The Business Case for Sustainability Data (Even When Reporting Isn’t Required)

• Small and medium sized enterprises are increasingly required to provide sustainability data due to indirect regulatory pressure from customers, supply chains, and financial institutions – even without a CSRD obligation. 
• Responding to these requests ad hoc creates inefficiencies, inconsistencies, and growing business risk. 
• The VSME standard, implemented through solutions like the osapiens HUB, provides a structured and scalable way to manage these demands efficiently. 

Many small and mid-sized enterprises assume sustainability reporting is a topic they can postpone. After all, the Corporate Sustainability Reporting Directive (CSRD) does not directly apply to most SMEs. Yet in practice, a growing number of SMEs are already being asked to provide detailed sustainability data – often repeatedly, and often under time pressure. 

The reason is simple: regulatory obligations do not stop at company boundaries. 

Sustainability reporting requirements are cascading through value chains, financial relationships, and procurement processes. For SMEs, this creates a new reality: not regulated directly, but expected to deliver reliable, structured, and comparable sustainability information. 

Where the pressure for sustainability reporting actually comes from 

CSRD spillover through the supply chain 

Large companies subject to the CSRD must disclose sustainability information covering their entire value chain. They cannot meet these obligations without data from suppliers and business partners. 

This affects SMEs in multiple ways: 

• Requests for ESG questionnaires aligned with CSRD or ESRS logic 
• Increasing expectations for standardized and comparable data 
• Short deadlines driven by reporting cycles of large customers 

For many SMEs, this is the first time sustainability data is requested in a structured and recurring way – and it rarely comes from just one customer. 

Due diligence laws extend responsibility downstream 

Regulations such as Germany’s Supply Chain Due Diligence Act (LkSG) and the upcoming EU Corporate Sustainability Due Diligence Directive (CSDDD) require companies to identify, assess, and mitigate sustainability risks across their supply chains. 

Even if SMEs are not directly in scope, they are increasingly asked to provide evidence on topics such as: 

• Environmental impacts 
• Human rights and labor standards 
• Governance and compliance practices 

What matters here is not formal reporting, but traceable and defensible data. SMEs that cannot provide it risk being classified as higher-risk suppliers and may loose customers. 

Banks and financial institutions raise expectations 

Financial institutions are also tightening their sustainability requirements. ESG factors are becoming part of: 

• Credit risk assessments 
• Loan conditions 
• Refinancing and funding decisions 

Many banks now request sustainability data directly from their clients regardless their size to meet their own regulatory obligations and risk management frameworks. Inconsistent or incomplete information can directly affect financing conditions or delay decisions altogether. 

Taken together, these forces reinforce each other. A sustainability request from a customer today can quickly reappear as a requirement from a bank or investor tomorrow. 

Why ad hoc ESG reporting puts your business at risk 

Many SMEs respond to these growing demands pragmatically: filling out questionnaires when they arrive, collecting data manually, and adjusting answers depending on the requester. At first glance, this seems efficient. In reality, it creates hidden costs and growing risks. 

Common consequences include: 

• Different answers to similar questions across customers and banks 
• Unclear scope and constantly expanding data requests 
• Repeated manual work with no reuse of existing information 
• Internal uncertainty about responsibilities and data ownership 

Beyond inefficiency, this approach leads to a gradual loss of control over the company’s sustainability narrative. Data that is inconsistent, incomplete, or reactive increasingly influences supplier ratings, risk classifications, and financing decisions. 

Over time, sustainability reporting becomes reactive, fragmented, and increasingly resource-intensive. This means missing out on a huge strategic and high value opportunity. 

VSME: A practical sustainability framework that isn’t just another obligation 

This is where the Voluntary Sustainability Reporting Standard for SMEs (VSME) changes the equation. VSME does not exist to turn SMEs into CSRD reporters. Its core value lies elsewhere: it defines what SMEs should reasonably provide – and what they do not have to. 

As a structured framework developed by EFRAG, the same body behind ESRS, VSME offers: 

• A clearly defined and proportionate reporting scope 
• Standardized sustainability information aligned with market expectations 
• A reusable data foundation for customers, banks, and partners 

Without a recognized reference framework, every customer, bank, or business partner effectively defines its own reporting scope. VSME reverses this logic by setting a clear, externally legitimized boundary that SMEs can rely on. So instead of answering every request differently, SMEs can rely on a consistent set of data points and narratives that reflect their actual size, resources, and relevance. 

In this sense, VSME acts as a bridge: compatible with CSRD logic, but tailored to SME reality. 

From reactive reporting to controlled transparency 

Using VSME as a reference point allows SMEs to shift from reactive responses to controlled sustainability communication. 

Key benefits include: 

• Clear boundaries for incoming data requests 
• Reduced duplication of work across stakeholders 
• Improved consistency and credibility of sustainability information 
• A scalable foundation for future requirements 

At an operational level, this means working with one structured dataset that can be reused across customers, banks, and internal stakeholders. That way rebuilding answers from scratch each time can be easily avoided. Rather than increasing effort, structured reporting then reduces uncertainty and workload. 

Why osapiens is the ideal partner for managing growing sustainability pressure 

While VSME provides the framework, efficient implementation determines whether it creates value or friction. 

The osapiens HUB enables SMEs to operationalize VSME reporting in a structured, digital, and scalable way. Instead of managing sustainability data across spreadsheets, emails, and documents, companies benefit from one central source of truth. 

With the osapiens HUB, SMEs can: 

• Collect and manage VSME-aligned sustainability data centrally 
• Reuse information across customer, bank, and partner requests 
• Ensure traceability, consistency, and audit-ready documentation 
• Extend their reporting setup seamlessly if future requirements or additional standards become relevant  

Trusted by more than 2,400 customers worldwide, osapiens combines regulatory expertise with practical implementation experience. The platform is designed to grow with your business – from voluntary VSME reporting today to more advanced requirements tomorrow. 

Indirect regulatory pressure is not a temporary trend. Companies that establish structured sustainability reporting now gain control, credibility, and efficiency.