This thesis investigates the following research question: How are Dutch non-listed SMEs integrated into sustainability policies aimed at meeting the EU’s 1.5-degree climate target, and what are the implications of the CSRD for their sustainability strategies and operational adaptations? SMEs play a crucial role in the EU’s economy, and thus contribute significantly to total emissions. By interviewing 7 SMEs, and 3 mid-market companies, this thesis uses stakeholder and institutional theory to explore how SMEs integrate sustainability in their operations, the challenges they face, and their contributions to the energy transition. These results are supported by a policy analysis which covered 8 EU, and 5 Dutch documents. The findings reveal that while respondents are intrinsically motivated towards sustainability and take action to improve sustainability, their knowledge of regulations like the Corporate Sustainability Reporting Directive (CSRD) is limited due to lacking communication and bureaucratic complexities. Indirect pressure from larger companies requiring sustainability data from SMEs can promote sustainable practices, but this effect varies. The thesis underscores that achieving the EU’s climate goals requires the inclusion of SMEs and highlights the need for future research into their collective impact. Recommendations include simplifying reporting frameworks, providing financial incentives, and developing inclusive policies that address SMEs’ unique challenges. This study highlights the indispensable role of SMEs and offers insights for policymakers to better support these enterprises in contributing to the EU’s climate objectives.