Fantasy busting: CSRD and, Small and Medium Enterprises (SMEs)

There is a prevalent false impression that SMEs should adjust to the Company Social Accountability Directive (CSRD); in different phrases, they have to put together lengthy and “sophisticated” standardised ESG and/or sustainability reviews. Nonetheless, that is removed from the reality (Desk 1). So, what’s the precise scope of the CSRD?

1. Massive listed EU firms with greater than 500 fte
2. Massive non-listed EU firms with sure traits (Desk 1)
3. SMEs listed on EU-regulated market
4. Non-EU firms producing over €150M within the EU.

It is essential to notice that the CSRD applies to a selected subset of SMEs, specifically the LISTED ones (LSMEs). What does ‘listed’ imply? It signifies that these firms promote their securities/shares on a inventory trade, which refers back to the public availability of their shares for buying and selling. The brand new guidelines have been designed to make sure that traders and different stakeholders have entry to the data they should assess the influence of firms on folks and the setting and for traders to guage monetary dangers and alternatives arising from local weather change and different ESG/sustainability points.

There are roughly 1.4 million micro, small, and medium-sized enterprises (SMEs) in The Netherlands alone [1]. Until listed on a inventory trade, these SMEs will not be required to be CSRD compliant (besides if nationwide regulation makes it an obligation beneath a distinct idea). As compared, “solely” round 50.000 enterprises are obliged to report beneath CSRD within the EU.

Does this imply an on a regular basis SME doesn’t should be accountable for environmental, social, and governance (ESG) features? In fact not. The corporate’s dimension doesn’t decide the significance of moral and accountable behaviour. Each firm, no matter its dimension, ought to try to behave ethically and responsibly. Can non-listed SMEs be affected by the brand new EU reporting standardisation course of? Sure, there are numerous methods to be affected:

1. Not directly, as a result of you’re the main provider to somebody CSRD compliant, scope 3 emissions beneath the CSRD cowl a broad vary of oblique emissions. Scope 3 emissions confer with all oblique emissions that happen within the worth chain of the reporting firm, together with each upstream and downstream actions. These are emissions circuitously produced by the reporting firm however by these linked to its operations. These suppliers and suppliers are SMEs for more often than not.
2. Due to monetary and investment-related laws and entry to refinancing and loans. (Keep tuned for one more article coming about this topic.)

I imagine the above-mentioned new guidelines will likely be extra beneficial for non-listed EU SMEs. They current a possibility for these firms to exhibit their dedication to sustainability and accountable enterprise practices, doubtlessly enhancing their competitiveness and market attraction. To take a straightforward instance, think about CO2 emissions. Who has extra beneficial CO2 emissions, the one who produces and sells from the EU market to the EU market or who first must ship the product from a 3rd nation?

Anyhow, the brand new guidelines are right here to remain, and it is higher to get conversant in them and create a extra clear and moral entrepreneurial setting. It’s all the time a good suggestion for firms to observe voluntary reporting requirements for non-listed SMEs. This generally is a advanced course of, however sources and help can be found that can assist you navigate it (and it’s voluntary). The present a number of ESG information requests are anticipated to be standardised by lowering the variety of uncoordinated requests you might need obtained till now. The brand new voluntary reporting customary is predicted to help SMEs with higher entry to lenders, traders, and shoppers, mitigating dangers higher and serving to to know their enterprise and its impacts in depth. If you wish to take part in tasks with us, please e mail m.ratkai[@]hotelschool.nl

References:
[1] Statista (2024). Out there: Netherlands SMEs 2023, by dimension | Statista (openathens.web) [accessed 29 May 2024]

About Melinda: 
Dr. Melinda Ratkai, initially from Hungary, earned her PhD in SME Administration and Economics from the College of Huelva, Spain, in 2014. She is at the moment a lector at Hotelschool The Hague, specializing in company governance and sustainable finance. With over a decade of expertise in administration economics and digital accounting/finance, Dr. Ratkai specialises in company sustainability reporting frameworks. Her work helps the hospitality trade in adapting to new reporting necessities, selling moral and ESG-conscious enterprise practices, and attracting sustainability-minded stakeholders.

Nina de Graaf
Hotelschool The Hague

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