they care and influence sustainability in your organisation?

2. Build Internal Expertise

Training your team is essential. Programmes like the ESG Leadership Programme can demystify reporting frameworks and empower employees to lead sustainability efforts effectively. In order to embed sustainability as a culture in your organisation, every single employee has a role to play in your sustainability strategy, from awareness, to specific green skills and highly specialized skills, WE ALL have something to learn.

3. Collaborate with Stakeholders

Your suppliers, partners, and clients all play a role in your ESG journey. Transparent communication ensures alignment with their values and avoids unnecessary friction.

4. Develop a Phased Plan

Set yourself a target into the future (Maybe NetZero for 2030?) and break it down into manageable milestones. Focus first on the low hanging fruit, how can you improve your organisations impact on the environment or people the quickest? For example, you could provide all your employees with energy, waste and water management skills to reduce your use of utilities, reduce your emissions and save money for the next step of your ESG journey.

5. Measure and report

Only what gets measured will get managed. Measuring your environmental or social impact with real data is the only way to ensure your reporting is transparent and science based. You do not need to report on EVERYTHING from day one. Once again, our advice is to start with the “easier” metrics. For example, Scope 2 emissions are emissions from the purchased of electricity. Steam, heat or cooling. Get all your electricity and heating bills from last year and identify your kW usage of energy per month, multiply that by the CO2 conversion value relevant to your country and Voilà!! You have measured your scope 2 emissions, easy, isn’t it?

Overcoming Challenges: What SMEs Need to Watch Out For

A. Costs of Compliance

There’s no sugarcoating it, preparing ESG reports can be costly. Initial expenses for audits, and staff training will need to be accounted for and can seem daunting. However, these investments often yield long-term financial benefits through efficiency gains and reputational growth. At Fifty Shades Greener, we have been working with organisations to reduce their environmental impact since 2019. After completing our training programmes, clients are reporting energy savings in average of 30%. What would those savings mean for your bottom line?

B. Data Collection Hurdles

Unlike traditional financial reporting, ESG reporting dives deep into environmental impact, governance structures, and even your supply chain’s carbon footprint. Gathering ESG data, particularly Scope 3 emissions, requires cooperation across your supply chain. SMEs should prioritise building strong partnerships and establishing clear data-sharing expectations with their own suppliers.

C. Fear of Greenwashing

Incomplete or misleading reports can lead to accusations of greenwashing. Avoid this by sticking to measurable, verifiable metrics. If you can stand behind your data and you report transparently, you are not greenwashing.

What’s at Stake for SMEs That Ignore CSRD?

Not to scare you, but ignoring CSRD compliance does come with some real risks. Failing to align with ESG reporting might take you out of the game from been a supplier or reseller of a larger company, it might also affect your client based and lose you real sales or contracts. In the 2026, when SMEs need to report by law, Regulators are unlikely to show tolerance, even for smaller companies, so penalties for non-compliance can add up quickly.

While the potential downsides are real, they’re entirely avoidable! With the right preparation and tools, compliance doesn’t have to be so intimidating, it’s an opportunity to strengthen your business and stand out in a market that increasingly values transparency and sustainability.

Why CSRD Matters for the Planet and Business

At its core, the CSRD is about accountability and impact. By standardising ESG reporting, it paves the way for a greener, fairer economy. For SMEs, this is an opportunity to lead by example, showing that even small businesses can make a big difference.

Your Next Step: Embrace the ESG Revolution

Feeling overwhelmed? Don’t worry, we got you! At Fifty Shades Greener, we understand the challenges of navigating ESG reporting, which is why we’ve designed the ESG Leadership Programme.

With cohorts starting on 30 January 2025 and 2 April 2025, our programme will help you:

• Understand global ESG frameworks.
• Learn to measure, monitor, and report on sustainability metrics confidently.
• Embed sustainability into your business strategy.

Not sure where to start? Book a free consultation with our experts today, and let’s make sustainability your competitive edge.

Let sustainability be at the heart of your 2025 resolutions. Together, we can create a greener future!

About the Author

Kiri Spanowicz is the Communications Officer at Fifty Shades Greener, bringing a blend of sustainability knowledge and a spirited approach to her content. With a background in marine biology and years as a scuba diving instructor, Kiri leverages her deep appreciation for the natural world to advocate for environmental education. She is dedicated to crafting content that is not only fun and cheeky but also richly informative—believing that learning about sustainability should be as entertaining as it is enlightening. Her work, aimed at making environmental awareness engaging and accessible, has been recognized across various platforms. Follow Kiri's journey on LinkedIn or through the Fifty Shades Greener blog for a lively take on transforming both business practices and personal habits for a greener future.