The EU Just Rewrote ESG. Here's What It Means for SMEs

The Council of the European Union has released the final draft of two major sustainability laws: the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D).

This document sets the foundation for how ESG will be implemented across Europe. And while the new legal obligations target only the largest companies, the message to SMEs is just as important. ESG is still expected. The way to approach it is changing.

The regulatory shift

The new draft introduces a more balanced and realistic approach to sustainability reporting. Key changes include:

• CSRD will apply only to companies with more than €450 million in turnover and over 1,000 employees

• SMEs are out of scope and legally protected from excessive ESG data requests

• A voluntary ESG reporting standard for SMEs (VSME) is being introduced by the European Commission

• CS3D enforcement is postponed to 2029, with transition planning framed as a reasonable effort

• Sector-specific reporting is no longer mandatory

• Penalties are capped and liability is handled at the national level

This is not a step back. It is a shift toward ESG systems that better reflect the structure and resources of European businesses.

What this means for SMEs

SMEs have never been the main legal target of these directives. But they have always felt the pressure from partners, clients, banks, and public bodies. That pressure is not going away.

The difference is that now there is more clarity. The EU is giving SMEs room to engage with ESG in a more practical, proportional, and business-oriented way. The upcoming VSME standard gives structure to that effort, without overburdening internal teams or creating unrealistic reporting expectations.

What the opportunity looks like

This is not just about avoiding risk. It is about creating real value.

Businesses that act early will strengthen their role in supply chains, gain access to green finance, and improve their chances of securing public procurement or funding. They will also gain something less visible but just as important: clarity of purpose and credibility with the stakeholders that matter.

This is the right moment to approach ESG strategically, not reactively.

How Dataphoria fits in

Dataphoria is built to turn ESG into business value. We support growing companies that want to use ESG as a tool for savings, visibility, and access to resources.

Our platform does more than generate reports. It helps you create a personalized action plan, benchmark against your industry, and track performance over time. We support you in identifying funding opportunities, standing out in procurement processes, and connecting with a growing network of clients, partners, and lenders who are ESG-focused.

We have helped companies secure international clients by making their ESG data visible and credible. We have guided businesses from fragmented efforts to clear ESG strategies. We have transformed reporting into something useful for growth.

Now, with the VSME standard coming into focus, SMEs finally have the framework they need. What they need next is a way to act quickly and clearly.

The opportunity is not to prove you are compliant. It is to show what you stand for and grow because of it. Dataphoria is here to help you do that.