This project investigates the impact of the EU Corporate Sustainability Due Diligence Directive (CSDDD), the EU Corporate Sustainability Reporting Directive (CSRD) and the recently recommended Voluntary Standard for SME (VSME) on Small and Medium-sized Enterprises (SMEs) embedded in productive value chains. These rules exert significant pressure on the governance, management and reporting of and by SMEs which are tightly interwoven with larger manufacturing centres, but often lack the resources or guidance to adapt to sweeping innovations.
The Province of Modena provides an ideal setting to study these dynamics. Its economy combines world-renowned automotive industries, internationally protected agri-food products, and specialized clusters. These sectors show how SMEs face substantial compliance demands from larger business partners. Caught in this regulatory “grey zone”, they must navigate expectations without comparable frameworks for evaluating impacts or reporting. To ease this tension, the EU’s Omnibus Package, part of the 2025 Competitiveness Compass, proposes lighter sustainability obligations for SMEs, including simplified due diligence and streamlined reporting. Yet regulatory simplification alone cannot close the gap. ESG obligations also expose SMEs and their directors to criminal risks within a fragmented and evolving regulatory framework.
What is needed is a systematic effort to clarify how sustainability duties apply to SMEs, with the aim of assessing whether compliance challenges arise and translating statutory rules into clear and actionable operational rules. Only through this dual approach (researching the legal barriers and equipping firms with tools to lower the costs of compliance) can sustainability due diligence and reporting become effective and supportive for competitiveness.
This project aims at making two pivotal contributions. First, by adopting an interdisciplinary approach which combines legal expertise with sustainability reporting, it aims at clarifying the scope of SME-directors’ duties by developing guidance for ensuring reasonable efforts to mitigate environmental impacts and prevent negative effects on human rights. Secondly, this project will examine how sustainability information can be effectively integrated into the governance of local productive ecosystems, to support boards and top management in decision-making, risk management, and stakeholder engagement. The project addresses the need to ease compliance with EU-level obligations, acknowledging that regulatory complexity may put enterprises under pressure – an issue clearly recognized by the “Stop the Clock” Directive (EU) 2025/794, which temporarily postpones the application of sustainability obligations to avoid undermining competitiveness. This additional time must be used to prepare for compliance – and that is precisely what this project aims to support.