Starting in 2025, small and medium-sized enterprises will be required to publish transparent and verifiable reports demonstrating their commitment in terms of the ecological transition. Those companies that are beginning to report will benefit from a degree of leeway. This normalisation process will gradually mobilise the majority of in-house teams. New constraint or opportunity to transform certain corporate cultures?

What? When? How?

With SFDR and the European taxonomy having only recently entered into the jargon of sustainable finance, a new acronym has now been added to the alphabet soup of ESG reporting: the CSRD (Corporate Sustainability Reporting Directive), a European regulation adopted in 2023. Certain commentators are already speaking of a new era in terms of reporting, while others are speaking of a tightening of the current framework with new requirements as to the publication of data concerning “sustainability” (ex-“extra-financial”, implying that the links with financial considerations were .. exterior).

In reality, this new directive, whose cornerstone is the principle of the “double materiality”, will make it possible to identify the challenges at the crossroads of impacts produced by the enterprise and those that affect it. With over 50,000 enterprises concerned and up to 1,180 data points to be collected, the CSRD aims to bring together companies with financial players by creating a shared language and inspiring confidence.

A potentially transforming regulation

In contrast to financial data, ESG data are not traditionally compiled using the same software used to process financial budgeting, closure and consolidation data. In contrast, their mandatory integration into the annual management report represents a genuine change and could contribute to potentially significant costs reductions or profit growth. For example, in the office real estate sector, a green building often benefits from higher occupancy rates because companies favour leasing “green spaces” in order to align themselves with their values and to the extent that they commit themselves to attaining objectives in terms of reductions in their emissions and integrating ESG into their strategies. Consequently, a green building can generate higher rental income, with on average a base rental rate per square meter 2.5% to 5% higher than that of a non-green building. This corresponds to the market rate for LEED certified office buildings, thereby boosting the potential gross revenues generated by the real estate property.¹

Certain small or medium-sized companies have not waited for 2025 to report their ESG data. This is enabling them to position themselves on the mission-driven company segment or to obtain sustainability labels supporting their individual or disparate initiatives.

The link between CSR, finance and innovation is pushing companies covered by these regulations to ask themselves the question of who will be responsibility for compliance. A certain degree of ambiguity can be seen within the SMEs, which do not necessarily have an interest in disclosing during this anticipatory phase what measures they are in the process of putting into place. There is a very good chance that they will emulate what the major companies (generally further along in this process) will have reported in year 1.

Are the SMEs sufficiently equipped?

The question of sustainable development has already been at the heart of numerous entrepreneurial projects for several years. Nevertheless, updates in response to regulatory issues will require genuine efforts by the SMEs in terms of information, preparation and commitment. We anticipate that the transversal nature and rigour of the sustainability reporting will imply the participation of financial, human relations, purchasing, communications and operational teams and the support of top management. The CSR teams, when in place, should serve as intermediaries based on their ability to educate and make proposals.

It is also possible that SMEs will face scattered resistance when taking concrete actions in order to reduce their environmental impacts. The leading source of carbon emissions is often linked to mobility (fleet of gasoline or diesel-powered vehicles). Working with employees in the shift to electric or hybrid vehicles is sometimes a challenge outside major cities.

When the company is intrinsically tied to sustainable development, as in the case of the waste management specialist Séché Environnement, motivating employees (who include numerous ecologists) regarding the decarbonisation theme is practically an integral part of its business and growth model. This company even regularly publishes its level of compliance with the CSRD (currently 60%).

Discussion forums focused on accompanying SMEs in the adoption of the CSRD (such as those of the French Socially Responsible Investment Forum (FIR)) are enabling companies such as Chargeurs, Fnac Darty, Derichebourg and Linedata to sound out investors concerning their expectations and to evoke the limitations of an approach sometimes based on box-ticking. The CSRD effectively implies sincere disclosures of tangible information.

“Intelligence is the ability to adapt”, but not artificially

The countdown has begun. Nevertheless, for the first reporting by SMEs, the expected level of compliance could be moderate, along the lines of audits, which certify the sincerity of the information disclosed. The CSRD can be viewed more as a mountain to be climbed rather than a simple task. Finding outside expertise (specialised consultants) to compile the carbon report, monitor predefined indicators and shift into high gear in terms of the contribution to the ecological transaction could be a preferable option. For asset management companies such as Mandarine Gestion, which is heavily invested in the small and midcap universe, the CSRD will significantly increase the access to raw and audited information. As concerns the boom in artificial intelligence, it remains to be seen whether its use will facilitate the collection, analysis and comparison of published data.

¹ Brett Johnson & Katie Miller, Looking at ESG’s positive impact on property values, Ernst and Young, 2022

SMEs on the way to the CSRD?

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