When it comes to the European Sustainability Reporting Standards (ESRS), the conversation often centres on mandatory reporting for large and/or listed companies. However, small and medium-sized enterprises (SMEs) also face the challenge of limiting their environmental impact and acting in a socially responsible manner.
From 2026, listed SMEs will be required to report a simplified version of the ESRS. Although SMEs are not yet required to report, they may already encounter sustainability reporting through partners and suppliers who may already be required to do so. There are also companies that are already well advanced in sustainability and would like to share this. Therefore, this blog focuses on the voluntary and early reporting of the ESRS for SMEs.
Just as with reporting a company’s annual financial statements, the size of the organisation determines how much information must be reported. The ESRS definition includes a definition of a micro, small or medium-sized enterprise:
A company is micro if it does not exceed more than two of the following thresholds:
A company is small if it does not exceed more than two of the following thresholds:
A company is medium-sized if it does not exceed more than two of the following thresholds:
Companies that exceed more than two of the thresholds for medium-sized enterprises are considered large companies and are required to report under the CSRD. Medium-sized, small and micro companies therefore fall outside this scope but are still encouraged to report on sustainability.
For SMEs, simplified reporting under the ESRS only applies when they are listed. These companies are only required to collect their information from 2026 onwards and report in 2027. In the Netherlands, there are an estimated 35 or so listed small and medium-sized enterprises.
As a result, most Dutch SMEs are not yet engaged in sustainability reporting. On top of that, an estimate by ABN Amro shows that two-thirds of SMEs do not even know what the CSRD is.
Despite reporting not being mandatory, ABN Amro still expects 100,000 small and medium-sized enterprises to be affected by the CSRD. It may not be in the form of a sustainability report, but SMEs will have to collect information about their environmental and social impact.
Large companies that are already or will soon be required to report will request sustainability information from their suppliers, including from SMEs. If companies cannot provide this required information, they may even lose customers. Since a large part of the sustainability information already needs to be collected, non-obligated SMEs can be motivated to prepare a sustainability report by the many benefits.
Voluntary reporting according to the ESRS offers small businesses the opportunity to demonstrate their commitment to sustainability. This can help build trust with customers, investors and business partners. Moreover, it can help companies improve internal processes, save costs through more efficient use of resources, and meet the expectations of the market and regulatory authorities.
By reporting on sustainability efforts, small businesses can share their story in a credible and convincing way, which can lead to stronger brand perception and customer loyalty.
Small businesses can use the ESRS framework as a structured way to collect, analyse and report this information. Fortunately, these less-staffed companies are not required to report as extensively as large companies. A simplified (draft) version has been released for this purpose.
This standard covers the same sustainability issues as the ESRS, but is based on the size and fundamental characteristics of enterprises, allowing companies to report with less depth and therefore less research time.
Unlike the ESRS for large enterprises, where careful consideration has been given to defining the requirements, this standard has no legal authority and exists solely to provide enterprises outside the CSRD with a voluntary tool. However, this does not mean that SMEs may not report more extensively. They are in fact encouraged to apply the ESRS for larger enterprises, using the simplified version as a stepping stone.
It is therefore important to gradually improve reporting practices. Involving employees and stakeholders in this process can also yield valuable insights and engagement, thereby strengthening the company’s sustainability efforts.
The voluntary reporting of the European Sustainability Reporting Standards (ESRS) or the simplified version offers SMEs an opportunity to distinguish themselves in a sustainability-conscious market. Although reporting is not mandatory for everyone, the benefits of transparency in environmental and social impact cannot be ignored. Applying the simplified ESRS version enables SMEs to demonstrate their commitment to sustainability, improve operational efficiency and strengthen their brand.
Download (efrag.org) the draft version of the SME ESRS, including the definition
Download (efrag.org) EFRAG board meeting of final approval
’MKB ten onrechte nog niet bezig met CSRD’ - Accountancy Vanmorgen
deloitte-nl-sustainability-eu-tax-csrd-timeline-june-2022.pdf
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