CSRD and the Impact on SMEs

The Corporate Sustainability Reporting Directive (CSRD) introduces new reporting requirements for large companies and listed SMEs. Although most smaller businesses are not directly affected, the CSRD has significant implications for many SMEs in Germany. Why? Because their large corporate clients are now required to enforce strict sustainability standards across their entire supply chain.

Which companies are directly affected?

The CSRD applies to all large companies in the EU and all listed companies, excluding listed micro-enterprises. A company is classified as large if it meets at least two of the following criteria:

• More than 250 employees

• In excess of €40 million in turnover

• A balance sheet total of over €20 million

Indirect impacts on SMEs

While unlisted SMEs are exempt from direct CSRD reporting obligations, the practical reality is different. Once they supply large corporate clients subject to the CSRD, they become a key link in the sustainability chain. Large corporations suddenly require detailed ESG data to meet their own disclosure requirements – and this compliance burden is passed down to suppliers. Consequently, SMEs find themselves integrated into their clients' reporting processes and under close scrutiny.

1. Frequency of inquiries from large corporations

Large companies are required to collect ESG data from their suppliers on a regular basis. The frequency of these requests depends on the individual requirements of the client and can vary significantly. For SMEs, this demands a continuous readiness to collect and provide data. In addition to managing day-to-day business operations, they must now continuously supply information. The administrative burden is substantial and increases with every new request.

2. What information is requested?

The inquiries are often comprehensive, requiring:

• Environmental data: CO₂ emissions, the share of renewable energy in total consumption, and waste management details

• Social aspects: Working conditions, occupational health and safety, and measures to prevent child labour

• Governance data: Compliance with anti-corruption and anti-bribery policies

This data is essential for assessing the sustainability performance of the entire value chain and meeting statutory CSRD requirements.

3. Formats of information requests

The methods used to request this data are often complex and lack standardisation. These include:

• Standardised questionnaires in Excel or CSV formats, customized by each individual client.

• Online portals such as osapiens, Workiva, or Integrity Next, which centralise ESG data collection. SMEs must familiarise themselves with multiple platforms, manage various logins, and often enter the same data repeatedly.

• Self-assessment forms, received via email or completed through dedicated online forms.

This variety of formats results in significant duplication of effort and increases administrative overhead.

4. Increased administrative burden

This administrative overhead presents a major challenge, particularly for smaller enterprises. Most SMEs do not have dedicated sustainability teams. Instead, these requests are typically handled by an environmental officer or a single employee in addition to their core responsibilities. This results in overtime, frustration, and a higher risk of reporting errors – which in turn can jeopardise key client relationships.

5. Risk to business relationships

Inadequate or delayed responses to ESG inquiries can severely strain relationships with key clients. Suppliers unable to provide the requested information risk being excluded from the supply chain. For large companies, the stakes are high – compliance with the CSRD is a legal mandate. Consequently, they will prioritise partnerships with reliable suppliers capable of delivering the required data.

6. Costs of data management

To meet these growing requirements, investing in appropriate data management systems is increasingly necessary. Manual data collection quickly reaches its limits in terms of both time and resource cost. Software solutions for capturing, managing, and reporting ESG data can represent a significant expenditure. However, these investments are vital to meet rising market expectations and maintain a competitive edge.

7. Opportunities through sustainability initiatives

There is, however, an upside. Businesses that proactively address these new requirements can significantly strengthen their competitive position. Many corporate buyers prefer suppliers who not only deliver the required data but also demonstrate a clear strategy for improving their sustainability performance. This creates new opportunities: a strong sustainability profile helps SMEs differentiate themselves from competitors and win new business.

What steps should SMEs take now?

• Collect ESG data: Systematically gather relevant data to ensure efficient responses to client requests.

• Leverage technology: Implement automation solutions like turnus.ai to save time and minimise errors.

• Proactive communication: Work closely with corporate clients to understand their reporting requirements early and meet them effectively.

How turnus.ai can support you

turnus.ai provides an automated platform designed for responding to ESG inquiries. SMEs can save valuable time, eliminate errors, and deliver consistent data. This reduces administrative overhead, allowing your business to focus on core operations: driving growth and improving its sustainability performance. Learn more at turnus.ai.