EU Omnibus Directive: What SMEs Need to Know About CSRD & CSDDD Changes

As a small business owner in the EU, it's important to stay informed about regulatory changes that could impact your operations, even if they don't apply to you directly. The European Commission recently proposed amendments to its Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). While these mainly target large companies, there are some key takeaways for small and medium enterprises (SMEs) to consider.

Background on the CSRD and CSDDD

The CSRD introduces mandatory sustainability reporting requirements for certain large EU companies, aiming to provide investors and other stakeholders with comparable, reliable information on companies' environmental and social impacts. The CSDDD requires companies to identify and address human rights and environmental risks in their operations and value chains.

What's Changing?

The Commission is proposing to delay implementation deadlines for some companies under both Directives. Listed SMEs get a 2-year postponement before being subject to CSRD reporting, now starting in 2028 instead of 2026. The Commission also commits to substantially simplifying the sustainability reporting standards.

In a separate proposal, listed SMEs may be taken out of mandatory CSRD scope entirely, with voluntary reporting options provided instead. This would be a major relief for those companies.

Implications for Small Businesses

1. Indirect Value Chain Impacts

Even if your SME is not directly subject to the CSRD, you may still face pressure to provide sustainability data if you are part of the value chain of a large company that is covered. The good news is there will be limits on what large companies can ask for from smaller suppliers. The Commission aims to reduce this burden.

2. Increasing Focus on Sustainability

The direction of travel is clear - sustainability is a top EU priority. Customers, investors, banks and business partners will increasingly expect credible information on your environmental and social performance. Getting ahead of this trend could be a competitive advantage.

3. Preparing Your Business

It pays to integrate sustainability into your strategy and operations now, before you are compelled to by regulation or market pressure. Steps you can take:

• Measure your key environmental & social impacts
• Set improvement targets and make them public
• Engage staff, suppliers and other stakeholders
• Look for efficiencies and cost savings
• Consider voluntary sustainability reporting

4. Support and Resources

The EU plans support for SMEs on sustainability reporting, including digital tools and an SME forum to share implementation experiences. Stay engaged and seek out these resources.

The Bottom Line

While these EU sustainability Directives mainly impact large companies for now, SMEs can't afford to ignore this agenda. Get informed, take proactive steps to optimize your business, and position yourself to thrive in a greener, more transparent economy. As always, agility and adaptability are key SME strengths in navigating change.

Monitor the evolution of these EU regulations, but more importantly, keep pursuing sustainability improvements that make sense for your business. Embracing this shift is not just about compliance or avoiding value chain pressure. Done right, it's an opportunity to cut costs, attract talent, win customers and secure your long-term future. Sustainability is here to stay - make sure your small business is ready.