The Corporate Sustainability Reporting Directive (CSRD) introduces new reporting obligations for large companies and publicly listed SMEs. Although most smaller enterprises are not directly affected, the CSRD has significant repercussions for many SMEs in Germany. Why? Because their large clients now have stringent sustainability requirements across the entire supply chain.

Which companies are directly impacted?

The CSRD affects all large companies within the EU and all publicly listed companies, except for listed micro-enterprises. Companies are considered large if they meet at least two of the following criteria:

• More than 250 employees

• Over 40 million euros in revenue

• A balance sheet total of over 20 million euros

Indirect impacts on SMEs

Non-listed SMEs are indeed exempt from the direct reporting obligation of the CSRD, yet the reality often looks different. As soon as they supply large clients who are subject to the CSRD, they become part of the sustainability chain. Suddenly, large companies require detailed ESG data to fulfil their own obligations—and this responsibility is borne by the suppliers. Thus, SMEs are drawn into the reporting obligations of their large clients and quickly come into focus.

1. Frequency of large company inquiries

Large companies are obliged to regularly collect the ESG data of their suppliers. The frequency of inquiries depends on the individual requirements of the large company and can vary greatly. For SMEs, this means constant readiness for data collection and provision. Suddenly, they must not only keep their own business running but also continuously deliver data. The administrative burden is enormous and grows with each new inquiry.

2. What information is requested?

The inquiries are often very detailed. The requirements include:

• Environmental data: CO₂ emissions, proportion of renewable energy in total consumption, waste management information

• Social aspects: working conditions, workplace safety, measures to prevent child labour

• Governance data: adherence to anti-corruption policies

All this information is essential for assessing the sustainability performance of the entire value chain and fulfilling the legal requirements of the CSRD.

3. Formats of inquiries

The manner in which the inquiries are made is often complicated and hardly standardised. There are:

• Standardised questionnaires in Excel or CSV formats, individually designed by each client.

• Online portals such as osapiens, Workiva or Integrity Next, where ESG data is centralised. SMEs must familiarise themselves with multiple portals, manage different logins, and often input the data multiple times.

• Self-disclosure forms arriving as email inquiries or through specific online forms.

This variety of formats leads to substantial additional effort and causes further stress.

4. Increased administrative burden

This administrative burden poses a real challenge, especially for smaller businesses. Most SMEs do not have specialised sustainability teams. Instead, it is often the environmental officer or a single individual who must manage all these inquiries in addition to daily tasks. The result? Overtime, frustration, and an increased risk of errors—errors that can jeopardise the relationship with important large clients.

5. Risk to business relationships

Inadequate or delayed responses to ESG inquiries can severely strain the relationship with key clients. Suppliers who are unable to provide the requested information risk being excluded from the supply chain. A lot is at stake for large enterprises—their compliance with the CSRD is a legal requirement. Hence, they only work with suppliers who are equally reliable and can supply the necessary data.

6. Costs of data management

To meet the growing demands, investments in suitable data management systems are often indispensable. Manual data collection quickly reaches its limits—both time-wise and financially. Software solutions for collecting, managing, and transmitting ESG data can present a significant strain. However, these investments are necessary to meet increasing demands and remain competitive.

7. Opportunities through sustainability initiatives

However, there is a silver lining. Those who manage to proactively respond to the new requirements can strengthen their competitive position. Many large companies prefer suppliers who are not only ready to provide the required data but also have a clear strategy to improve their sustainability performance. This opens up opportunities: A strong sustainability record can help SMEs stand out from the competition and unlock new business opportunities.

What should SMEs do now?

• Collect ESG data: Systematically gather relevant data to efficiently respond to inquiries.

• Leverage technology: Employ automation solutions such as turnus.ai to save time and minimise errors.

• Proactive communication: Work closely with large clients to understand requirements early and fulfil them optimally.

How turnus.ai can support you

turnus.ai offers a platform for the automated response to ESG inquiries. SMEs save time, avoid errors, and deliver consistent information. This reduces the administrative burden and allows the company to focus on what matters: growth and strengthening its sustainability record. Learn more at turnus.ai.