ESG Knowledge Hub
ESG Reporting: What It Is, Why It Matters & How to Get It Right
More than 90% of large organizations now publish ESG reports. Learn how to build clear, compliant, and useful ESG disclosures.
ESG reporting, also known as non-financial reporting, involves disclosing how your company performs on environmental, social, and governance topics. It gives regulators, investors, customers, and other stakeholders a clear view into how you're managing risks, meeting standards, and making progress.
Key Takeaways
- ESG reporting is shifting from voluntary to mandatory in the EU (CSRD) and California (SB 253).
- Reporting is no longer just for large public enterprises — stakeholder pressure makes ESG data a commercial necessity for mid-sized companies.
- Global alignment is increasing through the ISSB, which provides a unified baseline.
- Core topics: Environmental (carbon, energy, waste), Social (labor, DEI, safety), Governance (ethics, board oversight).
Core Topics Covered in ESG Reports
Most ESG reports include a mix of data and narrative across key issue areas:
Environmental
- Carbon emissions (Scope 1, 2, and sometimes 3), energy use and sourcing, water use, pollution, waste management, and climate risk and adaptation efforts.
Social
- Labor practices and human rights, DEI, health and safety performance, and supply chain working conditions.
Governance
- Ethics and anti-corruption policies, board structure and oversight, executive compensation, and whistleblower mechanisms.
From Voluntary to Mandatory Reporting
In the early 2000s, ESG reporting was voluntary. Companies issued CSR reports to show goodwill. GRI offered early structure, but adoption was optional. By the 2010s, investors and rating agencies pushed for more consistent ESG data. From the late 2010s onward, governments introduced mandatory ESG disclosure rules.
Key milestones: 2017-2021 — UK, Japan, EU began requiring TCFD-aligned climate reporting. 2021-2022 — EU proposed CSRD. 2022 — ISSB launched. 2023-2024 — SEC climate rule advanced. 2025 — US policy pivoted. 2025-2026 — EU Omnibus I amended CSRD. 2026 — California SB 253 took effect.
How ESG Reporting Works: The 5-Step Process
ESG reporting follows a structured cycle:
1. ESG Data Collection
- Gather environmental data from operations, social data from HR, and governance data from legal/compliance functions. Manual tracking is common early on; software platforms help centralize and improve accuracy.
2. Materiality Assessment
- Identify which ESG issues matter most based on relevance to your business and importance to stakeholders. Some regulations require 'double materiality' — impact on business AND business impact on society.
3. Choosing a Framework
- GRI (broad stakeholder), SASB (industry-specific), TCFD (climate risk), CSRD-ESRS (EU mandatory), ISSB (global baseline). Choosing early helps shape structure and consistency.
4. Report Preparation & Verification
- Build the report with context (strategy, goals), metrics (performance data), and commentary (progress, setbacks). External assurance is becoming common — CSRD requires limited assurance.
5. Publication & Continuous Improvement
- Publish on your website, include in annual filings, submit to platforms like CDP. Each cycle brings new insights and data quality improvements.
Major ESG Reporting Frameworks
GRI
- Broad, stakeholder-focused. Covers full ESG spectrum. Supports double materiality. Most established and widely used.
SASB
- Sector-specific (77 industries), financially material, investor-focused. Now part of IFRS/ISSB.
CSRD / ESRS
- EU mandatory regime. Requires double materiality, digital tagging, third-party assurance. Applies to large EU companies and non-EU with significant EU presence.
TCFD
- Climate risk disclosure: governance, strategy, risk management, metrics. Voluntary but adopted as requirement in several countries. Incorporated into ISSB.
ISSB
- Global baseline: IFRS S1 (sustainability risks) and IFRS S2 (climate). Aims to complement financial reporting, adopted by multiple jurisdictions.
ESG Reporting in Practice
ESG reporting supports critical internal functions: Enhanced Risk Management — tracking indicators makes risks visible. Regulatory Due Diligence — structured documentation for laws like Germany's Supply Chain Act. Improved Operational Performance — publishing metrics drives accountability. Financial Outcomes — better ESG often aligns with lower costs, less disruption, stronger long-term value.
Frequently Asked Questions
What's the difference between CSR and ESG reports?
CSR reports are narrative-driven, communicating values to broad stakeholders. ESG reports are data-heavy, structured disclosures for investors and regulators, focused on quantitative metrics and material risks.
Which companies must report under CSRD in 2026?
Under the Omnibus I Directive: large EU companies with >1,000 employees AND >€450M annual turnover. Non-EU parent companies with >€450M EU turnover for 2 consecutive years.
When does California SB 253 take effect?
2026: Scope 1 & 2 for 2025 fiscal year. 2027: Scope 3 added. Applies to companies with >$1B revenue doing business in California.
What is double materiality?
Two fronts: how ESG creates financial risks for the business (financial materiality) AND how the business impacts people/environment (impact materiality). Core requirement under EU ESRS.
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