British companies cannot ignore reporting requirements of the Corporate Sustainability Reporting Directive (CSRD), even if they meet the UK Companies Act non-financial disclosure criteria. From 2025, UK-based companies operating in Europe that meet specific criteria, such as having listed securities on a regulated European market or generating annual revenues over €150M within the European Union (EU), must comply with CSRD.
Your Supply Chain Determines Your CSRD Requirements
The impact of CSRD extends beyond the companies directly required to report, emphasizing the entire value chain. Companies will need to gather and disclose data on their suppliers in addition to reporting on their own operations.
A company obliged to produce a CSRD report will be required to declare data across their supply chain—meaning UK companies that didn’t think CSRD would apply to them may find they are required to disclose data.
For example, UK companies may need to provide ESG data such as emissions and water consumption to their EU customers or a large UK enterprise. This is because CSRD mandates that the final reporting company identify and disclose risks within their value chain, including those associated with overseas operations. The final reporter could be another British company that meets the CSRD requirements, or a European company that wants to know their suppliers’ emissions, water consumption, or other ESG data.
British and EU ESG Reporting: Double the Responsibility
For companies in the UK, CSRD adds to the existing obligations of the UK Companies Act. Under the UK Companies Act, large companies (which meet two of these three criteria: £36m annual turnover, £18m balance sheet, 250 employees) are already required to report their annual energy use, greenhouse gas emissions, risk management, and related actions in their Directors’ Report. The Streamlined Energy and Carbon Reporting (SECR) framework extends this obligation to all large UK companies and Limited Liability Partnerships (LLPs). These disclosures must detail efforts taken to improve energy efficiency and reduce carbon footprints, supporting transparency and accountability in addressing climate risk.
For British companies, the UK Companies Act requires risk to be addressed in a manner aligned with the Task Force on Climate-Related Financial Reporting (TCFD). Management of this framework has been passed to the International Financial Reporting Standards (IFRS) and has evolved into the IFRS Standard S2, effectively making the IFRS a mandatory reporting standard in the UK, including climate risk management.
Climate and sustainability reporting obligations are growing. As regulations change and new ones are implemented, companies in the UK and EU need to be aware of and, even more critically, understand how these regulations impact them.
The Business Benefits for UK Companies Pursuing CSRD Compliance
Perhaps more important than legislative compliance is the aspect of business efficiency and resilience. Many UK companies increasingly recognize that sustainability and ESG deliver significant business value and that climate risk needs to be managed in accordance with their corporate risk management framework.
Companies that adopt a thorough and comprehensive approach to climate risk management will benefit in the following ways:
- Financial Resilience: Climate risks—both physical impacts from extreme weather events and transition risks from shifting towards a low-carbon economy—have direct financial implications. By evaluating climate risk and integrating the management of that risk into business strategy, UK companies can safeguard assets, ensure operational continuity, and maintain profitability amid changing climatic conditions.
- Investor Confidence: The investment community is increasingly prioritizing sustainability and Environmental, Social, and Governance (ESG) factors when making decisions. Transparently addressing climate risk strengthens investor confidence and is conducive to accessing capital in an investment landscape favoring sustainability-oriented businesses.
- Consumer Demand: UK consumers are more environmentally conscious than ever. Companies that demonstrate a genuine commitment to reducing their carbon footprint can capture market share by aligning with consumer values. This shift towards sustainability is a fundamental and permanent change in consumer behavior that presents significant growth opportunities for businesses.
- Innovation and Competitive Advantage: Innovation is at the heart of addressing climate risk effectively. Companies investing in renewable energy sources, energy-efficient technologies, and sustainable business models can discover new avenues for cost savings and revenue generation. This secures a competitive advantage in an economy increasingly driven by green initiatives.
- Reputation Management: A company’s reputation is one of its most valuable assets. By actively managing climate-related risks, businesses enhance their public image and build trust with customers, employees, suppliers, and regulators alike. In contrast, companies that fail to consider environmental impact risk damaging their brand reputation.
- Talent Attraction: A commitment to sustainability resonates strongly with today’s workforce, particularly among millennials who seek purpose-driven employment. Leaders in climate action attract top talent looking to contribute towards meaningful work that has a positive impact on society.
Addressing climate risk is no longer optional for UK businesses. It’s a legal requirement, critical for business resilience, essential for effective supply chain management, and, when done right, delivers significant business value.
How CSRD Reporting Software Will Help
Sustainability management solutions and ESG software address climate risk by helping organizations to systematically collect, analyze, and report environmental data. This data-driven approach allows for:
- Carbon Tracking: monitoring greenhouse gas emissions to identify critical sources that drive the carbon footprint
- Energy Management: optimizing energy use and increasing efficiency across operations
- Waste Reduction: implementing strategies for waste minimization, recycling, and responsible disposal
- Resource Conservation: managing water usage and other natural resources effectively
- Compliance Management: ensuring adherence to environmental regulations and standards
- Scenario Analysis: assessing potential impacts of climate-related risks under various future scenarios
- Third-party Datasets: integrating third-party data helps companies understand the context in which they operate, to identify risks that are material to their business
- Target Setting: establishing science-based targets for reducing emissions in line with international goals like the Paris Agreement
- Sustainability Projects: planning and tracking initiatives aimed at reducing environmental impact
In aggregate, CSRD compliance software facilitates the integration of ESG metrics into business strategy and process, enhancing transparency with stakeholders. It also removes the heavy lift of moving critical data into standardized reporting frameworks such as CDP, GRI, or TCFD.
With CSRD compliance software and sustainability solutions, companies can proactively manage their climate risk, improve sustainability performance, and contribute to global efforts against climate change—all while maintaining a competitive advantage in a transitioning economy.
