"Do I actually need to comply with CSRD?"

If you run a UK SME, the short answer is no. You will not file a CSRD report. But you will almost certainly feel the effects — in the form of more ESG questionnaires from customers who do report.

Here is what the thresholds actually mean, what changed in December 2025, and what UK businesses should be doing about it.

What CSRD is — briefly

The Corporate Sustainability Reporting Directive is an EU regulation requiring companies to publish detailed sustainability reports alongside their financial statements. It replaced the older Non-Financial Reporting Directive (NFRD) and dramatically expanded the number of companies in scope. Reports follow the European Sustainability Reporting Standards (ESRS), which cover everything from greenhouse gas emissions to workforce conditions to governance structures.

CSRD is EU law. The UK has not adopted it. But that distinction matters less than you might think.

The direct reporting thresholds

CSRD applies directly to companies that meet at least two of these three criteria:

| Criterion | Threshold | |-----------|-----------| | Employees | 250 or more | | Net turnover | More than €50 million | | Total balance sheet | More than €25 million |

Companies meeting two of the three are "large undertakings" under the directive and must report. Listed SMEs (those traded on EU-regulated markets) are also in scope, though with simplified standards and a later start date.

The reporting is phased:

2025 reports (published 2026): Companies already under NFRD — roughly 11,700 large EU public-interest entities.
2026 reports (published 2027): All other large EU companies meeting the thresholds above.
2027 reports (published 2028): Listed SMEs (with an opt-out deferral until 2028 reports).

If your UK business does not meet two of the three thresholds, you are not directly in scope. Full stop.

The December 2025 Omnibus changes

In December 2025, the European Commission published the "Omnibus" simplification package, which significantly altered CSRD's reach.

The key changes:

Raised thresholds for some categories. The Omnibus proposal raised the employee threshold for "large undertaking" classification to 1,000 employees for the first wave of new reporters. Companies with 250-999 employees that were due to report from 2026 got a two-year postponement while simplified standards are developed.

Scope narrowing. The estimated number of companies directly in scope dropped from approximately 50,000 to roughly 10,000 in the near term. Many mid-sized EU companies that were preparing to report were told to wait.

VSME as a value chain cap. This is the change that matters most to UK SMEs. The Omnibus package established the Voluntary Sustainability Reporting Standard for SMEs (VSME) as the maximum that large reporting companies can request from their SME suppliers. In other words, when a large company collects supply chain data to complete its own CSRD report, it should not ask SME suppliers for more information than the VSME standard covers.

This is intended to prevent a cascade of excessive data requests. In practice, it means the questionnaires reaching SMEs should become more standardised and bounded. That is good news — but it does not mean fewer questionnaires. If anything, it means more companies will send them, because the VSME gives them a clear framework for what to ask.

Why UK businesses care

CSRD is EU legislation. The UK government has not adopted equivalent rules (though the FCA has introduced some climate disclosure requirements for listed companies and large asset managers). So why does this matter for a 50-person business in Birmingham or Bristol?

Because supply chains do not stop at borders.

If you supply goods or services to an EU-based company — or to a UK company that supplies an EU-based company — the data request flows downstream to you. The large company filing a CSRD report needs to disclose value chain information. That includes emissions, labour practices, and governance standards across its suppliers. You are part of that value chain.

Even if your customer is UK-based, they may have EU operations, EU customers, or EU investors that trigger CSRD obligations. The reporting company needs data. The most efficient way to collect it is a questionnaire sent to every significant supplier.

You are not reporting. You are responding.

This distinction is worth emphasising because it changes how you should think about CSRD.

Reporting means preparing a structured disclosure document under ESRS, having it audited, and publishing it alongside your annual accounts. That is a significant compliance exercise requiring specialist expertise.

Responding means answering a questionnaire from a customer who is doing the above. You are providing data points, not producing a regulated report. The requirements are lower, the format is simpler, and the content is largely information you already have or should have.

The VSME standard recognises this. It defines three modules:

Basic module: Qualitative policies and practices. Minimal quantitative data.
Narrative-Policies, Actions and Targets (PAT) module: More detail on what you are doing and planning.
Business Partners module: Quantitative metrics that a reporting company might need from its supply chain.

Most SME supplier questionnaires will draw from the Basic and PAT modules. The questions will feel familiar: Do you have an environmental policy? What are your emissions? How do you manage health and safety? Do you screen your suppliers?

If you have been answering ESG questionnaires already, you have been doing VSME-level reporting without knowing it.

What this means practically

Three things are happening at once:

More companies are reporting under CSRD, which means more companies need supply chain data, which means more questionnaires to their suppliers.
The VSME standard caps what they can ask, which means questionnaires will become more predictable. The same five categories, the same types of questions, the same evidence requirements.
UK SMEs are not exempt from the ripple effect. You will not file a report. But you will answer more questionnaires, more often, from more customers.

The businesses that handle this well — quickly, consistently, with evidence attached — will have a competitive advantage in procurement. The ones that scramble, send inconsistent answers, or miss deadlines will lose contracts to competitors who are better prepared.

Action items for UK SMEs

You do not need to hire a sustainability consultant or learn the ESRS standards. But you do need to be organised. Here is what to do now:

Build a fact library. Collect your existing ESG answers, policies, and data into a single, structured location. Organise by the five standard categories (Environment, Social, Governance, Supply Chain, Company Overview). The step-by-step guide walks through this process in detail.

Track evidence expiry. Certificates expire. Data goes stale. Policies need annual review. Keep a log of when each piece of evidence was last updated and when it needs refreshing. A quarterly review takes 30 minutes and saves days of scrambling when questionnaires arrive.

Standardise your responses. If three different people in your company answer ESG questionnaires, you will get three different sets of figures and three different descriptions of the same policies. Pick one set of approved facts and make sure everyone uses them. Consistency across questionnaires builds buyer confidence.

Understand what you are being asked and why. When the next questionnaire arrives, you will recognise the VSME-shaped structure behind it. Knowing why the questions exist — because your customer has reporting obligations — helps you give better answers. You are not ticking boxes. You are providing the data that keeps you in their supply chain.

If you want to build and maintain your fact library with automatic question-to-answer matching, AnswerVault was designed for exactly this workflow. Start a free 14-day trial and see how long your next questionnaire response actually takes.

Sources

CSRD Directive — Directive (EU) 2022/2464 of the European Parliament and of the Council, 14 December 2022. Official Journal of the European Union, L 322.
NFRD — Directive 2014/95/EU of the European Parliament and of the Council, 22 October 2014.
ESRS Set 1 — Commission Delegated Regulation (EU) 2023/2772, 31 July 2023. Adopted European Sustainability Reporting Standards.
Omnibus Simplification Package — European Commission, COM(2025) 80 final, 26 February 2026. Proposal amending CSRD and other sustainability due diligence reporting requirements.
VSME Exposure Draft — EFRAG, Voluntary ESRS for non-listed SMEs — Exposure Draft, November 2023. Available at efrag.org.
CSRD scope estimates — European Commission Impact Assessment, SWD(2021) 150 final, accompanying the proposal for CSRD.

CSRD Thresholds Explained: Does Your Business Need to Report?