FitforREACH-2: Supporting ESG and CSRD Compliance through Better Chemical Management

All companies in the European Union have faced serious challenges in recent years. Beyond the post-pandemic energy crisis and raw material shortages, businesses are also increasingly affected by geopolitical instability and climate change. The EU's response to these environmental and climate-related issues is the European Green Deal, announced in 2019, which has led to the development of several sustainability-related directives.

The Role of ESG and CSRD

Under the ESG (Environmental, Social, and Governance) regulatory framework, EU law requires companies above a certain size to disclose how their activities affect society and the environment, as well as how they manage related risks and opportunities. This aims to improve transparency and support sustainable development. 

The Corporate Sustainability Reporting Directive (CSRD 2022/2464/EU) applies from the 2024 financial year for certain companies, with reports to be published in 2025. These reports must follow the European Sustainability Reporting Standards (ESRS), developed by EFRAG. On 26 February 2025, the Commission adopted a package of proposals to simplify EU rules and boost competitiveness, known as the Omnibus Simplification Package. Among others, the package proposes applying the CSRD only to the largest companies (those with more than 1000 employees) and reducing administrative burdens for businesses, particularly by making it easier for companies to comply with sustainability requirements and enhancing their competitiveness. Although these legislative proposals aim to reduce administrative burdens on smaller companies, sustainability reporting remains a key expectation across the value chain.
The ESRS introduce comprehensive disclosure requirements across environmental, social, and governance topics, requiring both quantitative and qualitative data. The structure includes two cross-cutting standards and ten topical standards, covering over 1100 data points. Even understanding which indicators are relevant — based on the Double Materiality Assessment (DMA) - is a significant task for many companies.
While SMEs are not directly subject to CSRD obligations, they are increasingly expected to demonstrate ESG alignment. To support this, EFRAG developed the VSME (Voluntary Sustainability Reporting Standard for non-listed SMEs), offering a simplified yet meaningful structure for sustainability disclosure.

FitforREACH and Sustainability Reporting – Strategic Synergies

The FitforREACH-2 project helps SMEs strengthen compliance with chemical safety legislation, improve risk management practices, and replace hazardous substances with safer alternatives. These efforts contribute directly to sustainability performance and align well with ESG expectations and reporting standards.

How FitforREACH aligns with VSME

The VSME Basic Module highlights several areas where FitforREACH can contribute to reporting: 

• B2 – General Information: Describing internal regulations on the safe use of chemicals
• B4 – Pollution: Efforts to reduce hazardous emissions
• B6 – Resource Use and Circular Economy: Linked to material efficiency and substitution
• B9 – Health and Safety: Workplace chemical safety, procedures, and employee training 

The Comprehensive Module allows more detailed disclosures in these areas — all supported by FitforREACH guidance, tools and documentation.

How FitforREACH supports ESRS requirements

Several ESRS indicators directly relate to chemical risk and substitution practices:

• E2 – Pollution
  • E2-1: Pollution-related policies
  • E2-4: Pollution of air, water, and soil
  • E2-5: Use of substances of concern (SoCs) and SVHCs
  • E2-6: Financial impacts of pollution-related risks
• E5 – Resource Use and Circular Economy
  • E5-1, E5-4, E5-5: Material inflows/outflows, substitution efforts
• S1 – Own Workforce
  • S1-14: Occupational health and safety metrics

FitforREACH provides knowledge, frameworks, and practices that help companies generate relevant, reportable data under these standards.
 

FitforREACH as an Enabler of Double Materiality Assessment

A key requirement of CSRD/ESRS is the Double Materiality Assessment (DMA):

• Impact materiality: How the company affects people and the environment (e.g., through the use of SVHCs)
• Financial materiality: How do environmental risks affect the company (e.g., through regulation, liability, substitution costs, waste disposal costs?)

FitforREACH helps companies navigate both sides of this assessment — by identifying high-risk substances, supporting substitution, and reducing future liabilities — while also improving environmental performance.

From Practice to Reporting: Real Value for SMEs

Beyond compliance, FitforREACH helps companies document and communicate their progress through:

• Chemical safety policies and internal procedures
• Substitution action plans and records
• Training programs and workforce engagement
• Metrics on pollution prevention and material efficiency

These outputs can serve as evidence in CSRD-aligned reports or voluntary disclosures, and may also support third-party audits.

Conclusion: FitforREACH as a Strategic ESG Advantage

FitforREACH-2 goes beyond chemical risk management — it empowers companies to meet modern sustainability expectations. For SMEs, participation in the project can:

• Enhance ESG maturity
• Simplify the path toward CSRD and ESRS readiness
• Strengthen eligibility for green finance or sustainability-linked funding
• Improve resilience in the face of growing regulatory and market demands

In short, FitforREACH offers SMEs a practical, measurable, and strategic advantage in building a more sustainable future.

Author: Katalin Herner - Accredited ESG consultant, Certified Sustainability Manager (Sustainable Business Academy), Executive Director, KÖVET Association for Sustainable Economies