CSRD for SMBs: What Sustainability Reporting Means for You
The Corporate Sustainability Reporting Directive (CSRD) will impact nearly the entire business landscape—including your company. Even if you are not directly required to report, you'll feel the 'ripple effect' from customers, banks, and partners. Understand what this means for you and how you can prepare.
Think of CSRD as Financial Reporting for Sustainability
The Corporate Sustainability Reporting Directive (CSRD) introduces a common, mandatory standard for how companies report on their impact. The reporting covers Environmental (E), Social (S), and Governance (G) aspects. The key takeaway is that this information must be reliable, comparable, and verified by an auditor, just like financial figures. This is a complete shift from previous, more voluntary schemes.
Sustainability is moving from a communications exercise to a financial discipline.
You'll Be Indirectly Affected Through the Value Chain
Even if your company isn't directly required to report initially, you will experience the so-called 'ripple effect'. Your large customers, who are subject to reporting, will need to collect data from their entire value chain—including you. At the same time, banks and insurance companies will increasingly assess your ESG risk when granting loans or pricing insurance. In other words, the market will demand that you are in control.
Ignoring CSRD means risking lost contracts and less favorable terms.
Fact Box: ESG Explained:
- E - Environment: The company's impact on the climate and environment, including emissions, resource use, and biodiversity.
- S - Social: How the company manages relationships with employees, suppliers, customers, and local communities.
- G - Governance: How the company is led, managed, and controlled, including ethics, risk management, and board oversight.
Start with the 'G': Good Governance is the Bedrock
For many SMBs, measuring a carbon footprint seems overwhelming, but there's an easier place to start. The 'G' for Governance is the bedrock of all sustainability. It's about having an active board, clear processes, solid risk management, and verifiable documentation. These are measures you should have in place anyway to run a healthy business.
By professionalizing your corporate governance, you're already building the foundation for your future sustainability reporting.
“The market will demand that you are in control, regardless of whether the law requires you to submit a formal report.”
Want to learn more about how you can build a solid foundation to meet the new sustainability reporting requirements? Download our free corporate governance checklist and get started today.