Since its entry into force in January 2023, the EU Corporate Sustainability Reporting Directive (CSRD) has steadily expanded the landscape of corporate disclosure. Much of the early focus fell, unsurprisingly, on large enterprises and publicly listed giants. But as the months have passed—and as deadlines for compliance loom—attention is shifting towards another group now firmly within scope: large and listed small and medium-sized enterprises (SMEs). For many of these firms, especially in sectors like manufacturing and agriculture, the requirements feel daunting. Understandably so. Non-financial reporting is no longer just a matter of broad sustainability statements or high-level commitments. What’s being asked now is detailed, data-backed disclosure across multiple dimensions, including supply-chain greenhouse gas (GHG) emissions.
The challenge here, or at least one major challenge, lies in balancing rigor with practicality. SMEs typically lack the resources of their larger counterparts. Dedicated sustainability teams, enterprise-grade data systems, external consultants on retainer—these are, for many, luxuries rather than standard features. And yet the expectations under CSRD are clear. Firms will need to disclose scope 1, 2, and, crucially, scope 3 emissions. That means emissions embedded in supply chains—upstream and downstream—which are often the most difficult to quantify.
One route forward, at least for those in manufacturing and agriculture, involves leveraging publicly available datasets to build initial estimates. Eurostat, for example, offers a range of sector-level emissions factors and supply-chain input-output tables that can serve as a foundation. The granularity varies. Some datasets provide broad averages for ISIC-coded sectors, while others drill down into sub-sectoral detail. Neither is a perfect fit for firm-specific reporting, of course. But these datasets can help SMEs begin constructing supply-chain GHG profiles where direct supplier data is lacking or incomplete. It’s not the whole solution, but perhaps a starting point.
Firms might consider creating supplier questionnaires aimed at filling the gaps between these generalized datasets and their actual supply chains. But here’s where it gets tricky: smaller suppliers may be no better equipped than their SME customers to provide reliable emissions data. In some cases, a tiered approach could help. Start with large or high-impact suppliers—those contributing most significantly to purchased goods emissions—and work outward over time. And there’s a judgment call to be made about materiality. Trying to capture every last gram of CO₂ embedded in minor inputs risks wasting scarce capacity.
Beyond data collection, SMEs will need to think about structuring their ESG narratives in a way that aligns with both regulatory expectations and sector realities. The CSRD allows, indeed encourages, tailoring disclosures to a firm’s specific context. But there’s value in adopting a template or framework that lends consistency across reporting periods—and that allows stakeholders (investors, regulators, even customers) to make comparisons across firms. One practical step is to align narrative structures to ISIC-tagged sector codes. This helps ensure that disclosures reflect the material issues for the sector, as well as for the company itself.
For example, a manufacturer classified under ISIC code 25 (fabricated metal products) might focus on energy use in production processes, the carbon intensity of steel or aluminum inputs, and waste management practices. An agricultural SME under ISIC 01 (crop production) would likely emphasize land-use impacts, fertilizer-related emissions, and water use. It’s not about forcing rigid uniformity—each firm’s circumstances will differ—but about providing a coherent backbone for narrative disclosures.
SMEs might also want to reflect, cautiously perhaps, on how digital tools can support these efforts. There’s growing interest in open-source or low-cost software designed to assist with emissions tracking, supply-chain mapping, and ESG reporting. Some of these tools integrate directly with public datasets, helping firms cross-check their own figures against national or EU-level benchmarks. But take care: not all tools are equally robust, and adopting a new system can bring its own risks—data privacy, integration headaches, or simply added complexity.
Engagement with value chain partners is another piece of the puzzle. CSRD’s emphasis on supply-chain emissions effectively demands closer collaboration with suppliers. That’s easier said than done. Some suppliers may be reluctant to share data, especially if they fear being penalized or dropped as a result. Others may simply not have the data available. Here, transparency about expectations—and perhaps even capacity building—can make a difference over time.
It’s also worth mentioning that the CSRD reporting process is iterative. The first disclosures may be imperfect, based on estimates and assumptions that firms will need to refine as better data becomes available. And that’s to be expected. Regulators themselves acknowledge that reporting will evolve. What matters is that SMEs begin building processes that can mature, rather than aiming for immediate perfection.
SMEs face a delicate balancing act: demonstrating serious engagement with sustainability reporting requirements while managing the resource constraints that are, for many, very real. Early planning, use of open data sources, and structured ESG narratives aligned to sector codes can help lay the groundwork. But the path forward will likely be uneven at times, shaped as much by evolving data quality and supplier relationships as by regulatory guidance.