
What is the EU Taxonomy?
Discover the EU Taxonomy: what it is, how it defines sustainable activities, and its impact on businesses and financial markets.
ESG / CSR
Industries
As investors, regulators, and customers increasingly expect transparency around how companies manage environmental, social, and governance risks, ESG reporting provides the framework for meeting those expectations.
It’s now seen as a key marker of credibility and commitment.
In this article, we’ll delve into what ESG reporting requires, why it’s important for businesses, and what benefits it can bring.
The goal is to give stakeholders, including investors, regulators, customers, and employees, a transparent view of how the company is managing risks and opportunities linked to sustainability and ethical business conduct.
ESG (Environmental, Social, and Governance) and CSR (Corporate Social Responsibility) often get mentioned in the same breath, and while they’re closely related, they serve different purposes.
For example, a tech company might commit (through CSR) to lowering its carbon footprint and supporting local communities. ESG reporting would then quantify that impact.
With hundreds of ESG frameworks in use around the world, it’s no surprise that many companies struggle to figure out which ones to follow.
The landscape is fragmented, and different stakeholders often expect different things, making it hard to report in a consistent, meaningful way.
In response, some industries have started building more unified reporting frameworks.
Given the fragmented landscape of ESG standards, many companies choose to adopt established frameworks to bring structure and credibility to their reporting. These frameworks provide guidance on what to disclose, how to present it, and who the intended audience is, whether investors, regulators, or the general public.
Framework | Focus | Key Features |
---|---|---|
Global Reporting Initiative (GRI)
|
Broad sustainability impacts | Covers economic, environmental, and social topics; modular and sector-specific; widely adopted globally |
Sustainability Accounting Standards Board (SASB)
|
Financially material ESG data for investors | Industry-specific standards; focuses on ESG factors that impact financial performance |
Task Force on Climate-related Financial Disclosures (TCFD)
|
Climate-related financial risks | Recommends disclosures on governance, strategy, risk management, and metrics related to climate |
Carbon Disclosure Project (CDP)
|
Environmental impact reporting | Companies disclose data on climate change, water security, and deforestation; data used by investors |
International Integrated Reporting Council (IIRC)
|
Integrated reporting | Integrates financial information with sustainability performance to offer a holistic view of the organisation’s value creation over time |
UN Global Compact (UNGC)
|
Corporate sustainability principles | Encourages adoption of ten principles on human rights, labour, environment, and anti-corruption; requires annual progress reporting |
EU NFRD / CSRD
|
EU sustainability reporting regulations | NFRD mandates non-financial disclosures for large public-interest entities; CSRD expands scope and depth of reporting |
Streamlined Energy and Carbon Reporting (SECR)
|
UK energy and emissions disclosure | Requires large UK companies to report on energy use, GHG emissions, and energy efficiency actions |
By aligning with one or more of these frameworks, companies can improve the clarity, reliability, and impact of their ESG reports while also staying ahead of evolving regulatory requirements. Choosing the right framework often depends on your industry, location, and the expectations of your stakeholders.
The short answer: it depends on where your company operates and what kind of organisation you are.
Let’s break it down by region.
The EU has introduced a comprehensive suite of regulations that make ESG reporting mandatory for a wide range of companies, both inside and outside the bloc.
The Corporate Sustainability Reporting Directive (CSRD) is the cornerstone of this, replacing the older NFRD and significantly expanding the scope and depth of reporting obligations. But CSRD is just one piece of a broader regulatory puzzle.
Financial institutions must also comply with the Sustainable Finance Disclosure Regulation (SFDR), and new legislation like the Corporate Sustainability Due Diligence Directive (CSDDD) is pushing ESG responsibilities further into the supply chain. The EU Taxonomy, CBAM, and the Fit for 55 package round out the framework, all aimed at driving transparency and accelerating the green transition.
Here’s a summary of the major EU ESG-related regulations:
Regulation / Directive | Scope | Key Requirements |
---|---|---|
Corporate Sustainability Reporting Directive (CSRD)
|
Large EU companies, listed SMEs, and non-EU companies with significant EU activity | Detailed ESG disclosures using ESRS, to be included within management reports alongside financial statements; phased implementation through 2028. |
Sustainable Finance Disclosure Regulation (SFDR)
|
Financial market participants and financial advisors | Disclose how sustainability risks are integrated into investment decisions |
Corporate Sustainability Due Diligence Directive (CSDDD)
|
Large EU and non-EU companies with EU operations | Identify, prevent, and mitigate adverse environmental and human rights impacts |
EU Taxonomy Regulation
|
All companies under CSRD and SFDR reporting | Define and disclose environmentally sustainable activities |
Carbon Border Adjustment Mechanism (CBAM)
|
Importers of certain carbon-intensive goods | Report emissions from imported goods; comply with carbon pricing |
Fit for 55 Package
|
EU-wide climate policy package | Includes updates to ETS, CBAM, and other climate legislation to cut emissions 55% by 2030 |
The UK has taken a slightly more fragmented approach, with ESG requirements spread across several frameworks and departments. While there’s no single regulation equivalent to the EU’s CSRD, many companies - especially large ones - are subject to multiple overlapping obligations.
These include mandatory energy and emissions disclosures, climate-related financial reporting, and upcoming sustainability labelling rules to tackle greenwashing. NHS suppliers, too, are increasingly being asked to demonstrate sustainability performance as part of procurement requirements.
Here’s a summary of the UK’s current ESG reporting frameworks:
Regulation / Framework | Applies To | Key Requirements |
---|---|---|
Streamlined Energy and Carbon Reporting (SECR)
|
Large quoted and unquoted companies and LLPs | Disclose energy use, GHG emissions, and efficiency actions in annual reports |
FCA TCFD-Aligned Climate Reporting
|
UK-listed companies and FCA-regulated asset managers/owners | Annual climate disclosures aligned with TCFD |
Climate-Related Financial Disclosure (CRFD)
|
UK-registered companies with 500+ employees or £500M+ turnover | Disclose climate risks and transition strategies, based on TCFD approach; included in the Non-Financial and Sustainability Information (NFSI) section of the strategic report |
UK Sustainability Disclosure Standards (SDS)
|
All UK entities using sustainability-related terms in finance/marketing (expected in 2025) | Sustainability Disclosure Standards (SDS) will align with the International Sustainability Standards Board (ISSB) – bringing the UK’s ESG reporting into line with global expectations while reducing greenwashing and improving consistency |
Energy Savings Opportunity Scheme (ESOS)
|
Large organisations meeting the qualification criteria | Conduct energy audits every 4 years across buildings, transport, and operations |
NHS Evergreen Sustainable Supplier Assessment
|
NHS suppliers (phased rollout) | Submit sustainability assessments tied to NHS contract eligibility |
In contrast to the EU and UK, ESG reporting in the US remains largely voluntary at the federal level, but that doesn’t mean companies can ignore it.
Investor pressure, consumer expectations, and state-level legislation are all pushing businesses toward greater ESG transparency.
In 2024, the Securities and Exchange Commission (SEC) finalised a climate disclosure rule that would have required public companies to report detailed climate-related information in their filings. However, the rule was met with legal challenges, and by early 2025, the SEC signalled that it would no longer defend it in court, effectively stalling the effort.
Meanwhile, several US states have taken matters into their own hands:
Large US companies are also often expected to report voluntarily using frameworks like TCFD, SASB, or GRI, especially if they have global operations or investor demand for ESG transparency.
Here are some of the key benefits:
Deciding to report on ESG is a meaningful step, but turning that decision into action takes planning, structure, and commitment.
Here’s a step-by-step approach to building a reporting process that’s credible, useful, and aligned with your broader business goals:
While ESG reporting offers significant benefits, implementing it effectively can be a real challenge, especially for companies just getting started. The process often involves new systems, cross-departmental coordination, and evolving regulatory expectations.
Challenge | Description | Suggested Solutions |
---|---|---|
Data collection and quality
|
Difficulty in gathering accurate and complete ESG data due to fragmented sources and inconsistent standards | Invest in integrated data systems and conduct regular audits to ensure data reliability |
Lack of standardisation
|
No universal ESG reporting standard leads to confusion and inconsistency across frameworks | Use widely recognised frameworks (GRI, SASB, TCFD) to bring structure and comparability |
Resource constraints
|
High time, resource, and expertise demands can overwhelm smaller teams or companies | Prioritise key issues, automate processes, and seek external support where needed |
Stakeholder alignment
|
Conflicting expectations from investors, customers, and regulators can be difficult to manage | Engage stakeholders early and often to align ESG priorities and expectations |
Integration into corporate strategy
|
Resistance to embedding ESG within operations | Ensure leadership buy-in and provide ongoing education and internal communication |
Regulatory compliance
|
Keeping up with shifting regulations across jurisdictions adds complexity | Stay informed on regulatory updates; consult legal and ESG professionals regularly |
Ensuring data transparency
|
Reports must be credible and trustworthy; a lack of transparency undermines stakeholder trust | Adopt strong governance practices and consider third-party verification of reports |
Greenly offers a comprehensive suite of carbon management services designed to assist companies at every stage of their ESG reporting and sustainability journey.