ESG for SMEs: A Practical Starting Point.

13 Οκτ 2026 · @Nikos Stavropoulos

Introduction

Most small businesses have no legal duty to report on ESG (environmental, social and governance) topics, yet many already receive questions about them from customers and banks. In the EU, small and medium-sized enterprises (SMEs) represent 99% of all businesses [6], while the revised Corporate Sustainability Reporting Directive (CSRD) now applies only to companies with more than 1,000 employees and more than EUR 450 million in net turnover [3]. The pressure on an SME therefore rarely comes from the law directly. It comes through the value chain: a large customer or a lender asks for data. This article argues that an SME does not need a large team or a long report to respond well. It needs a short list of topics that matter for its own business, a few reliable numbers, and a voluntary reporting standard to organise them. I explain what the European framework now offers SMEs, how to choose the few topics, and a first-year plan. The plan is my own suggestion, built on the sources listed at the end, and I mark it as such.

Why SMEs are in scope without a legal duty?

The European Commission adopted a Recommendation on a voluntary sustainability reporting standard for SMEs on 30 July 2025 [1]. According to a law-firm summary, it is meant to help non-listed SMEs and micro-undertakings answer information requests from large companies and financial institutions, and it asks those requesters to limit their questions, as far as possible, to the information the standard contains [2]. Reporting under it is voluntary: the same summary notes that it "is not envisaged by the CSRD". Omnibus I added a legal layer to this idea, which is often called the value chain cap. Undertakings with no more than 1,000 employees that sit in the value chain of a reporting company are "protected", and may refuse requests for ESG information that go beyond the European voluntary standard [3]. A sustainability-software vendor's summary adds two limits: the protection covers requests made for CSRD reporting only, and it does not cover requests for other purposes, such as certain due diligence requirements [4]. Member States have until 19 March 2027 to transpose the relevant national measures [4]. Research suggests why preparation matters. A systematic review of sustainability management tools for SMEs found that most tools see little to no implementation in SMEs, and discusses barriers and facilitating criteria [7]. My inference: an SME that waits for a request often meets it without any data in hand, while one that has a short, tidy data set can answer in an afternoon.

Start with the few topics that matter.

Large companies run a formal double materiality assessment. An SME does not have to. One practitioner article on the voluntary standard states that no double materiality analysis is required for its Basic Module, though a simplified version is still recommended [5]. I did not find an official source that defines what a "simplified" version should look like, so the method below is my own suggestion, not a standard procedure.

Three questions are usually enough to build a first shortlist of three to five topics:

The shortlist is then recorded in one page: topic, why it matters, who owns it, which number will be tracked. My suggestion is that this page is more useful at the start than a long policy; it is a practical judgement, not a research finding.

Standards that fit a small business

The voluntary SME standard (VSME). It has two modules. The Basic Module is, in the Recommendation's wording as summarised by a law firm, "designed for micro-undertakings and constitutes a minimum requirement for other undertakings". The Comprehensive Module adds datapoints that banks, investors and corporate clients are likely to request, and it presupposes the Basic Module [2]. The Commission's SME categories help locate a business: micro below 10 staff, small below 50 and medium-sized below 250, combined with turnover or balance sheet ceilings [6]. Its legal successor. Omnibus I requires a formal standard for voluntary use. A vendor summary reports that the Commission adopted it as a delegated regulation on 3 July 2026, that it stays closely aligned with VSME, and that it still had to pass scrutiny by the European Parliament and the Council and be published in the Official Journal [4]. I could not confirm from an official source whether that has now happened, so check the current status before you quote it to a client. ISO management systems. ISO 14001 (environment) and ISO 9001 (quality) are not reporting standards; they organise how a company manages its processes. The sources I opened focus on the obstacles for small firms. A Lund University report from 2000, focused mainly on Sweden, on ISO 14001 and EMAS reports that small enterprises often see the standards as bureaucratic, that implementation and certification cost more relative to turnover, and that they usually need substantial staff time and paid consultants [8]. The systematic review above likewise discusses barriers to tool adoption in SMEs [7]. My inference: certification is a sensible second step, once the business has a stable set of data and a clear reason, such as a tender that requires it. Greenhouse gas basics. If energy and fuel are on your shortlist, the same logic applies to emissions: start with fuel, electricity and heating. Our article on ISO 14064 explains the scopes and boundaries in more detail.

A practical first-year roadmap

The sequence below is my own suggestion, not a requirement of any standard. It is designed so that each step produces something usable even if the project stops there.

1. Months 1–2: scope and shortlist. Confirm who is asking and why. Pick three to five topics with the questions above. Name one owner, often the owner-manager.
2. Months 2–4: collect the first numbers. Gather twelve months of data for the shortlisted topics from invoices and payroll: electricity, fuel, waste, headcount, accidents, training. Record the source and any estimate.
3. Months 4–6: organise it in the voluntary standard. Map the numbers to the Basic Module. If a customer or bank has a questionnaire, answer it from this data set, and decline requests that go beyond it only after checking whether the value chain protection applies to that request.
4. Months 6–9: set two or three small targets. For example, a lower electricity use per unit of output, or fewer lost-time accidents. Keep targets modest and measurable.
5. Months 9–12: review and decide. Repeat the data collection, compare with the first year, and decide whether to move to the Comprehensive Module, to a management system such as ISO 14001, or to simply keeping the Basic Module up to date.

Limits of this article

• Status of the voluntary standard. The adoption date and the scrutiny process come from a vendor's summary [4]. A law-firm note written earlier expected publication by 19 July 2026 [3]. The two dates differ, and I could not reconcile them from official texts.
• Value chain cap. I did not read the legal text or Annex II of the delegated act. The scope description relies on secondary summaries, and the national transposition in Greece was not checked.
• VSME content. I did not read the full standard. The module descriptions come from a law-firm summary and a practitioner article, not from the standard itself.
• Evidence base. The academic sources are a 2016 literature review and a 2000 report focused on Sweden. They show recurring obstacles for small firms but say nothing about the new European framework.
• The roadmap and the three-question method are my own suggestions and have not been tested in a study.
• This is general information and not legal advice.



References

1. European Commission (2025). Commission Recommendation (EU) 2025/1710 on a voluntary sustainability reporting standard for small and medium-sized undertakings, 30 July 2025. EUR-Lex. Only the title and date were visible to me.
2. Linklaters. European Commission adopts recommendation on voluntary sustainability reporting for SMEs. Secondary source.
3. CMS. ESG news as of 18 March: Omnibus I reduces thresholds and obligations for undertakings. Secondary source.
4. Dcycle. Voluntary Standard (VS): what suppliers need to know. Vendor blog; secondary source.
5. Terra Institute. VSME update: everything important about the simplified reporting structure. Practitioner article; secondary source.
6. European Commission. SME definition. Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs.
7. Johnson, M. P. & Schaltegger, S. (2016). Two decades of sustainability management tools for SMEs: How far have we come? Journal of Small Business Management, 54(2), 481–505. DOI: 10.1111/jsbm.12154. I read the abstract only.
8. Dalhammar, C. (2000). Implementation and certification of environmental management systems in small enterprises: Approches and limitations. Lund University. I read the catalogue record only.