CSRD: A New Era for UK Corporate Sustainability

The Corporate Sustainability Reporting Directive (CSRD) is a landmark piece of EU legislation designed to enhance the transparency and comparability of sustainability information disclosed by companies. This directive, which will become mandatory for large UK businesses from 2025, aims to drive sustainable economic growth and combat climate change.

Though most UK SMEs are not in scope as it requires significant operations or financial ties to the EU, it is expected that the Labour Party will herald closer regulatory alignment. In any case, CSRD marks a clear change in sustainability reporting requirements: companies will be required to provide detailed information on their environmental, social, and governance impact, with a breadth not yet seen, and receive third party assurance over the findings.

When does it apply?

• 2025: Businesses already subject to the NFRD will have to start reporting on the financial year 2024.
• 2026: Large undertakings not currently subject to the NFRD will have to start reporting on the financial year 2025.
• 2027: Small and medium enterprises and small and non-complex credit institutions and captive insurance undertakings will have to start reporting for the financial year 2026 - with a further possibility of voluntary opt-out until 2028.
• 2029: Non-European companies that have branches or subsidiaries will have to start reporting.

To prepare for CSRD, UK businesses should take the following steps:

1. Conduct a double materiality assessment: This is an evaluation of factors important to your company through a sustainability and financial lens.
2. Develop a sustainability strategy and align it to risk management: Create a clear roadmap for achieving sustainability goals, aligned with the company's overall business strategy.
3. Implement data management systems: Invest in tools to collect, analyse, and report on sustainability data accurately.
4. Engage with stakeholders: Consult with employees, investors, customers, and suppliers to understand their expectations and priorities.
5. Prepare for validation: from year 1 limited companies will be required to gain limited assurance over their data.

While CSRD may present challenges for businesses, it also offers significant opportunities. By embracing sustainability, companies can:

• Improve risk management: Identify and mitigate sustainability risks that could impact their operations and financial performance.
• Enhance investor relations: Attract and retain socially responsible investors by providing transparent and comparable sustainability information.
• Strengthen brand reputation: Build trust with customers and stakeholders by demonstrating a commitment to sustainability.
• Drive innovation: Develop new products and services that address environmental and social challenges.
• Foster a positive work culture: Create a more engaged and motivated workforce.

CSRD represents a major milestone in the journey towards a more sustainable economy. By proactively preparing for its implementation, UK businesses can position themselves for long-term success and contribute to a more resilient and equitable future.

How can Rio help

At Rio, we help streamline your reporting processes by providing high quality and auditable data solutions. We recognise companies big and small are on their own sustainability journeys, and use innovative artificial intelligence to keep our product accessible for all budgets. Our platform automates the laborious aspects of sustainability reporting and is continually updated to reflect the latest regulatory changes, ensuring that your organisation stays ahead of the curve without the frantic rush to comply.

Why Rio.AI is the leading sustainability platform ⤵

1. Efficiency through automation: Rio.AI's platform automates the tedious aspects of sustainability reporting, freeing up valuable time for strategic initiatives.
2. Adaptive to regulations: As sustainability regulations evolve, Rio.AI's software seamlessly integrates new data fields and compliance measures. This adaptiveness is crucial, given the frequent updates and expansive nature of the CSRD, ensuring that companies remain compliant without the last-minute rush.
3. Built-in materiality framework: Our approach takes your sustainability universe and applies a sustainability and financial materiality lens. This ‘Double Materiality’ (DM) approach is aligned to the CSRD.
4. Access to experts: Rio will support you every step of the way with a team of dedicated sustainability professionals. They’ll provide you with an expert view on the best ways to make the most of your data to realise the true value of the CSRD exercise.
5. A library for learning: At Rio we strive to improve our environmental understanding and want to help you too! We have hundreds of modules covering crucial sustainability regulations and a host of other subjects. We also run monthly webinars and offer in-person workshops on Carbon Literacy, CSRD and much much more!