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Research into the effect of CSRD on SMEs

On 26 February, the European Commission presented an omnibus regulation for the CSRD. This new regulation bundles and streamlines existing regulations, which should make it easier for companies to comply with sustainability guidelines.

The main elements of the proposal for the CSRD are:

  • The start date for companies that have to report for 2025 or 2026 is postponed by 2 years.
  • Only companies with more than 1000 employees will still fall under the CSRD. The number of companies that will still fall under the CSRD will therefore be reduced by 80%.
  • The number of (qualitative) data points will be reduced.
  • The weight of the auditor’s test will not be increased and will remain a test with limited certainty about the sustainability report.

For SMEs, this proposal means that they will no longer fall under the CSRD at all. In addition, companies subject to the CSRD may only request information from non-CSRD-obligated companies in their value chain that is included in a voluntary sustainability standard that is yet to be developed. This final measure should ensure that the sustainability reporting of CSRD-obligated companies does not lead to disproportionate information requests for smaller companies.

What is the effect?

Is this measure premature or justified? In recent months, I have contributed to the research into the indirect effects of the CSRD on SMEs, which was carried out by the New Finance lectorate of The Hague University of Applied Sciences on behalf of the Ministry of Economic Affairs. The ministry wants to gain insight into the obstacles that SMEs experience in responding to data requests resulting from the CSRD. The ministry uses the research results to develop a practical and effective approach that helps SMEs to provide and use sustainability information within the chain themselves.

The surveys and discussions with SMEs, CSRD-obligated companies, industry associations and other organisations reveal the following effect:

  • Most SMEs (72%) do not (yet) receive data requests, which means that the effects of the CSRD are currently limited for SMEs as a whole. However, 65% of SMEs with more than 50 employees indicate that they already receive data requests and 7% expect to receive them in the future.
  • Despite the above challenges, a majority of SMEs (60%) indicate that they are able to meet data requests well or excellently.
  • In some cases, data requests lead to increased workload, negative effects on customer relationships and concerns about sharing business-sensitive information.
  • Most SMEs currently see more disadvantages than advantages. A minority sees opportunities, such as better internal and external collaboration, strengthening the competitive position and the use of sustainability data to save costs.

Perhaps the research was conducted a little too early to be able to really measure the effect. Only the first group of CSRD-obligated companies are reporting their first sustainability report according to the CSRD this year. They can use sector averages and indirect measures (proxies). A transitional provision also applies for the first three years for information from the value chain.

Next steps

Whether the Omnibus proposal will be adopted in this form will not be known until the end of June / beginning of July at the earliest, after decision-making in the Council of the EU and the European Parliament. The ministry will include the findings and recommendations from this study in the negotiations on the Omnibus proposal.

Read more about the CSRD, the research, results and recommendations in the report (only summary in English).

News item Ministry of Economic Affairs.

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