What is CSRD Reporting? A Practical Guide for SMEs

Sustainability is no longer optional for businesses in Europe. Companies are expected to demonstrate responsibility for their environmental and social impacts. One of the most important developments in this area is the Corporate Sustainability Reporting Directive (CSRD). For small and growing businesses (SMEs), understanding CSRD reporting — and how to provide this information to clients or banks — is increasingly essential.

This guide explains what CSRD reporting is, why it matters for small and growing businesses (SMEs), and how you can implement it in a practical, achievable way.

1. Understanding CSRD: What is CSRD?

1.1 CSRD Meaning

The Corporate Sustainability Reporting Directive (CSRD) is an EU law requiring companies to report on how their operations affect the environment, society, and governance. While it primarily applies to large companies, SMEs will often be asked for CSRD-style data by clients, banks, or larger partners.

In simple terms, CSRD reporting is about transparency — showing stakeholders that your SME manages environmental and social impacts responsibly.

1.2 Why CSRD Matters

The CSRD aims to:

• Standardise sustainability reporting across the EU for comparable, reliable information.
• Encourage sustainable business practices by highlighting areas for improvement.
• Provide transparency for investors, clients, and banks.

For SMEs, CSRD reporting is generally voluntary, but preparing reports now demonstrates market readiness and strengthens credibility.

2. Who Needs to Comply with CSRD?

2.1 Large Companies

CSRD requires all large companies in the EU to report according to the European Sustainability Reporting Standards (ESRS). Large companies are defined as having:

• More than 250 employees, or
• Turnover over €50 million, or
• Balance sheet total exceeding €25 million.

2.2 SMEs and Voluntary Reporting

Most SMEs are not directly in scope. However, many will be asked for CSRD-style reporting as CSRD deadlines approach. The Voluntary Sustainability Reporting Standard for SMEs (VSME) provides a practical framework:

• Basic Module — covers essential topics such as energy use, emissions, waste, workforce data, and governance. Most SMEs start here.
• Comprehensive Module — a more detailed version including strategy, targets, and transition plans. Banks or large clients may request this.

Not sure which to choose? Read our comparison of VSME Basic vs Comprehensive modules to decide which is right for your SME.

3. Key Areas of CSRD Reporting

3.1 Environmental Reporting

Start with core environmental metrics:

• Energy use — track electricity, gas, or vehicle fuel. Example: If your office uses 1,000 kWh per month, this is a simple number to report under Scope 2 emissions. Learn how to report electricity use from utility bills.
• Greenhouse gas emissions — Scope 1 (direct emissions, e.g., company vehicles) and Scope 2 (indirect emissions from purchased energy). See our step-by-step guide to reporting Scope 1 and 2 emissions.
• Waste management — types and amounts of waste, plus recycling or disposal methods.
• Water use — for businesses with significant water consumption.

Even simple tracking, like monthly electricity bills or recycling logs, is a solid start.

3.2 Social Reporting

Social reporting shows how your business affects people:

• Workforce data — number of employees, gender balance, age distribution, and training hours. Example: For a team of 15, record age ranges, gender balance, and total training hours for a Basic Module report.
• Health and safety — incidents, policies, and preventive measures.
• Community engagement — volunteering, charitable activities, or local development initiatives.

These show clients and banks that your SME takes social responsibility seriously.

3.3 Governance Reporting

Good governance underpins all sustainability work. Key topics:

• Board structure — size, diversity, and independence.
• Ethical policies — anti-corruption, whistleblowing, and supplier codes of conduct.
• Decision-making processes — how sustainability informs strategy.

Even small SMEs can demonstrate governance by documenting policies and assigning responsibility for sustainability.

4. How SMEs Can Prepare for CSRD Reporting

While CSRD reporting may seem complex, SMEs can take practical steps:

Step 1: Define Your Scope

Focus on your core operations and primary suppliers. Starting small keeps reporting manageable.

Step 2: Collect Basic Data

Key metrics include:

• Energy and fuel consumption.
• Waste and recycling records.
• Employee demographics and turnover.

Document assumptions and sources. Rough estimates are acceptable at first. Consider whether to use manual vs software approaches for CSRD reporting to streamline data collection.

Step 3: Select a Reporting Module

Begin with the Basic Module. Transition to the Comprehensive Module when requested by clients or banks. Use our CSRD requirements checklist to track what data you need to collect.

Step 4: Assign Responsibilities

Designate someone (finance, HR, or operations) to oversee sustainability reporting. Clear ownership improves accuracy and consistency.

Step 5: Prepare the Report

Include:

• Overview of the business.
• Environmental, social, and governance metrics.
• Policies, plans, and targets.

Tip: Use simple tables, charts, or graphics to make data digestible.

Step 6: Review and Update Regularly

Schedule annual reviews to refine metrics, update policies, and track progress. Continuous improvement shows commitment.

5. Benefits of CSRD Reporting for SMEs

Reporting offers practical advantages:

• Strengthens client and bank confidence — easier access to finance and contracts.
• Enhances competitiveness — proactive reporting sets you apart.
• Improves operational efficiency — tracking resources often highlights cost-saving opportunities.
• Prepares for future regulations — early adoption smooths compliance as your business grows.

Remember: your first report doesn’t have to be perfect — start small and improve over time.

6. Common Challenges and How to Overcome Them

• Data availability — collect measurable data first; estimate the rest. Improve accuracy over time.
• Complexity of standards — focus on key metrics; the VSME framework simplifies reporting.
• Resource constraints — integrate reporting into existing workflows; spreadsheets or simple tools help reduce effort.

7. Tools and Resources for SMEs

• VSME guidance documents — templates and examples for both modules.
• Government and EU portals — free checklists, guidance, and online tools.
• Industry networks — share best practices and case studies.

These resources make reporting manageable, even for smaller teams.

8. Looking Forward

Sustainability reporting is evolving rapidly in Europe. SMEs that embrace CSRD reporting now will:

• Be ready for future regulatory changes.
• Meet client and bank expectations today.
• Build a culture of transparency and responsibility.

Starting early ensures reporting becomes a natural part of your operations, not a last-minute scramble.

9. Summary

CSRD reporting is about transparency, accountability, and improvement. SMEs can start small, focus on achievable metrics, and expand reporting gradually. Using the VSME framework, your business can meet client demands, improve operations, and prepare for a sustainable future.

Frequently Asked Questions

What is the difference between CSRD and VSME?

CSRD is the EU law that mandates sustainability reporting for large companies, while VSME is a voluntary framework designed specifically for SMEs to report sustainability information in a simpler way. Most SMEs use the VSME Basic or Comprehensive modules to provide CSRD-style data to clients or banks, even though they’re not legally required to comply with CSRD directly.

Do SMEs have to comply with CSRD reporting?

Most SMEs are not legally required to comply with CSRD — only large companies meeting specific size thresholds must report. However, many SMEs are increasingly asked for CSRD-style sustainability information by larger clients, banks, or investors who need this data for their own reporting. Preparing voluntary reports using the VSME framework is becoming a competitive advantage.

How much does CSRD reporting cost for an SME?

The cost varies widely depending on whether you handle reporting manually or use software tools. Starting with the VSME Basic Module using spreadsheets and existing data sources (like utility bills and HR records) can be done with minimal cost — mainly internal staff time. As data collection becomes more complex or if you move to the Comprehensive Module, consider whether manual or software approaches are more cost-effective for your business.

What’s the first step for an SME to start CSRD reporting?

Start by collecting basic environmental data you already have access to, such as monthly electricity bills, fuel receipts, and waste collection records. Then gather simple workforce information from HR, like employee counts, gender balance, and basic training records. Focus on the VSME Basic Module metrics first — you don’t need perfect data to begin, and you can improve accuracy over time as reporting becomes routine.

Key Terms

Corporate Sustainability Reporting Directive (CSRD) — An EU law requiring large companies — and eventually some medium-sized ones — to report on environmental and social impacts. SMEs may be asked for CSRD-style data by banks or clients.

Voluntary Sustainability Reporting Standard for SMEs (VSME) — A simplified framework for SMEs to share sustainability information voluntarily.

Basic Module — Minimum sustainability disclosures under VSME, including energy, emissions, waste, workforce data, and governance.

Comprehensive Module — Extended VSME version with strategy, transition plans, and targets.

European Sustainability Reporting Standards (ESRS) — Detailed rules for large companies under CSRD.

SME (Small and Medium-sized Enterprise) — Business with fewer than 250 employees, turnover under €50 million, or balance sheet under €25 million.

Scope 1 and Scope 2 emissions — Direct emissions from company-controlled sources (Scope 1) and indirect emissions from purchased energy (Scope 2).

Turnover — Total income from normal business activities over one year.

Use our readiness assessment to understand where your company stands with CSRD compliance:

This tool will help you identify whether CSRD applies to your company and what steps you need to take to get started.