Caught in the middle : Challenges and Opportunities for SMEs under Indirect CSRD Compliance

The European Union (EU) has introduced the Corporate Sustainability Reporting Directive (CSRD) which mandates that companies disclose standardized sustainability-related information as part of their corporate reporting. The CSRD is being implemented in phases based on company size, but some small and medium-sized enterprises (SMEs) are indirectly required to begin reporting earlier due to their affiliation with parent companies that fall within the scope of the directive. This thesis explores the challenges and opportunities faced by SMEs operating under a parent company, focusing on the collection, management, and reporting of sustainability data. Using the resource-based view (RBV) and institutional theory, the study investigates how internal resources and external institutional pressures influence the collecting, managing and reporting of sustainability data. The findings reveal that SMEs face internal constraints in their intangible resources, specifically within human and organizational capital which limits their ability to effectively collect, manage and report sustainability data. At the same time, coercive institutional pressures, particularly from the parent company and regulatory demands, are key drivers of reporting behavior. Mimetic and normative pressures remain weak, resulting in limited benchmarking and peer engagement. Despite these challenges, the study also identifies emerging opportunities for increased internal competence and standardization, and enhanced market position and relationship with stakeholders.