Financial reporting benefits from decades of standardisation, well-established controls, and a shared understanding of what constitutes “material” information. ESG reporting, by contrast, is still converging. It asks organisations to measure impacts and risks that don’t always fit neatly into established accounting logic—often across longer time horizons, with more uncertainty, and with more stakeholders involved.
ESG topics are multi-disciplinary by nature
Even within the “E” of ESG, organisations may need data and expertise spanning energy, carbon accounting, waste management, water stewardship, climate science, and biodiversity. The “S” can include human rights, labour conditions, health and safety, diversity and inclusion, customer outcomes, and community impact. Governance spans board oversight, ethics, executive pay, internal controls, compliance, cyber governance, and more.
Each of these topics has:
- Different metrics and methodologies
- Different sources of data (internal and external)
- Different measurement intervals
- Different levels of maturity in standards and practice
It’s common for organisations to be strong on some topics (e.g., employee health and safety) and much less mature on others (e.g., Scope 3 emissions or human rights due diligence).
ESG is partly forward-looking
A meaningful ESG report is not just a backward-looking record of performance. It also includes:
- Targets and transition plans
- Scenario analysis and risk assessments
- Commitments and roadmaps
- Strategy integration
Forward-looking information introduces estimation and judgement. Two organisations can disclose the “same” topic but use different assumptions, boundaries, baselines, or scenarios—leading to inconsistent outputs that can be hard to compare.
ESG reporting serves many audiences at once
A single ESG report may be read by:
- Investors and analysts (risk, resilience, comparability)
- Regulators (compliance, completeness, traceability)
- Customers (ethics, product impacts, supply chain practices)
- Employees and candidates (culture, inclusion, purpose)
- Civil society and communities (impacts, accountability, transparency)
The challenge is that these audiences want different things. Investors often prioritise financially material risks and standardised metrics; communities may want impact transparency and accountability; regulators increasingly want structured, auditable data. One report must speak all these languages without becoming incoherent.
The Fragmented Standards and Frameworks Landscape
Few factors have created as much friction as the proliferation of ESG frameworks and standards. The ESG ecosystem has historically grown in layers—new frameworks emerging to solve specific problems—rather than through a single unified model.
Impact vs. value: different philosophies, different outputs
A core reason fragmentation persists is that ESG reporting has two distinct “centres of gravity”:
Impact-oriented reporting: what the organisation’s operations mean for the environment and society (often associated with broad stakeholder audiences).
Financially oriented reporting: what ESG issues mean for enterprise value, risk, and performance (often investor-driven).
Both are legitimate, but they lead to different disclosures. One might ask, “How do you affect water stress in local communities?” The other might ask, “How does water stress affect your operational continuity and cost base?”
Multi-framework reporting is common—and exhausting
Many organisations end up reporting against multiple structures. For example:
- They may align sustainability reporting to GRI for broad stakeholder impacts.
- Provide investor-aligned disclosures using SASB-style metrics.
- Include climate governance and risk disclosures aligned to TCFD.
- Start preparing for an emerging baseline aligned to ISSB.
- Map initiatives to UN SDGs for broader narrative context.
This creates very practical issues:
- Duplication: similar topics with slightly different definitions.
- Inconsistency: metrics appear in one place but not another, or values differ due to boundaries.
- Reporting overload: teams are stuck responding to frameworks rather than using data to drive action.
Mapping and interoperability are improving—but still hard
Convergence efforts have helped, and many organisations now build mapping tables (“crosswalks”) to align disclosures across frameworks. Still, crosswalking doesn’t eliminate the hard parts:
- Differing calculation approaches
- Differing materiality lenses
- Different disclosure granularity
- Different reporting boundaries (entity, operational control, financial control, value chain)
The direction of travel is toward harmonisation, but the present reality for many organisations is a hybrid environment where they must satisfy overlapping expectations.
ESG Reporting vs. Sustainability Reporting (and why the distinction matters)
Although the terms are often used interchangeably, ESG reporting and sustainability reporting are not the same thing—even when they cover similar topics.
ESG reporting is typically shaped by the needs of capital markets and governance. It focuses on ESG factors that can influence risk, resilience, performance, and enterprise value, and it tends to emphasise structured, comparable disclosures (metrics, controls, materiality, assurance readiness).
Sustainability reporting, by contrast, is often broader and more impact-led. It looks at how an organisation affects people and planet across its operations and value chain, and it may place more weight on narrative, programmes, partnerships, and longer-term outcomes—even where those impacts don’t neatly translate into near-term financial risk.
In practice, most organisations need both lenses: stakeholders want to understand impacts, while investors and regulators increasingly expect decision-useful ESG disclosures with traceability.
If you want a deeper breakdown, Read the full ESG vs sustainability reporting guide
Regulation: Higher Stakes, More Detail, Less Room for Ambiguity
A major shift in ESG reporting is the move from “best-efforts transparency” to “regulated disclosure.” This changes everything: the level of detail required, the need for traceability, and the consequences of mistakes.
Regulatory requirements can be highly prescriptive
Regulated ESG reporting often expects:
- Defined metrics and calculation methods
- Structured reporting formats
- Clarity on reporting boundaries
- Governance disclosures (roles, oversight, controls)
- Documentation and audit trails
Organisations that previously published glossy sustainability reports may find that those reports do not meet regulatory expectations. Narratives may still matter, but regulators increasingly want the “hard plumbing”: data discipline, controls, and proof.
Implementation timelines create operational strain
Even when organisations agree with the direction of regulation, implementation can be difficult:
- Data gaps may be large, especially in supply chains
- Internal systems may not be designed for ESG measurement
- Ownership may not sit cleanly in one department
- ESG expertise may be limited outside specialist teams
Often, the challenge isn’t the principle—it’s execution at speed.
Overlap with voluntary reporting creates confusion
Many organisations must juggle multiple obligations:
- Meet legal requirements in one format
- Satisfy investors and rating agencies in another
- Maintain narrative sustainability communications for customers and talent
This can lead to “multiple versions of the truth” unless governance is tight. A number in a regulated filing must match the number in a sustainability report, which must match the number used in investor presentations—unless differences are explicitly explained.
Materiality: The Heart of ESG Reporting—and a Common Failure Point
Materiality determines what you report and how much depth you provide. It also influences strategy: if something is material, it deserves governance attention, resources, and measurable goals.
Materiality is not “what’s popular”
A robust materiality process is not a trend exercise. It is a disciplined assessment of:
- What ESG issues could meaningfully affect the organisation
- What impacts the organisation creates across stakeholders
- Where risks, dependencies, and opportunities are most concentrated
Double materiality adds complexity—but improves rigour
Increasingly, organisations are expected to consider both:
Financial materiality: ESG issues that influence enterprise value (revenues, costs, assets, liabilities, cost of capital).
Impact materiality: the organisation’s impacts on people and planet (positive and negative, actual and potential).
This is more complex because it requires:
- Stakeholder engagement that is more than symbolic
- Evidence-based decision-making
- Documentation of thresholds and criteria
- Clear linkage to disclosures
Common materiality pitfalls
Organisations often struggle with:
- Overly broad topic lists that treat everything as material.
- Insufficient documentation of how decisions were made.
- Lack of governance alignment—material topics aren’t reflected in board oversight, KPIs, or risk registers.
- One-off assessments that quickly become outdated.
A good test: if your material topics don’t clearly influence your strategy, risk management, and targets, materiality has become a reporting exercise rather than a management tool.
Data Challenges: Availability, Quality, Consistency, and Control
For many organisations, ESG reporting is primarily a data problem disguised as a communications problem.
ESG data is scattered and inconsistent
Financial data is typically centralised within ERP systems and governed by mature processes. ESG data is often distributed across:
- Facilities and operations teams
- HR systems
- Procurement platforms
- Supplier reports and surveys
- Spreadsheets and manual logs
- Third-party calculators
Even when data exists, it may not be consistent:
- Different sites may interpret metrics differently
- Units may vary
- Boundaries may be unclear
- Collection methods may not be documented
Estimation is unavoidable—but must be transparent
Many ESG metrics require estimates (e.g., emissions factors, supplier averages, modelling). Estimation is not the issue; poor disclosure is. Stakeholders increasingly expect clarity on:
- Calculation methodology
- Assumptions and limitations
- Data coverage (what percent is measured vs estimated)
- Year-on-year methodology changes
Read about the complexities of CO2 reporting within ESG
Scope 3 and value chain data is particularly hard
While organisations may have reasonable control over Scope 1 and Scope 2 emissions, Scope 3 spans suppliers, logistics, product use, and end-of-life. Challenges include:
- Lack of supplier data
- Inconsistent supplier methodologies
- Difficulty estimating product-use emissions
- Unclear categorisation and boundaries
This is also where credibility risks rise: organisations can be tempted to report estimates without sufficient transparency.
Controls and audit trails are becoming essential
As ESG data becomes subject to assurance, organisations need to adopt “finance-grade” thinking:
- Data owners and approvers
- Documented definitions and methodologies
- Change control (when methods or factors change)
- Evidence retention
- Reconciliation and review steps
Without controls, ESG reporting becomes fragile: a change in a spreadsheet owner or a supplier data source can disrupt consistency year-to-year.
Assurance, Credibility, and Greenwashing Risk
As ESG reporting expands, stakeholder scepticism grows. Many readers assume claims are exaggerated unless evidence is provided. This is not just a reputational issue: regulators and watchdogs are increasingly active around misleading sustainability claims.
Why greenwashing risk is rising
Greenwashing risk increases when:
- Claims are vague (“eco-friendly,” “sustainable,” “net-zero-ready”)
- Progress is presented without baseline context
- Scope and boundaries are unclear
- Selective disclosure highlights positives while omitting negatives
- Targets are communicated without credible transition plans
Even well-intentioned organisations can stumble if marketing language outpaces what the data can support.
What credibility looks like in practice
High-credibility reporting tends to include:
- Balanced narratives (progress and challenges)
- Clear scope, boundaries, and methodology notes
- Consistent KPIs year-to-year
- Explanation of trade-offs and constraints
- Third-party assurance where feasible
Assurance isn’t a magic solution, but it forces the discipline of evidence and internal control.
Organisational Challenges: Ownership, Capability, and Culture
ESG reporting is cross-functional by design. That’s a strength—but it also makes execution harder.
Ownership is often unclear
ESG reporting may sit in the remit of sustainability, but requires inputs from finance, HR, procurement, legal, risk, and operations. Without clear accountability:
- Deadlines slip
- Data arrives late or incomplete
- Definitions diverge across teams
- The final report becomes a negotiation rather than a reflection of performance
Strong reporting organisations treat ESG like a governed process, with clear roles, timelines, and review points.
Capability gaps are common
Many teams involved in ESG reporting are learning on the job. Common gaps include:
- Carbon accounting expertise
- Human rights due diligence knowledge
- Understanding of evolving standards
- Data governance skills
- Assurance readiness
Training and internal enablement are often underestimated, but they are essential for consistent reporting quality.
Culture determines whether reporting drives change
In weaker environments, reporting is seen as “publishing.” In stronger environments, reporting is a mechanism for:
- Surfacing risks earlier
- Measuring progress against strategy
- Improving operational performance
- Strengthening governance and accountability
The difference is whether leaders treat ESG metrics as decision-grade data—or as messaging.
What “Good” Looks Like: Building More Effective ESG Reporting
Complexity isn’t going away. The goal is to build systems and approaches that can handle it.
ESG reporting for UK SMEs: where to start
Treat ESG reporting as a management system, not a document
The report is the output. The real work is:
- Governance
- Data processes
- Controls
- Accountability
- Integration with planning and risk
Mature organisations build repeatable reporting cycles with defined owners and documented methods.
Build a coherent reporting architecture
Instead of chasing every framework, create a structured architecture:
- Core disclosures aligned to regulatory requirements
- Investor-focused metrics for comparability
- Stakeholder impact narratives where relevant
- A mapping layer that connects them without duplication
This allows you to produce multiple outputs without reinventing the process each time.
Prioritise material topics and go deep
Better reporting is not more reporting. It’s:
- Sharper focus
- Clearer strategy linkage
- Deeper disclosure where it matters most
- Better explanation of trade-offs
A shorter report that is evidence-based and decision-relevant often beats a longer report that tries to cover everything.
Invest in data infrastructure and governance
Practical steps include:
- Standard metric definitions and calculation guides
- Central repositories for ESG data
- Automated collection where feasible
- Clear approval workflows
- Audit-ready evidence storage
Even modest improvements here can radically reduce reporting friction.
Align narrative and numbers
The most effective ESG reports connect:
- Strategy (what you’re trying to do)
- Governance (who owns it)
- Risks (what could derail it)
- Metrics (how you measure it)
- Targets (where you’re going)
- Performance (what actually happened)
This alignment is what makes reports feel coherent—and credible.
ESG Reporting Is a Journey—But It Can Become a Competitive Advantage
ESG reporting is often experienced as a burden: multiple frameworks, difficult data, rising scrutiny, and limited time. But organisations that build strong reporting foundations often discover a secondary benefit: better management.
When ESG reporting is structured and decision-grade, it can:
- Improve risk visibility
- Strengthen operational control
- Uncover inefficiencies and savings
- Build trust with investors and customers
- Protect reputation through transparency
The reporting landscape will continue to evolve, but the winners will be those who treat ESG reporting as a core business capability—grounded in evidence, governed with discipline, and linked directly to strategy.
