To prepare for the EU’s sustainability reporting deadline, SMEs should proactively partner with large customers to understand data requirements and invest in technology and human capital to automate data collection and analysis
Small- and medium-sized enterprises (SMEs) are required to start reporting their sustainability data in 2027, covering the 2026 financial year, to comply with the European Union’s Corporate Sustainability Reporting Directive (CSRD), with the potential for the opt-out.
This SME deadline follows that of larger companies, which must submit their 2025 data in the beginning of 2026. With this period less than 12 months away, it is likely that 2025 will serve as a crucial time for large organizations. For many proactive organizations, this will be a time to invest resources in honing data collection and reporting methodologies. Many organizations will also need to identify gaps in their data and capabilities, along with identifying opportunities to enhance the reporting process for 2026.
Some anticipated areas of improvement include the development of industry-specific standards and best practices for compliance, as larger corporations focus on prioritizing their most significant risks, opportunities, and impacts.
Additionally, there will be an increased emphasis on engaging with and supporting suppliers, including SMEs. This focus aims to achieve greater clarity and visibility in supply chain data, ultimately contributing to more comprehensive and accurate reporting.
This makes 2025 potentially a tumultuous year for SMEs, according to Nikko Karlo Robles, the CEO of Ascentys, a Switzerland-based sustainability technology provider. Indeed, there are many challenges on the horizon to meet the growing demands for reporting around areas of environmental, social & governance (ESG) activities — and cost, lack of resources, data capture, and education and knowledge all have been cited as key challenges to CSRD compliance for SMEs.
Getting results from investment
As a result, SMEs need to take action now by focusing on getting the most return on investment from their limited resources, and two critical ways they could do that include:
Partner with customers now
To navigate these issues, it is wise for SMEs to proactively engage with their large customers to understand their customers’ ESG data requirements and expectations. By partnering with customers now, SMEs can gain valuable insights into the specific metrics and information they need to collect and gain clarity on what to prioritize for effective allocation of resources. This collaboration can also provide additional capacity for the future.
To implement this recommendation, SMEs should start by identifying the key stakeholders within their customer organizations that are involved in ESG initiatives, such as sustainability officers or procurement managers, advises Robles.
Specifically, SMEs should schedule regular meetings or workshops to discuss ESG reporting requirements, challenges, and potential solutions. They should also foster open communication and collaboration with customers, trade associations, and chambers of commerce to strengthen their business relationships and potentially uncover new opportunities for sustainable growth.
Likewise, collaborating with customers allows SMEs to stay head of the curve on evolving regulations, learn from the experiences of their large customers, and proactively align processes to meet evolving expectations.
Invest in technology and human capital
An Accenture poll released around the time of the World Economic Forum in late-January revealed that 58% of executives expect generative AI solutions to be adopted at scale within their organizations in 2025, up from just 37% who said that in 2024. And, according to another Accenture report, 44% of working hours in the United Sates are in scope for AI-enabled automation or augmentation.
Consequently, 2025 will likely be a critical year for SMEs to eliminate time-consuming and resource-intensive efforts around manual data collection. It can be difficult to track progress and report accurately on sustainability metrics because inadequate technology and systems make the collection, management, and analysis of sustainability data laborious.
However, SMEs can automate data collection and enhance decision-making capabilities by leveraging AI-powered tools and analytics. This results in reducing time and errors associated with the use of manual processes.
Part of making informed technology investment requires scanning the landscape of providers to find solutions with advanced data management capabilities that align with the company’s specific needs and maturity level. For example, you should select tools that not only offer reporting functionalities but also provide analytics that can unlock business value.
As part of this investment diligence, Robles also recommends doing a thorough workforce assessment to identify skills gaps and opportunities for upskilling. This helps to ensure that your organization’s human capital is equipped to maximize the potential of these new tools.
Simultaneously, SMEs should seek partnerships with industry leaders and government agencies to help develop training programs that align with their long-term strategies. These collaborations can help build internal capabilities and provide employees with the necessary skills to navigate the evolving landscape and effectively utilize new technologies.
Investing now for the future
As the latter half of the 2020s unfolds, technology will play a bigger role in sustainability and its reporting. Indeed, predictive analytics, benchmarking, and scenario-planning tools will be used more as data management workflows and capabilities mature, aided by evolving AI use cases. However, this will mean organizations will need to pay special attending to how their data is maintained and used, including taking steps to improve data cleansing and reconciliation, as well as carefully managing data co-mingling across different internal systems to better address data gaps seamlessly. While some technology providers already do this, the use cases will begin to trickle further down as more companies start to report their data.
In the meantime, sustainability will remain both a challenge and growth opportunity for SMEs. By partnering with customers and investing in technology and human capital, SMEs can secure their future and transform sustainability into a strategic asset as a resilience-building capability and a competitive differentiator.
You can learn more about how companies are managing their disclosure and reporting requirements here
