### By Ashutosh Gupta, TMF Group’s Head of ESG Delivery, and Pierre Lechat, TMF Group’s Head of ESG Solutions

#### Introduction: The Importance of Sustainability in Aviation

While recent global adjustments to environmental reporting regulations may have relaxed, deferred, or even eliminated certain requirements, this does not diminish the pressing need for sustainability advancement within the aviation sector, particularly for the aircraft leasing industry. In fact, the current climate could be characterized as the most opportune moment for aircraft lessors to bolster their environmental reporting. Investors, customers, and suppliers are increasingly considering sustainability criteria in their decision-making processes.

#### Regulatory Changes and the Call for Action

In an effort to reduce administrative burdens and enhance competitiveness for their resident businesses, numerous jurisdictions have recently scaled back or postponed environmental reporting regulations. A noteworthy example of this trend is the March 2025 announcement by the US Securities and Exchange Commission, where it decided to cease its defense of climate disclosure rules, particularly the Climate-Related Disclosure Standards. While the rules mandating companies to report on climate risks and greenhouse gas emissions remain technically in place, their enforcement has been significantly weakened.

Similarly, in February 2025, the European Union proposed modifications to its Corporate Sustainability Reporting Directive (CSRD), aiming to simplify and minimize administrative reporting tasks. The updated Omnibus proposal will confine its scope to companies with over 1,000 employees and those that either generate more than €50 million in turnover or possess over €25 million in total assets. The EU has also delayed the application of all reporting mandates under the CSRD by two years for companies needing to report for the fiscal years 2026 or 2027.

However, amidst this backdrop of reduced regulatory intensity, several jurisdictions—including California and New York—are strengthening their environmental reporting requirements.

#### Navigating Regulatory Flux: What Should Aircraft Lessors Do?

In light of this shifting regulatory landscape, the question arises: how should aircraft lessors navigate these complex, changing goalposts?

### Why Driving Sustainability Remains Crucial

Aircraft lessors play a crucial role in the realm of environmental reporting, specifically concerning carbon emissions. Although lessors do not operate aircraft directly, their choices regarding aircraft types, fuel efficiency, and fleet renewal have significant implications for broader aviation sustainability.

> **“A company that transparently reports its environmental commitments and actively manages environmental impacts can gain a competitive advantage in areas such as borrowing costs, access to capital, and investor interest.”**

By proactively disclosing environmental strategies and performance metrics—especially in areas such as transitioning to more fuel-efficient aircraft—lessors can significantly enhance their credibility and build trust among investors, customers, and suppliers. Sustainable reporting positions these lessors as responsible partners, aligning their operations with emerging environmental regulations and customer sustainability commitments.

Moreover, lessors that exhibit leadership in transparent environmental reporting will likely secure preferential financing terms. Investors are increasingly inclined toward sustainable and green investments. Therefore, a firm that transparently articulates its environmental commitments can gain a competitive edge in securing favorable borrowing rates and attracting investor interest.

Additionally, non-financial reporting can help lessors distinguish themselves in a competitive marketplace. By effectively communicating their contributions to aviation sustainability, lessors can elevate their brand identity above their competitors, thus securing longer-term partnerships with airlines, suppliers, and other stakeholders.

By initiating environmental reporting today, aircraft lessors can prepare for impending regulatory shifts and evolving market demands. The regulatory environment is continuously changing, and companies that embed transparency in their environmental performance are better positioned to avoid potential future compliance costs.

### Seven Steps to Effective Sustainability Reporting

Embarking on the journey of sustainability reporting can be intimidating, especially given the uncertainty surrounding future regulations. However, by segmenting the task into manageable steps, companies can effectively navigate this process.

#### Step 1: Assign Clear Accountability

Determining who will take charge of emissions reporting is a crucial first step. Should this role be assigned to the Chief Financial Officer (CFO) or the Chief Sustainability Officer (CSO)? While financial reporting follows well-established processes, non-financial reporting brings forth additional challenges that a dedicated CSO might be better equipped to handle.

#### Step 2: Select Priority Areas and Define Scope

Identifying and prioritizing key environmental performance issues that resonate with both the business and stakeholders is essential. Companies must evaluate currently addressed areas and those needing improvement while also clearly defining the reporting boundaries—this includes relevant regions, subsidiaries, partners, and suppliers. Prioritizing issues ensures that resources are allocated to the most impactful activities.

#### Step 3: Collect and Analyze Data

With established priorities, companies should begin gathering data from various sources—internal documents, stakeholder discussions, and industry benchmarks. This data should be analyzed to ascertain the current baseline and performance levels and to identify gaps that need bridging.

#### Step 4: Establish Targets

Following data analysis, companies should set specific, measurable reduction targets that challenge yet remain attainable, in alignment with industry benchmarks or international standards.

#### Step 5: Create and Execute an Action Plan

A detailed action plan that outlines strategic steps to address identified gaps and meet emissions targets is critical. This plan should include assigned responsibilities, allocated resources, and timelines for execution.

#### Step 6: Track and Disclose Progress

Monitoring performance against established targets allows for ongoing assessment of the effectiveness of actions taken. Companies should utilize key performance indicators (KPIs) and communicate their results to stakeholders through regular emissions reporting.

#### Step 7: Engage Consistently with Stakeholders

Maintaining active engagement with both internal and external stakeholders—such as employees, investors, customers, and suppliers—fosters collaboration and enhances trust. Internally, it is crucial to educate employees about sustainability initiatives. Externally, consistent updates on progress and challenges accompanied by active solicitation of feedback is essential.

### Conclusion: Leveraging AI legalese decoder for Enhanced Reporting

Effective sustainability reporting should not merely be viewed as a compliance obligation; it should be regarded as a strategic investment yielding competitive advantages through transparency. For aircraft lessors, this translates into commercial benefits like enhanced customer loyalty, improved investor attractiveness, stronger supplier relationships, and proactive risk management.

Utilizing tools like AI legalese decoder can further assist aircraft lessors in deciphering complex regulatory frameworks and ensuring compliance with evolving environmental standards. By simplifying legal and regulatory documents, the AI legalese decoder can help lessors streamline their reporting processes, enabling them to focus on what truly matters: advancing sustainability in the aviation industry.

The time for non-financial reporting is indeed now.