CSRD for SMEs: What Does the Value Chain Requirement Mean in Practice?

CSRD does not apply to small companies, but its effects do

CSRD (Corporate Sustainability Reporting Directive) is an EU directive that requires the largest companies to report on sustainability matters in a standardised format. The obligation applies directly to approximately 50,000 companies across Europe, primarily companies with more than 250 employees or a turnover exceeding 40 million euros.

CSRD does not directly obligate SMEs. But there is a big “but”.

The value chain requirement reaches small companies

CSRD requires reporting companies to also report on their Scope 3 emissions, that is, their supply chain. In practice, this means that large companies will start requesting sustainability data from their own suppliers and subcontractors.

This is the channel through which CSRD requirements flow down to SMEs:

1. A large customer (more than 250 employees or listed on a stock exchange) falls within the scope of CSRD
2. CSRD requires it to report its Scope 3 emissions
3. Scope 3 includes emissions from purchased goods and services, i.e., supplier emissions
4. The customer asks the supplier (a small company) to provide emissions data

This is already an everyday reality in many value chains.

What data is requested from a supplier?

In practice, the request may be:

• “Report your total annual carbon footprint (Scope 1, 2, and 3)”
• “Complete our sustainability data form (often EcoVadis- or VSME-based)”
• “Provide an ISO 14067-compliant product-level carbon footprint for the products we purchase from you”

The form of the request depends on the customer. Some request a VSME report, some use their own forms, and some request product-level data.

Preparing in advance pays off

The best time to start emissions accounting is not the week when a customer sends a form to be filled in with two weeks’ notice. The calculation typically takes 6–10 weeks, and a calculation done under pressure rarely withstands a customer’s follow-up questions.

For companies with significant large customers, particularly in manufacturing, construction, logistics, or retail, it makes sense to carry out a baseline organisational emissions calculation proactively.

What does NGS recommend?

If you know or suspect that a large customer of yours falls within the scope of CSRD, it is worth:

1. Checking the customer’s size: more than 250 employees or listed = CSRD has come or is coming into force
2. Starting with Scope 1 and 2 calculations: this is the fastest and easiest part, and sufficient for many forms
3. Planning Scope 3 as a next step: in particular, Category 1 (purchased goods and services) is often the largest
4. Considering VSME reporting: if the customer has already requested it or a request is expected

Once the baseline has been done properly once, subsequent updates are much faster.

Summary

CSRD does not directly obligate SMEs, but the value chain requirement means that suppliers to large customers have a practical need for emissions reporting. The best way to prepare is to start the calculation proactively, before the pressure comes from outside.