The Sustainability Reporting Ripple : Direct and Indirect Implications of the EU Corporate Sustainability Reporting Directive for SME Actors

Much thought has been given by EU institutional actors to how to encourage real change by companies around sustainability matters. This paper recognises that an important part of that jigsaw lies in the replacement of the Non-Financial Reporting Directive’s limited vision with the Corporate Sustainability Reporting Directive’s expanded vision for sustainability reporting by boards under uniform European Sustainability Reporting Standards. This paper excavates the significance of the likely considerable knock-on effects that remodelled sustainability reporting under the CSRD will have on EU SME actors. Of particular interest is the indirect impact on SMEs who find themselves in the upstream or downstream value chain of larger reporting companies obliged to gather value chain data to comply with the new mandatory sustainability reporting regime. It is argued that the indirect, trickle-down impacts of the Directive on SMEs value chain actors upstream and downstream from regulated reporting companies will be momentous and costly to respond to. As such, assistance and understanding from other regulatory actors and states is crucial. Furthermore, while outside the direct regulatory net, the trickle-down effect of value chain reporting may present a competitiveness issue for SMEs such that larger reporting companies may transfer business to producers and suppliers who are better able to be transparently engage in voluntary reporting on sustainable value creation and to supply the type of ESG scorecards that the Corporate Sustainability Reporting Directive and the associated European Sustainability Reporting Standards are indirectly demanding