How CSRD Improves Employee Recruitment and Retention
Finding and keeping good people has never been harder for small and growing businesses (SMEs). In a tight labour market, culture and values matter as much as salary. That’s where CSRD reporting — often viewed as a compliance burden — becomes a surprisingly powerful tool.
By making your company’s environmental, social, and governance (ESG) efforts visible, you show employees (and potential recruits) that your business stands for something beyond profit. CSRD helps turn sustainability into a recruitment and retention advantage.
1. Transparency Builds Trust
Employees, especially younger generations, want to work for companies that are open about their impact. CSRD’s reporting principles — transparency, accountability, and comparability — align perfectly with this expectation.
Even if your SME is not directly subject to the CSRD Directive (EU 2022/2464), using its logic through the Voluntary Sustainability Reporting Standard for SMEs (VSME) can:
- Demonstrate ethical leadership and care for people
- Show commitment to long-term stability
- Build employee pride and trust in management
A short sustainability report can do more to boost morale than an internal memo about “values.”
2. Purpose Attracts the Right Talent
Jobseekers increasingly choose employers with a clear sense of purpose. According to multiple EU surveys, more than 70% of under-35s prefer to work for companies that act on environmental and social issues.
By publishing even a basic sustainability report, you communicate:
- What your company stands for
- How you treat people and the planet
- What progress you’re making
This makes your brand more attractive to skilled workers who align with your values — not just your pay scale.
3. CSRD Makes Workforce Data Meaningful
The ESRS S1 Standard (Own Workforce) under CSRD focuses on fair pay, working conditions, and equal opportunities. While SMEs can apply a simplified version via VSME Basic Module, these same topics are powerful management tools:
- Tracking training hours highlights where skill gaps exist.
- Recording health and safety data prevents future issues.
- Monitoring gender balance helps attract diverse talent.
You can use these metrics to improve HR strategy — not just meet compliance expectations.
4. Sustainability Strengthens Retention
People stay longer when they feel proud of their employer’s role in society. CSRD-style reporting helps you document and communicate achievements like:
- Reduced waste or energy use
- Employee well-being initiatives
- Local community projects
- Flexible working or inclusion policies
Sharing these results internally reminds staff that their daily work contributes to something bigger. That sense of shared purpose directly reduces turnover and boosts engagement.
5. Internal Communication Improves Engagement
A sustainability report isn’t just for external audiences. It’s a powerful internal communication tool. Use it to:
- Celebrate team achievements (“we reduced our energy use by 10%”)
- Highlight contributions from different departments
- Encourage employees to suggest improvements
This creates two-way engagement — employees see their ideas valued and visible in the company’s progress story.
6. VSME Reporting Keeps It Simple for SMEs
Small businesses often assume sustainability reporting is too heavy. But the VSME Standard (EFRAG, 2024) was designed to make it manageable:
- 11 core disclosures only
- No consultants required
- Flexible narrative and data options
By focusing on proportional reporting — a few key metrics and qualitative descriptions — SMEs can enjoy the HR benefits of transparency without overcomplicating operations.
Frequently Asked Questions
Do small businesses have to report on workforce topics under CSRD?
Only large or listed companies are legally required to. But SMEs can use the VSME framework voluntarily to communicate workforce data that supports recruitment and client relationships.
What kind of data should I include?
Start with workforce size, gender balance, employee turnover, training hours, and well-being initiatives. You can add qualitative descriptions — such as your approach to inclusion or health and safety — to provide context.
Does publishing this data create risks?
Not if you’re transparent. Even small gaps or challenges can be shared positively (“We’re starting to collect more data on training next year”). Authenticity builds credibility.
How often should I report?
Once a year is enough. Align your workforce report with your financial year to make data collection easier and consistent.
Key Terms
- CSRD: Corporate Sustainability Reporting Directive (EU 2022/2464)
- VSME: Voluntary Sustainability Reporting Standard for non-listed SMEs (EFRAG, 2024)
- ESRS S1: Standard focusing on an organisation’s own workforce (part of CSRD framework)
- Employee Engagement: The level of commitment and motivation employees feel toward their company
- Material Topics: Areas where your business has significant impact — like workforce well-being or diversity
Conclusion: People Stay Where Purpose Lives
CSRD reporting isn’t just about data — it’s about people. By sharing your sustainability story, you show current and future employees that your business takes responsibility, cares about their well-being, and plans for the future.
For SMEs, even a simple annual workforce report can turn compliance into culture — attracting talent, improving loyalty, and building the kind of workplace people are proud to join and stay in.