ESG reporting is the process by which a business discloses information about its environmental, social and governance performance, allowing investors, regulators and stakeholders to evaluate how responsibly and sustainably the organisation operates.
Companies search for ESG reporting guidance because they want a clear explanation of what ESG reporting is, how it differs from sustainability reporting, what ESG reports contain and how they can prepare them effectively. ESG reporting has become a core expectation in regulated financial markets, and many organisations now view it as a standard part of compliance and long-term business strategy.
Understanding ESG Reporting
ESG reporting refers to the structured disclosure of data that helps stakeholders assess a company’s environmental impact, social responsibility and governance practices. It enables consistent evaluation of how a business manages risks and opportunities related to sustainability.
While reporting formats differ across industries and regulatory requirements, ESG reports generally provide measurable, comparable information that investors and regulators can use to assess performance over time.
ESG Reporting vs Sustainability Reporting
Although the terms are often used interchangeably, ESG reporting and sustainability reporting serve slightly different purposes. ESG reporting is more data-driven, investor-focused and aligned with regulatory expectations, particularly in financial markets.
It helps organisations show how sustainability factors influence corporate performance and risk management. Sustainability reporting is broader and often framed around a company’s long-term environmental and social impact rather than specific investor metrics.
Both approaches overlap significantly, but ESG reporting typically uses formal standards and structured indicators that enable comparability between organisations.
Core Components of ESG Reports
ESG reports are typically organised around the three pillars of environmental, social and governance performance. Each section includes both qualitative explanations and quantitative metrics that reflect how the organisation manages specific risks, obligations and goals.
Environmental Metrics
Environmental reporting focuses on how the business affects natural resources and the climate. Common disclosures include greenhouse gas emissions, energy use, waste generation, water consumption and progress toward climate targets.
Businesses also explain how they plan to reduce emissions or improve environmental performance. Environmental data is becoming increasingly standardised as regulators and investors prioritise transparency in climate-related risks.
Social Metrics
The social component covers how the organisation manages its relationships with employees, customers and communities. Typical metrics include workforce diversity, health and safety performance, training and development initiatives, data protection measures and community engagement.
Many businesses also report on supply chain standards and human rights practices, providing insight into how responsibly they operate beyond their own facilities.
Governance Metrics
Governance disclosures address how the organisation is managed and how it ensures ethical and responsible decision-making. Key areas include board structure, executive remuneration, risk management systems, anti-corruption policies and internal controls.
This section clarifies how the business ensures accountability and oversight, which is essential for stakeholder confidence.
Why Does ESG Reporting Matters?
ESG reporting matters because it provides a transparent view of a company’s sustainability performance and long-term resilience. Regulators increasingly require structured non-financial disclosures, and investors rely on this information to assess risk, value and growth potential.
ESG reporting also supports internal decision-making by helping businesses identify operational risks, inefficiencies or opportunities for improvement. For many companies, strong ESG transparency improves reputation, supports access to capital and demonstrates accountability to employees, customers and communities.
Key Frameworks and Standards for ESG Reporting
ESG reporting is shaped by formal frameworks that guide how information is disclosed. These standards help organisations present data consistently and enable stakeholders to evaluate performance reliably. Understanding the role and scope of each framework helps companies choose the appropriate structure for their reports.
Corporate Sustainability Reporting Directive (CSRD)
The CSRD introduces wide-reaching sustainability disclosure requirements for companies operating in the EU. It requires detailed reporting on environmental, social and governance impacts using the European Sustainability Reporting Standards (ESRS).
For many businesses, CSRD represents a significant shift toward mandatory, standardised reporting and increased scrutiny of non-financial data. Although UK companies are not automatically subject to CSRD, many with EU operations must comply.
Global Reporting Initiative (GRI)
The GRI is one of the most widely used sustainability reporting frameworks. It provides detailed guidance on disclosures covering environmental impact, labour practices, community involvement and governance transparency.
GRI is particularly well suited for organisations that want to demonstrate broad sustainability commitments to a wide audience, including customers and civil society, rather than focusing solely on investor expectations.
ISSB and SASB Standards
The International Sustainability Standards Board (ISSB) integrates and replaces many earlier sustainability disclosure approaches, including those developed by the Sustainability Accounting Standards Board (SASB).
ISSB focuses on financially material information, data that affects a company’s value and risk profile. These standards are designed to support global consistency, enabling investors to evaluate sustainability performance using comparable metrics.
The Role of the Legal Entity Identifier (LEI) in ESG Reporting
While not itself an ESG reporting framework, the Legal Entity Identifier (LEI) helps ensure that ESG disclosures are associated with the correct legal entity. LEIs provide a globally recognised, unique identifier that regulators, investors and data platforms use to match sustainability information to the appropriate organisation. As ESG databases grow and reporting becomes more standardised, the ability to link disclosures to a verified entity becomes increasingly important. Holding an active LEI supports business transparency, improves data accuracy across reporting systems and simplifies cross-border compliance requirements.
How to Prepare an ESG Report
Preparing an ESG report starts with identifying which sustainability factors are most relevant to the business. A materiality assessment helps determine which environmental, social and governance topics have the greatest impact on operations, risk and stakeholder expectations. Once these topics are defined, companies gather data from internal systems, policies and performance indicators. This may involve collaboration across finance, operations, human resources, risk and sustainability teams.
Organisations then select the appropriate reporting framework, such as GRI or ISSB, to structure disclosures. A clear structure helps ensure that the report covers key metrics consistently and transparently.
Drafting the report involves explaining policies, describing initiatives, presenting data and outlining future goals or action plans. Once complete, the report is reviewed internally and, increasingly, submitted for external assurance to verify accuracy. Regular updates help maintain transparency and support continuous improvement.
What a Sustainability Report Includes
A sustainability report provides a broader narrative of how a business understands and manages its environmental and social impacts. While ESG reports prioritise structured metrics and investor-oriented disclosures, sustainability reports often include strategy, long-term commitments and community-focused outcomes.
Common sections include the organisation’s sustainability vision, climate strategies, resource management, employee wellbeing, ethical procurement and progress toward social or environmental targets. Many companies publish combined ESG and sustainability reports to present both quantitative metrics and qualitative context.
Challenges in ESG Reporting
Many organisations face challenges when preparing ESG reports, largely due to data availability, evolving regulations and the need for cross-department collaboration. Businesses may lack consistent processes for collecting environmental or social data, making it difficult to report accurately.
Changing regulatory standards, such as those introduced by CSRD or ISSB, require ongoing updates to reporting methods. Smaller businesses may also struggle to dedicate resources to developing mature sustainability systems. Addressing these challenges requires planning, clear responsibilities and tools that support reliable data collection and analysis.
Best Practices for Effective ESG Reporting
Effective ESG reporting relies on accuracy, clarity and consistency. Companies benefit from defining clear objectives and aligning reporting with recognised frameworks to improve comparability. Establishing reliable data collection processes ensures that information is complete and audit-ready. Including both performance results and future goals demonstrates transparency and commitment to improvement. Many organisations also enhance their reporting by engaging stakeholders, publishing regular updates and integrating ESG considerations into broader business strategy. Ultimately, well-structured reporting supports credibility and strengthens long-term relationships with investors, regulators and customers.
FAQ
What is included in ESG reporting?
ESG reporting includes information on a company’s environmental impact, social responsibility and governance practices. It typically presents data such as emissions, workforce policies, risk management systems and ethical standards. The purpose is to provide investors and regulators with a clear view of how sustainably the organisation operates.
What is the difference between ESG reporting and sustainability reporting?
ESG reporting focuses on measurable indicators that help investors evaluate risk and performance, while sustainability reporting is broader and often centred on environmental and social impact. Many companies integrate both approaches, using ESG metrics to support investor transparency and sustainability narratives to explain long-term strategy.
What are ESG reports used for?
ESG reports are used by investors, regulators and other stakeholders to assess how responsibly a business manages environmental, social and governance factors. They help organisations demonstrate transparency, manage compliance obligations and identify opportunities for operational improvement. Consistent ESG reporting also supports credibility and strengthens stakeholder trust.
