2026 CSRD & ESRS: Regulations SMEs Need to Prepare for
CSRD expands mandatory sustainability disclosure to companies that were never part of previous reporting frameworks.
Listed SMEs enter the timeline next, and unlisted SMEs will still feel pressure through value-chain requirements.
The goal of the introduction is to establish one fact: SMEs must understand both the directive (CSRD) and the standards (ESRS), as the two will shape their reporting requirements from 2026 onward.
Let’s look at what SMEs will face in 2026 regarding changes under CSRD and ESRS.
The Regulation Timeline: What Actually Changed for SMEs
The Corporate Sustainability Reporting Directive (CSRD) is the legal foundation; the ESRS are the technical rulebook. CSRD (enacted in December 2022, effective from January 2024) expanded sustainability reporting obligations across Europe.
The European Commission, following CSRD’s mandate, adopted the first set of ESRS on 31 July 2023, establishing the standardised, binding disclosure requirements companies must follow under the directive.
Since the adoption of the CSRD, the rollout of reporting obligations has been phased to give companies time to prepare.
The first wave began with companies previously under the older directive (NFRD), primarily large public-interest firms, which started reporting in fiscal year 2024 (first reports due in 2025).
The second wave included other large companies (meeting criteria such as > 250 employees or substantial turnover/assets), with the original timeline targeting fiscal-year 2025 (reports due in 2026).
The third wave under the original plan was intended for listed SMEs (small and medium-sized enterprises with securities listed on EU-regulated markets), starting in fiscal year 2026, with reports due in 2027.
However, a significant update in 2025, the ESG Omnibus Proposal, introduced changes to some of these deadlines. Under the revised schedule,
Large companies that were due to report in 2026 are now expected to start in 2028 (for fiscal year 2027).
Listed SMEs that would have begun reporting in 2027 now have a deferral option until 2028, meaning their first reports may not be required until fiscal year 2028 (or 2029, depending on adoption).
Despite the formal deferral, many SMEs already feel pressure through their position in broader value chains.
Large companies (now subject to the CSRD / European Sustainability Reporting Standards (ESRS)) will begin requesting ESG and sustainability data from their suppliers and partners well before those suppliers may formally need to report.
That means SMEs are indirectly drawn into CSRD compliance early, even if they opt out or await their reporting window.
For SMEs, the real implication is this: “in scope” is not just about official deadlines.
It is about procurement, value-chain requirements, investor expectations, and business relationships. What matters now is readiness for when a partner or buyer asks.
ESRS for SMEs: What Will Be Required
The European Sustainability Reporting Standards for SMEs (known as ESRS LSME) were created to give smaller listed companies a way to meet CSRD obligations without the complexity imposed on large enterprises.
The goal is not to shrink responsibility, but to make disclosure workable.
ESRS LSME focuses on fewer data fields, simplified metrics, and a clearer link between what an SME reports and what actually affects its operations. SMEs will be expected to disclose information that reflects their most material risks and impacts.
This includes a basic view of emissions, workforce conditions, governance practices, and the way they interact with their upstream and downstream value chains.
Unlike the full sector-agnostic ESRS, which demands detailed coverage across dozens of topics, ESRS LSME focuses on what is proportionate for smaller entities. The structure is lighter, the expectations narrower, and the reporting burden scaled to the size and resources of SMEs.
What matters is clarity, not volume. The aim is to help SMEs explain where the business is vulnerable, how it affects people and the environment, and which areas require management attention.
For many, this will be the first time such disclosures are formalised. ESRS LSME provides a path that is demanding enough to build trust, yet restrained enough to complete without overwhelming internal teams.
CSRD is the directive. ESRS is the standard. SMEs will ultimately need to navigate both.
What SMEs Should Look Out For in 2026–2027
The following two years will not align with formal deadlines.
SMEs will feel the effects of CSRD and ESRS through pressure points that appear long before any official reporting date.
The first shift will come from large customers. As they begin submitting ESRS-aligned disclosures, they will request structured ESG data from suppliers, often in formats that resemble full ESRS expectations.
Many SMEs will encounter these requests earlier than expected, and in more detail than they have prepared for.
Friction usually occurs in the same areas.
ESG data requests are arriving earlier than expected, driven by large companies preparing their own CSRD reports.
Mismatched templates and terminology, with SMEs being asked for ESRS-level detail that they cannot yet produce.
Record-keeping gaps, especially for emissions, workforce indicators, and basic governance processes.
Supplier screening based on transparency, where procurement teams prioritise partners who can provide credible ESG data.
External scrutiny is rising regardless of legal scope, meaning that even unlisted SMEs may be evaluated as part of a customer’s value-chain disclosure.
The risk is not compliance itself. It is being unprepared for expectations that enter the business through contracts, tenders, partner requirements, and procurement policies, not through legislation.
How SMEs Can Prepare Early With Minimal Burden
Preparation does not require complex systems or heavy reporting frameworks. What SMEs need is a single, structured way to manage ESG data.
An all-in-one ESG reporting platform helps SMEs establish a clear baseline by collecting key metrics (emissions, workforce data, governance practices, and value-chain information) in one place. This removes the need for scattered spreadsheets and manual tracking.
Most importantly, a central platform makes it easier to share clear, consistent, and stakeholder-friendly reports. Instead of rebuilding information for each request, SMEs can respond quickly with structured, reliable data.
This is where Terra Reporting comes in.
Terra is an all-in-one platform designed to make CSRD and ESRS reporting manageable for SMEs, turning early preparation into a streamlined, low-burden process aligned with 2026 expectations.
Final Words
SMEs cannot wait for formal deadlines to act. While CSRD reporting obligations for many SMEs may be deferred to 2028, data expectations are already arriving in phases through procurement processes, value-chain requests, and customer requirements.
Large companies that are already in the scope of CSRD and ESRS will not wait for their suppliers to become formally obligated. As they build their own sustainability reports, they will increasingly request structured ESG data from SMEs, often aligned with ESRS logic and terminology. In practice, this means that data readiness, not legal scope, becomes the real starting point for SMEs.
Early preparation is therefore less about producing a formal report and more about establishing a reliable ESG data foundation. Collecting baseline data, defining ownership, documenting processes, and ensuring consistency across requests significantly reduce friction as these demands scale over time.
For many SMEs, managing this phased increase in ESG data requests in spreadsheets or ad hoc documents quickly becomes inefficient. This is why ESG reporting software and lightweight sustainability reporting platforms are increasingly used to centralise ESG data, maintain traceability, and consistently respond to recurring requests from customers and partners.
A well-designed ESG reporting platform allows SMEs to start small, focus on proportionate disclosures, and gradually expand as requirements mature. Instead of reacting to each request individually, companies can reuse validated data and demonstrate readiness at every stage of the CSRD timeline.
Terra Reporting provides clarity in complexity. By supporting structured ESG data collection aligned with ESRS LSME, Terra helps SMEs move from reactive responses to proactive data readiness.
Contact Terra Reporting to see how a straightforward, actionable approach can make ESG reporting manageable for your SME.