CPA Bulletin

34 CPA Bulletin > November 2024 www.cpa.uk.net If any of these conditions are fulfilled, the business must publicly report on its sustainability performance in accordance with the applicable ESRS guidelines. What are UK Companies’ Obligations under CSRD? 1. Double Materiality and ESRS Compliance Under the CSRD, companies are required to adhere to the reporting standards outlined in the ESRS, encompassing various ESG aspects. In-scope companies must conduct a double materiality assessment, considering the impact of their business on ESG factors and how these factors may influence business risks and opportunities. 2. Integrated Reporting Businesses need to prepare financial statements and management reports in XHTML format, tagging sustainability information using a digital taxonomy for accessibility and comparability. This requires investing in digital reporting systems that meet EU standards. 3. Data Collection Across the Value Chain With the CSRD’s emphasis on the entire value chain, companies must collect and report sustainability data from all suppliers and business partners. Establishing robust data management systems to accommodate this requirement is crucial, particularly given the possibility of evolving standards that may impact reporting practices. 4. Timeline for Compliance Compliance deadlines for non-EU companies begin with financial years starting in 2025, meaning that the first reporting will be due in 2026. The first group of companies required to comply includes those listed on EU-regulated markets, which were previously within the scope of the Non-financial Reporting Directive. This implies that the majority of rental companies will need to comply at a later date, depending on their size. Given the CSRD’s phased rollout, it is prudent for UK businesses to monitor the standards’ development closely and ensure readiness for each reporting phase. Challenges and Opportunities While the CSRD adds regulatory obligations, it also presents opportunities for UK-based companies to strengthen their ESG transparency and appeal to sustainability-focused investors and clients. Even if the size of EU revenues of a UK based rental company does not qualify to fall under the direct scope of CSRD, it may be that a major EU customer will require from the rental company information on sustainability performance in the ESRS format. One challenge, however, is managing compliance from outside the EU, where businesses may need to adapt existing reporting processes or engage external expertise to align with the ESRS framework effectively. Flexible and adaptable reporting systems are essential, as the ESRS guidelines may evolve by 2026, making it essential for UK companies to remain informed on any updates. The CSRD is part of a broader European framework that includes the Corporate Sustainability Due Diligence Directive (CSDDD). The CSRD requires companies to publicly report sustainability data, while the CSDDD emphasizes behavioural compliance, mandating companies to actively identify, prevent, and mitigate adverse human rights and environmental impacts. Together, the CSRD and CSDDD create a framework where companies must disclose sustainability information and take actionable steps to address risks. In short, the CSRD focuses on reporting, while the CSDDD focuses on behaviour. Final Thoughts The CSRD is set to raise the standard for corporate sustainability reporting globally. By proactively preparing for CSRD, UK companies can align their sustainability practices with EU standards, contributing to a more transparent and sustainable business environment. Embracing CSRD compliance may also position these businesses favourably with stakeholders and customers. European Rental Association (ERA) can assist rental companies in the UK in determining how concretely the EU sustainability legislation applies to them. ERA is also currently preparing a tool to help rental companies with their double materiality assessments, taking into account the specificities of the rental sector. ERA can be contacted at: era @ erarental.org GUEST ARTICLES: 2