EU sustainability reporting changes: An SME guide

Earlier this year, the EU Council approved simplifications to the EU Sustainability Reporting rules proposed by the European Commission in February 2025. The approved changes reduce the number of companies required to report, but not the need for organisations to understand what is happening across their supply chains.

While most EU Small to medium-sized enterprises (SMEs) fall out of the formal scope of the EU Corporate Sustainability Reporting Directive (CSRD), if you are an SME owner, you are still likely to be asked for information by customers in your supply chain who are required to report.

In many ways, the landscape has already changed, and internal sustainability goals, voluntary sustainability standards, and the appetite to be more environmentally conscious is already embedded in how many companies operate. As a result, sustainability compliance requirements are likely to remain part of day-to-day commercial discussions for SMEs operating within those supply chains.

Therefore, the key question for SMEs is not whether these rules apply directly, but how they affect interactions with customers and prospects, and what may be expected in response.

EU sustainability reporting – What has changed?

The Omnibus I package introduces a series of changes to EU sustainability rules, including updates to both the EU Corporate Sustainability Reporting Directive (CSRD) and the EU Corporate Sustainability Due Diligence Directive (CS3D).

The direction of travel is towards fewer companies in scope and less detailed reporting requirements, with a clearer focus on larger companies.

For EU CSRD, this includes:

• Higher reporting thresholds, meaning only the largest organisations are now required to comply.
• A significant reduction in the number of companies in scope (estimated at around 80% fewer).
• Delays to reporting timelines for certain companies.
• Simplified reporting standards, with less detailed disclosure requirements.

According to the Council, the amended directive also provides for a transition exemption for companies that had to start reporting from the financial year 2024 (the so-called ‘wave one’ companies) falling out of scope for 2025 and 2026, so it is worth checking where you stand now if your company did fall into scope in this wave.

What these EU sustainability reporting changes mean for SMEs

Although many SMEs will not be required to report under CSRD or CS3D, larger organisations must still assess and disclose information about their value chains, including suppliers. Companies you are interacting with may also be voluntarily disclosing under VSME, Voluntary Sustainability Reporting Standards, or indeed, this may be a framework you are considering for your company for competitiveness reasons.

This effectively shifts part of the reporting burden down the chain. Even without a direct obligation, SMEs will likely be asked to provide information to support their customers’ disclosures.

Typically, this will involve areas such as:

• Carbon footprint data (for example, energy use or emissions).
• Internal policies or procedures on environmental impact.
• Governance or supply chain practices.

The level of detail will vary, but sustainability information is increasingly forming part of how larger companies and multinationals engage with their suppliers. It can influence how suppliers are selected and retained and is often built into procurement processes.

SMEs are now regularly asked to provide this information, but many are not yet equipped to do so consistently, either because the data is not readily available or because it is unclear what is expected.

As a result, the challenge is often less about the request itself and more about responding in a consistent and efficient way.

How can SMEs report their sustainability credentials more confidently?

For SMEs, these requests arise through tenders, supplier questionnaires, onboarding processes, or periodic information requests, often at short notice.

They are not always consistent. Different organisations may ask for similar information in different formats, or at different levels of detail. In many cases, there is not yet a standardised approach, which can add to the administrative burden.

The focus is therefore less on reporting itself and more on how quickly and clearly this information can be provided.

A few simple steps can help:

• Understanding what is actually required – clarifying what is needed, and what is not, can avoid unnecessary work.
• Knowing where relevant data sits- for example, energy usage, carbon emissions, supplier information, or existing policies.
• Keeping information up to date – rather than recreating it each time a request is received.
• Responding consistently – so that similar requests do not require different answers each time.
• Being aware of contractual requirements – some requests will be informal, while others may be linked to supplier terms.
• Appointing an internal lead – having a clear point of responsibility can help coordinate responses, maintain consistency, and avoid duplication across teams when requests are received.
• Working with a sustainability expert – where requirements become more detailed, external support can help identify what data is needed, how to structure it, and how to present it in a way that meets customer expectations.

Without some structure, they can quickly become very time-consuming. A more organised approach can make requests easier to manage as they arise.

How can AAB help

Sustainability reporting requirements are continuing to evolve, and for many SMEs, the challenge lies in understanding what is expected through customer relationships rather than direct regulation.

If you would like to discuss how the Omnibus simplification package may affect your business or need support putting in place a practical approach to handling sustainability-related requests, please contact our Sustainable Business & ESG team, Ruairí Power or your usual AAB contact.

To learn more about AAB’s ESG commitments, view the AAB 2025 impact statement.