What is the EU Taxonomy?
1 min
Level
In this article, we'll break down what the EU Taxonomy is, how it works, the criteria for sustainable activities, and its broader impact on businesses and financial markets.
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What is ESG reporting, and should you be doing it?
Level
“ ESG reporting has become a key part of how businesses operate - it's not just a way to showcase values but also to measure and communicate them. ”
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.
What is ESG reporting?
Concept and goals
“ ESG reporting is the process through which companies disclose data on their environmental, social, and governance performance. This can include everything from carbon emissions and energy use to diversity metrics, supply chain practices, and board structure. ”
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.
Note: there’s no single universal standard for ESG reporting, but many companies use recognised frameworks like the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), or the Task Force on Climate-related Financial Disclosures (TCFD) to structure their reports.
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What's the difference between ESG and CSR?
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.
CSR is about companies taking responsibility for their social and environmental impact.
This often plays out through initiatives like ethical sourcing, community programmes, and charitable donations.
The idea has been around for over a century, with early examples found in the philanthropic efforts of business leaders like Andrew Carnegie and John D. Rockefeller.
ESG, on the other hand, is a more structured evolution of CSR.
While CSR is typically values-driven and focused on doing the right thing, ESG adds a measurable, reportable framework.
It turns those good intentions into data, allowing companies to track progress and stakeholders to see the full picture.
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.
“ Think of it this way: CSR sets the intention, ESG reporting shows the results. ”
What are ESG reporting criteria?
“ ESG reporting is built around three core pillars: environmental, social, and governance performance. Each one covers a range of topics that companies may choose to report on, depending on their sector, size, and applicable regulations. ”
Environmental
This pillar looks at how a company’s activities affect the natural world.
Social
The social aspect focuses on how a company treats people, from employees and suppliers to customers and communities.
Governance
Governance relates to how a company is run.
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Environmental
Carbon emissions
Total greenhouse gases produced directly and indirectly by a company.
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Environmental
Product carbon footprint
Emissions produced over the lifecycle of a product.
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Environmental
Climate change vulnerability
Exposure to risks posed by climate change.
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Environmental
Use of natural resources
Water, minerals, fossil fuels consumption.
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Environmental
Waste management
Handling of waste reduction, recycling, disposal.
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Environmental
Clean tech & renewables
Investments in technologies reducing environmental impact.
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Governance
Corporate governance
Rules and processes for directing and controlling the company.
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Governance
Board diversity
Inclusion of diverse members in leadership positions.
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Governance
Executive pay
Fair and transparent compensation for top executives.
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Governance
Business ethics
Adherence to ethical standards in operations.
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Governance
Tax transparency
Clarity in disclosing tax practices and payments.
ESG reporting standards and frameworks
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.
“ This lack of standardisation has led to some well-known cases of companies appearing to perform well on paper, only to face major controversies later. Both Volkswagen and Boohoo, for example, received strong ESG ratings before facing backlash over emissions cheating and labour abuses. ”
In response, some industries have started building more unified reporting frameworks.
Note: one example is the ESG Data Convergence Initiative, launched by the private equity sector to create a common set of ESG metrics and improve comparability across firms. But like many initiatives in this space, it’s voluntary, and private equity firms still have to navigate a patchwork of ESG expectations from investors, regulators, and other stakeholders.
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.
“ Using a recognised framework not only helps improve the quality and consistency of ESG reports but also makes it easier for stakeholders to compare companies on a like-for-like basis. ”
| Framework | Focus | Key Features |
|---|---|---|
|
Global Reporting Initiative (GRI)
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Broad sustainability impacts | Covers economic, environmental, and social topics; modular and sector-specific; widely adopted globally |
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Sustainability Accounting Standards Board (SASB)
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Financially material ESG data for investors | Industry-specific standards; focuses on ESG factors that impact financial performance |
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Task Force on Climate-related Financial Disclosures (TCFD)
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Climate-related financial risks | Recommends disclosures on governance, strategy, risk management, and metrics related to climate |
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Carbon Disclosure Project (CDP)
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Environmental impact reporting | Companies disclose data on climate change, water security, and deforestation; data used by investors |
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International Integrated Reporting Council (IIRC)
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Integrated reporting | Integrates financial information with sustainability performance to offer a holistic view of the organisation’s value creation over time |
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UN Global Compact (UNGC)
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Corporate sustainability principles | Encourages adoption of ten principles on human rights, labour, environment, and anti-corruption; requires annual progress reporting |
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EU NFRD / CSRD
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EU sustainability reporting regulations | NFRD mandates non-financial disclosures for large public-interest entities; CSRD expands scope and depth of reporting |
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Streamlined Energy and Carbon Reporting (SECR)
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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.
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Is ESG reporting mandatory?
The short answer: it depends on where your company operates and what kind of organisation you are.
“ Over the past few years, ESG reporting has shifted from being largely voluntary to a more regulated space, especially in the EU and UK. While there’s still no global standard, the direction of travel is clear: companies are increasingly being required to report on their environmental, social, and governance performance. ”
Let’s break it down by region.
European Union (EU)
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)
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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. |
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Sustainable Finance Disclosure Regulation (SFDR)
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Financial market participants and financial advisors | Disclose how sustainability risks are integrated into investment decisions |
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Corporate Sustainability Due Diligence Directive (CSDDD)
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Large EU and non-EU companies with EU operations | Identify, prevent, and mitigate adverse environmental and human rights impacts |
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EU Taxonomy Regulation
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All companies under CSRD and SFDR reporting | Define and disclose environmentally sustainable activities |
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Carbon Border Adjustment Mechanism (CBAM)
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Importers of certain carbon-intensive goods | Report emissions from imported goods; comply with carbon pricing |
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Fit for 55 Package
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EU-wide climate policy package | Includes updates to ETS, CBAM, and other climate legislation to cut emissions 55% by 2030 |
United Kingdom (UK)
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)
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Large quoted and unquoted companies and LLPs | Disclose energy use, GHG emissions, and efficiency actions in annual reports |
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FCA TCFD-Aligned Climate Reporting
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UK-listed companies and FCA-regulated asset managers/owners | Annual climate disclosures aligned with TCFD |
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Climate-Related Financial Disclosure (CRFD)
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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 |
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UK Sustainability Disclosure Standards (SDS)
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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 |
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Energy Savings Opportunity Scheme (ESOS)
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Large organisations meeting the qualification criteria | Conduct energy audits every 4 years across buildings, transport, and operations |
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NHS Evergreen Sustainable Supplier Assessment
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NHS suppliers (phased rollout) | Submit sustainability assessments tied to NHS contract eligibility |
United States (US)
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.
Note : That said, companies are still required to disclose material ESG risks in their SEC filings if those risks could impact financial performance. For many large businesses, this includes climate change, diversity and inclusion, or governance-related issues.
Meanwhile, several US states have taken matters into their own hands:
- California introduced landmark climate disclosure laws in 2023: SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act). These laws apply to both public and private companies operating in California, with thresholds starting at $1 billion and $500 million in annual revenue, respectively.
- The laws require companies to report on greenhouse gas emissions (including Scope 3) and disclose climate-related financial risks, starting from 2026 for the emissions data and 2026 for risk reporting.
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.
What are the benefits of ESG reporting?
“ Even when it’s not legally required, ESG reporting offers clear strategic value. It helps companies build resilience, stay ahead of regulation, and strengthen relationships with key stakeholders, from customers and investors to employees. ”
Here are some of the key benefits:
- Preparing for future regulation: Reporting ESG metrics voluntarily is a smart form of risk management. It gives your company time to develop effective strategies, build internal systems, and integrate ESG into day-to-day operations, before disclosure becomes mandatory.
- Meeting customer expectations: Consumers are paying closer attention to the values behind the brands they support. A recent survey found that 78% of people prefer to buy from companies that are environmentally responsible. ESG reporting helps build credibility and trust, boosting both brand reputation and sales.
- Attracting investors: Investor interest in ESG is rising fast, with ESG-aligned investments projected to make up 50% of US-managed assets by the end of 2025. Transparent reporting can improve access to capital by appealing to investors looking for responsible, lower-risk companies. A lack of ESG data, on the other hand, can raise red flags.
- Engaging and retaining employees: Strong ESG performance can also be a powerful tool for talent attraction and retention. One study found that 64% of millennials wouldn’t take a job at a company without a clear CSR policy, and 84% said they’d be more loyal to employers that take social and environmental issues seriously. ESG reporting helps signal those values and shows that your company is taking action, not just talking about it.
- Improving financial performance: Companies with strong ESG credentials tend to outperform their peers. Why? Because ESG strategies can help reduce operational costs, increase productivity, and identify new market opportunities. They also make companies more resilient in times of crisis, whether environmental, economic, or reputational.
- Identifying risks and improving operations: The reporting process itself often reveals valuable insights. ESG audits can uncover inefficiencies, compliance risks, or supply chain issues that might otherwise go unnoticed, helping businesses strengthen operations and plan more effectively for the future.
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How to implement effective ESG reporting
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:
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Build the right team
Start by assembling a cross-functional ESG team with representatives from finance, HR, operations, legal, and sustainability. This group oversees reporting, coordinates data, and ensures alignment with company values.
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Identify what matters most
Conduct a materiality assessment to identify ESG issues relevant to your business and stakeholders. Use interviews, benchmarks, and regulatory analysis to prioritise meaningfully.
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Set clear, measurable goals
Define SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals to address material ESG issues—such as reducing emissions or increasing board diversity—and track your progress.
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Build an ESG strategy and roadmap
Develop a clear roadmap with defined actions, owners, KPIs, and timelines. Make it ambitious but adaptable as your company evolves or regulations change.
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Set up robust data systems
Implement reliable tools to gather and monitor ESG data. Ensure consistency, verifiability, and integration with frameworks like GRI, SASB, or TCFD.
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Report transparently
Use recognised ESG frameworks to guide disclosure. Be honest about progress and challenges to build trust with stakeholders.
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Embed ESG into your culture
Incorporate ESG into daily operations. Train teams, set internal expectations, and celebrate contributions to sustainability.
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Monitor and refine
Track results, gather feedback, and adapt. ESG is an ongoing effort that improves with consistent reflection and course correction.
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Commit to long-term improvement
Perfection isn’t the goal - progress is. Start where you are, build strong foundations, and make steady improvements over time. The companies that get ESG right aren’t necessarily the ones with the flashiest reports, but those that stick with it and make it part of how they do business.
ESG reporting challenges
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 |
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Resource constraints
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High time, resource, and expertise demands can overwhelm smaller teams or companies | Prioritise key issues, automate processes, and seek external support where needed |
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Stakeholder alignment
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Conflicting expectations from investors, customers, and regulators can be difficult to manage | Engage stakeholders early and often to align ESG priorities and expectations |
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Integration into corporate strategy
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Resistance to embedding ESG within operations | Ensure leadership buy-in and provide ongoing education and internal communication |
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Regulatory compliance
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Keeping up with shifting regulations across jurisdictions adds complexity | Stay informed on regulatory updates; consult legal and ESG professionals regularly |
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Ensuring data transparency
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Reports must be credible and trustworthy; a lack of transparency undermines stakeholder trust | Adopt strong governance practices and consider third-party verification of reports |
“ By anticipating these challenges and putting the right systems and processes in place, companies can build a more credible, consistent, and resilient ESG reporting structure. Over time, this not only improves reporting quality but also strengthens internal decision-making and stakeholder trust. ”
How Greenly can help with ESG reporting
Greenly offers a comprehensive suite of carbon management services designed to assist companies at every stage of their ESG reporting and sustainability journey.
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Start your climate journey by measuring your GHG emissions
- Carbon assessment - Calculate your Scope 1, 2, and 3 emissions. With the support of our climate expert team, build custom action plans aimed at reducing these emissions.
Decarbonise your supply chain
- Supplier engagement - Engage your suppliers in your journey to Net Zero, helping them reduce their carbon emissions and monitor their progress.
- Supply chain optimisation - Identify the most wasteful suppliers and replace them with less carbon-intensive alternatives. Analyse your Scope 3 emissions to improve transparency in your ESG communications.
Determine your product's full impact with Life Cycle Assessment
- Life Cycle Assessment (LCA) - Conduct a comprehensive LCA to provide transparency to your customers and gain a competitive edge. Understand the full environmental impact of your products and identify areas for improvement.
Build your carbon action blueprint
- Decarbonisation roadmap - Establish a detailed roadmap for decarbonisation, complete with science-based reduction goals and actionable steps toward achieving Net Zero.
- Customised actions - Choose industry-specific actions and follow step-by-step implementation guidelines. Leverage Greenly's proven tools and expertise to assess reduction potential and associated costs.
CSRD with Greenly
- CSRD guidance - Navigate the complexities of the Corporate Sustainability Reporting Directive (CSRD) with Greenly's specific tools and dedicated platform.
Align with SBTi
- SBTi alignment - Start your journey with the Science Based Targets initiative (SBTi) and rely on Greenly to guide you through the validation process. Our team will expertly collect and analyse global sustainability and emissions data to support your efforts.
Note : Greenly's comprehensive services and expert support can help your company effectively measure, manage, and report its ESG performance, driving towards a more sustainable future. For more information and to get started on your ESG journey, visit our website.
Sources:
- Greenly, Carbon Emissions: What You Need to Know, https://greenly.earth/en-gb/blog/ecology-news/carbon-emissions-what-you-need-to-know
- Greenly, The GRI (Global Reporting Initiative): How to Implement It, https://greenly.earth/en-gb/blog/company-guide/the-gri-global-reporting-initiative-how-to-implement-it
- Greenly, TCFD Standards: All You Need to Know, https://greenly.earth/en-gb/blog/company-guide/tcfd-standards-all-you-need-to-know
- Greenly, The Sustainability Accounting Standards Board (SASB), https://greenly.earth/en-gb/blog/company-guide/the-sustainability-accounting-standards-board-sasb
- Greenly, CSR Meaning: All You Need to Know, https://greenly.earth/en-gb/blog/company-guide/csr-meaning-all-you-need-to-know
- ACCP, Corporate Social Responsibility: A Brief History, https://accp.org/resources/csr-resources/accp-insights-blog/corporate-social-responsibility-brief-history/
- Greenly, How to Choose a Framework Among All ESG Standards, https://greenly.earth/en-gb/blog/company-guide/how-to-choose-a-framework-among-all-esg-standards
- BBC News, Boohoo: What's Going Wrong at the Fast Fashion Giant?, https://www.bbc.com/news/business-34324772
- The Guardian, Boohoo Accused of Failing to Improve Working Conditions in Its Supply Chain, https://www.theguardian.com/business/2021/jun/18/boohoo-accused-of-failing-to-improve-working-conditions-in-its-supply-chain
- ESG Data Convergence Initiative, Homepage, https://www.esgdc.org/
- Greenly, What is the ESG Data Convergence Initiative?, https://greenly.earth/en-gb/blog/company-guide/what-is-the-esg-data-convergence-initiative
- Greenly, What is the Sustainable Finance Disclosure Regulation (SFDR)?, https://greenly.earth/en-gb/blog/company-guide/what-is-the-sustainable-finance-disclosure-regulation-sfdr
- Greenly, The Corporate Sustainability Due Diligence Directive (CSDDD), https://greenly.earth/en-gb/blog/company-guide/the-corporate-sustainability-due-diligence-directive-csdd
- Greenly, What is the Non-Financial Reporting Directive (NFRD)?, https://greenly.earth/en-gb/blog/company-guide/what-is-the-non-financial-reporting-directive-nfrd
- Greenly, What is the EU Taxonomy?, https://greenly.earth/en-gb/blog/company-guide/what-is-the-eu-taxonomy
- Greenly, The Carbon Border Adjustment Mechanism (CBAM), https://greenly.earth/en-gb/blog/company-guide/the-carbon-border-adjustment-mechanism-cbam
- Greenly, All You Need to Know About the Fit for 55 Plan, https://greenly.earth/en-gb/blog/ecology-news/all-you-need-to-know-about-the-fit-for-55-plan
- Greenly, What is the Climate Disclosure Rule Proposed by the SEC?, https://greenly.earth/en-gb/blog/ecology-news/what-is-the-climate-disclosure-rule-proposed-by-the-sec
- McKinsey & Company, Consumers Care About Sustainability—and Back It Up with Their Wallets, https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/consumers-care-about-sustainability-and-back-it-up-with-their-wallets
- Deloitte, Advancing ESG Investing, https://www2.deloitte.com/content/dam/insights/us/articles/5073_Advancing-ESG-investing/DI_Advancing-ESG-investing.pdf
- Forbes, The Power of Purpose: The Business Case for Purpose (Pt. 2), https://www.forbes.com/sites/afdhelaziz/2020/03/07/the-power-of-purpose-the-business-case-for-purpose-all-the-data-you-were-looking-for-pt-2/
- Greenly, Our Top 5 ESG Softwares, https://greenly.earth/en-gb/blog/company-guide/our-top-5-esg-softwares
- Greenly, How Does Greenly Help Communicate a Sustainability Plan?, https://greenly.earth/en-gb/blog/company-guide/how-does-greenly-help-communicating-on-a-sustainability-plan
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