Corporate Sustainability Reporting Directive – engagement of SMEs into the EU multilevel sustainability enforcement system

Purpose This study aims to explore the role of small and medium-sized enterprises (SMEs) in the evolving landscape of sustainability reporting within the European Union (EU). It focuses on the indirect but significant implications of the Corporate Sustainability Reporting Directive (CSRD) for SMEs, particularly through their integration into value chains and the multilevel sustainability enforcement system established by the EU. Design/methodology/approach This study uses a doctrinal legal analysis of the CSRD and related EU regulations, combined with a systematic review of current academic and regulatory literature. Particular attention is given to the proportionality principle and the role of digital technologies in facilitating or hindering compliance by resource-constrained SMEs. Findings This research finds that while the CSRD offers SMEs potential benefits, such as enhanced competitiveness, investment readiness and alignment with future regulatory expectations, it also presents significant challenges. These include limited ESG expertise, data collection burdens and difficulties in aligning with evolving reporting standards. This paper highlights how digitalisation, though promising, requires tailored implementation to support SME capacities. It also emphasizes the enabling role of public authorities, larger corporations and industry associations in fostering SME compliance. Originality/value This paper contributes to emerging scholarship by reframing SMEs as critical actors in EU sustainability governance. It offers original insights into how legal, technological and policy mechanisms intersect to shape SME reporting practices, and it proposes specific recommendations for ensuring that proportionality and digital enablement are integrated into future sustainability reporting frameworks.