Epsilon Archive for Student Projects

Abstract

The Corporate Sustainability Reporting Directive (CSRD), while primarily targeting large firms, it exerts significant indirect pressure on small- and medium-sized enterprises (SMEs) as its influence trickles down through value chains and investors, even though these smaller entities are not legally bound to comply. This cascading demand for sustainability data has made sustainability disclosures a crucial “hygiene factor” for maintaining legitimacy. However, SMEs face considerable challenges due to inherent financial and human resource constraints.
This multiple case study, employing a qualitative and inductive approach, investigates how Swedish SMEs experience and respond to these CSRD-related pressures. Drawing on legitimacy theory, institutional isomorphism, and a dialectic perspective, the study explores how these pressures shape SMEs’ internal sustainability disclosure strategies. The empirical data were collected through semi-structured interviews with SME representatives and relevant stakeholders who influence their sustainability reporting practices. The data were analyzed thematically.
The empirical findings indicate that Swedish SMEs experience substantial pressures. Resource constraints and regulatory uncertainty lead to institutional contradictions and personal burdens for individuals within these firms. Consequently, SMEs adopt hybrid legitimacy strategies, often focusing on pragmatic, minimum viable compliance through simplified tools and templates to signal conformity at a low cost. The study concludes that despite resource limitations and uncertainty, SMEs are compelled to engage in sustainability reporting due to indirect CSRD pressures, utilizing hybrid strategies, and their collective praxis contributes to reshaping institutional norms and the broader regulatory landscape. Theoretically, the study highlights how emotional burden interacts with institutional dynamics. Practically, it identifies the need for simplified supportive reporting tools to reduce the burden on resource-constrained SMEs.