From 2024, large companies are required to be transparent on their impact on climate and society through sustainability reporting. This obligation stems from the European Corporate Sustainability Reporting Directive (CSRD). But did you know that non-reporting obligated companies, such as SMEs, are also directly or indirectly affected by the introduction of CSRD? On this page, we explain what CSRD entails and how it can impact your company.
European commission wants to streamline sustainability reporting
The European Commission has launched an initiative known as Omnibus 1, which aims to streamline the reporting rules for businesses in EU countries. The proposal makes a number of changes, including to various parts of the CSRD legislation. In June 2025, the Council voted in favour of the proposal, but it still needs approval from the European Parliament. We do not yet know the outcome.
Everything you need to know about the CSRD
What is the CSRD exactly?
CSRD stands for Corporate Sustainability Reporting Directive. This European directive is part of the European Green Deal, and makes it compulsory for businesses to report on their sustainability status. Listed companies will be obliged to report on the 2024 financial year in 2025. This information is becoming increasingly important to clients, investors, regulators and other stakeholders.
When will the CSRD regulations come into force?
The group of companies directly expected to comply with the CSRD is gradually increasing every year.
- Since 1 January 2024, the CSRD has applied to companies that were previously subject to the Non-Financial Reporting Directive (NFRD).
- As of 1 January 2025, the CSRD made sustainability reporting mandatory for all large companies. To be considered ‘large’, a company must satisfy two of the following criteria:
- Over 250 employees
- Over €50 million in annual revenue
- Over €25 million on the balance sheet
- From 1 January 2026, the CSRD will apply to listed SMEs as well.
Both for large companies and listed SMEs, there is currently some uncertainty over their CSRD reporting obligation. This is due to the European Commission’s ‘Omnibus proposal’. This proposal, which is actually a package of proposals, includes a number of amendments intended to simplify sustainability legislation. One key proposed amendment is to reduce the group of companies for which CSRD reporting is mandatory. The proposal is to raise the size threshold from 250 to 1,000 employees. Additionally, it proposes to remove the reporting obligation for listed SMEs.
Given that the Omnibus proposal is still under review by the European Parliament, its actual impact is still unclear. One key point in the negotiations is the number of employees used as the size threshold, which is expected to ultimately be between 500 and 1,750 employees.
Will the CSRD affect my company?
The CSRD could affect your company directly and indirectly.
- Directly: If the above criteria mean that you are required to report under the CSRD, go to ‘CSRD for large and publicly listed companies’. Due to the Omnibus proposal, there are also companies that were initially subject to CSRD reporting but are now out of scope. These companies can opt to publish sustainability reports on a voluntary basis.
- Indirectly: If your company is not subject to CSRD reporting, you may still be affected by the CSRD indirectly. You may, for example, get data requests from companies that do have to file a report under the CSRD. Since they need to have a good understanding of their value chain, these companies may ask your company how your products are made and whether this is done responsibly.
If you only sell or provide services to consumers or mainly do business with SMEs, the chances are slim that you will get such data requests. For now, you will probably not be required to collect any additional data.
How do I prepare my company for the CSRD?
Want to get your company prepared for possible data requests from companies that are subject to CSRD reporting? The European Commission has had a set of voluntary standards developed for SMEs: the VSME standards. Developed especially for SMEs, these standards offer a clear and accessible way to report on your ESG performance.
The VSME standards are simpler than those for companies that do have to report under the CSRD. With a view to protecting SMEs, the European Union has adopted the VSME standards as the maximum amount of data that an SME can be asked to provide. This prevents you as an entrepreneur from being flooded with wide-ranging and complex data requests.
What is ESG information?
Non-financial information relating to sustainability is also known as ESG information. ESG refers to three main themes, which can be used to measure the impact of a company: Environmental (e.g. climate change), Social (e.g. working conditions) and Governance (e.g. management structure).
What does a CSRD report look like?
The CSRD is an EU directive and as such, comes under European legislation. All sustainability reports must satisfy the European Sustainability Reporting Standards (ESRS). These standards state exactly which sustainability aspects must feature in the report, ensuring that everyone compiles sustainability reports in the same way.
How do you submit a CSRD report?
Companies need to submit the report through an online portal and it must have been audited by an external statutory auditor, such as your accountant.
What does voluntary reporting under the VSME standards look like?
The VSME standards are based on the ESG themes and are designed to support SMEs in their voluntary sustainability reporting. These standards are broadly applicable, regardless of what industry you operate in. Contrary to the CSRD, which requires companies to select reporting topics based on materiality, the VSME standards do not differentiate in terms of topics to include in the report. There are, however, two modules you can choose from.
- The basic module: this module sets the minimum level of voluntary reporting and can be used by any type of company.
- The comprehensive module: somewhat more comprehensive, this module is mostly used in production sectors, such as agriculture, food, construction and manufacturing. It offers scope to include additional topics in the report.
Wondering what approach your sector is taking to voluntary reporting? Many trade associations are currently working on sector-wide initiatives. Check in with your trade association to see whether they are working on a coordinated approach for the whole sector.
How do you file a VSME report?
Since VSME reporting is not mandatory, you do not have to officially file the report, like you would with a CSRD report. There are, however, various ways you can use your VSME report. For example, you can share it with clients and investors in response to their CSRD data requests. Other than that, you could publish it on your website to showcase your company’s sustainability credentials.