ESG Reporting Guide: Frameworks, Data & Best Practices
ESG reporting has become one of the most talked-about topics in sustainability, and one of the hardest to keep up with.
New regulations, reporting requirements, frameworks, and stakeholder expectations continue to emerge, making it difficult for organisations to know where to focus their efforts.
ESG reporting involves sustainability, finance, operations, procurement, risk, and leadership teams.
This guide explains the essentials of ESG reporting, including key frameworks, reporting requirements, double materiality, ESG data management, and the processes organisations use to transform sustainability information into reliable, decision-ready reporting.
What Is ESG Reporting?
Before getting into the practical side of ESG reporting, it's useful to understand its history, purpose, and how it evolved from a niche sustainability concept into a widely adopted reporting practice.
ESG reporting is the process of measuring and disclosing information about an organisation's environmental, social, and governance performance.
It provides a structured way for companies to communicate how they manage topics such as climate impact, resource use, employee wellbeing, business ethics, human rights, and corporate governance.
Today, ESG reporting plays an increasingly important role in how organisations communicate across their entire stakeholder landscape.
How Did We Get Here? The Story of ESG Reporting
The foundations of ESG reporting can be traced back to sustainability and corporate responsibility initiatives that gained momentum during the 1990s and early 2000s.
The term "ESG" became widely recognised after the United Nations' Who Cares Wins report introduced environmental, social, and governance factors as part of investment decision-making in 2004.
Since then, ESG reporting has expanded significantly. What began largely as a voluntary disclosure has evolved into a more structured practice supported by reporting frameworks, standards, and regulatory requirements across many regions.
Who Uses ESG Reports?
ESG reporting involves much more than the sustainability team. It brings together data, expertise, and decision-making from across the organisation.
Each pillar of ESG reflects different aspects of how a business operates, meaning multiple departments play an active role throughout the reporting process.
Environmental (E): Environmental reporting focuses on topics such as greenhouse gas emissions, energy consumption, waste management, water use, biodiversity, and resource efficiency. Sustainability, environmental, operations, facilities, engineering, and energy management teams typically contribute to these disclosures.
Social (S): Social reporting covers how organisations manage their relationships with employees, contractors, suppliers, customers, and communities. It includes workforce wellbeing, diversity and inclusion, employee development, health and safety, labour practices, human rights, and supply chain responsibility. Human Resources, Health & Safety, Procurement, and People teams are often key contributors.
Governance (G): Governance focuses on how the organisation is directed and controlled. Topics include business ethics, board oversight, executive accountability, risk management, compliance, internal controls, anti-corruption, and regulatory compliance. Executive leadership, finance, legal, compliance, risk, and corporate governance teams typically lead these disclosures.
Beyond internal teams, ESG reports are also used by investors, regulators, customers, suppliers, lenders, and business partners to understand an organisation's sustainability performance, risk management, and long-term resilience.
As ESG reporting requirements continue to evolve, successful reporting depends on collaboration across the organisation rather than ownership by a single department.
ESG Reporting vs Sustainability Reporting
The terms ESG reporting and sustainability reporting are often used interchangeably, but there is a subtle difference between them.
Sustainability reporting typically focuses on an organisation's broader environmental, social, and economic impacts.
ESG reporting is generally more structured around measurable performance indicators and governance-related disclosures that stakeholders use to assess business performance, risk, and accountability.
In practice, the distinction continues to narrow. Most modern sustainability reporting initiatives incorporate ESG metrics, and many ESG reporting requirements are now embedded within broader sustainability reporting frameworks.
| Aspect | ESG Reporting | Sustainability Reporting |
|---|---|---|
| Primary Focus | ESG ReportingBusiness risks, opportunities, governance, and measurable ESG performance | Sustainability ReportingBroader environmental, social, and economic impacts of the organisation |
| Main Audience | ESG ReportingInvestors, regulators, boards, lenders, and business partners | Sustainability ReportingA wider stakeholder group, including employees, communities, customers, investors, and regulators |
| Reporting Approach | ESG ReportingStructured, data-driven, and often linked to specific metrics and disclosures | Sustainability ReportingMore holistic and narrative-driven, often combining strategy, goals, impacts, and performance |
| Typical Topics | ESG ReportingClimate risks, governance structures, diversity metrics, emissions data, compliance indicators | Sustainability ReportingSustainability strategy, environmental impact, social initiatives, community engagement, long-term goals |
| Main Objective | ESG ReportingSupport decision-making, risk assessment, accountability, and compliance | Sustainability ReportingCommunicate sustainability performance, impacts, commitments, and progress |
Why does this distinction matter? Many organisations use the terms interchangeably. However, stakeholders often expect different types of information depending on the context.
An investor discussing ESG reporting may be looking for measurable performance indicators, risk exposure, and governance disclosures. A sustainability report may include those elements while also covering broader topics such as long-term environmental impact, community initiatives, and sustainability strategy.
Understanding this distinction helps organisations select the right frameworks, align reporting expectations, and communicate sustainability information more effectively.
Why Does ESG Reporting Matter More in 2026 Than Before?
2026 marks an important turning point for ESG reporting in Europe.
Following the Omnibus I Directive, adopted on 24 February 2026, the scope of mandatory sustainability reporting changed significantly. Companies are now generally required to report under the CSRD if they have more than 1,000 employees and over €450 million in annual turnover, reducing the number of organisations expected to report under the ESRS from roughly 50,000 to around 5,000, a reduction of 80–90%.
While this change reduced the number of companies directly in scope, it did not reduce the importance of ESG reporting.
Many organisations continue to receive sustainability information requests from customers, investors, financial institutions, and supply chain partners. Voluntary reporting frameworks such as the VSME are also becoming increasingly relevant for companies outside the mandatory scope that still need to demonstrate transparency and provide reliable ESG information.
What Changed with the Omnibus I Directive?
Rather than removing sustainability reporting requirements altogether, the Omnibus I Directive reshaped who is required to report and how organisations are expected to prepare.
The revised thresholds significantly reduced the number of companies subject to mandatory ESRS reporting, while placing greater emphasis on simplifying reporting obligations and reducing administrative burden for businesses.
At the same time, the directive reinforced the importance of voluntary reporting. Many organisations that are no longer directly in scope are still expected to provide ESG information to customers, investors, lenders, and supply chain partners. As a result, frameworks such as the VSME are becoming increasingly important for organisations seeking to demonstrate transparency and maintain access to business opportunities.
For companies that remain within the scope of the CSRD, the focus has shifted from preparing for compliance to establishing robust ESG data management, governance, and reporting processes capable of supporting reliable, audit-ready disclosures.
Investors Want Greater Transparency
Investors increasingly consider ESG information alongside financial performance when evaluating organisations.
Understanding how a company manages climate-related risks, governance practices, workforce issues, and long-term sustainability priorities can provide valuable insight into resilience, risk exposure, and future performance.
As a result, ESG disclosures have become an important source of information for investment analysis, due diligence, and stakeholder engagement.
Sustainability Expectations Extend Across Supply Chains
Reporting expectations rarely stop at the boundaries of a single organisation.
Customers, suppliers, and business partners are increasingly requesting ESG-related information as part of procurement processes, supplier assessments, and partnership evaluations.
This has created a ripple effect across value chains, where organisations may be asked to provide sustainability information even if they are not directly subject to reporting regulations themselves.
ESG Supports Better Business Decisions
While compliance often initiates ESG reporting efforts, many organisations are discovering value beyond regulatory requirements.
Reliable ESG information helps leadership teams understand trends, identify risks, monitor performance, and evaluate opportunities that may otherwise remain hidden across departments and business units.
This is where ESG reporting begins to move beyond disclosure and become a practical management tool.
The organisations gaining the most value from ESG reporting are often those that use it not only to satisfy reporting requirements, but also to support planning, prioritisation, and decision-making across the business.
ESG Reporting Frameworks and Standards Explained
One of the biggest challenges in ESG reporting is understanding which frameworks, standards, and regulations apply to your organisation.
The ESG reporting landscape includes both mandatory requirements and voluntary frameworks. Some define what organisations must report, while others provide guidance on how sustainability information should be structured and disclosed.
Although the number of frameworks can seem overwhelming, many are becoming increasingly aligned around common sustainability topics and disclosure principles.
1) CSRD
The Corporate Sustainability Reporting Directive (CSRD) is the European Union's sustainability reporting regulation.
It requires qualifying organisations to disclose sustainability information alongside financial reporting and introduces more detailed reporting requirements than previous regulations.
CSRD does not define the disclosures itself. Instead, it requires companies to report according to the European Sustainability Reporting Standards (ESRS).
2) ESRS
The European Sustainability Reporting Standards (ESRS) provide the detailed disclosure requirements used under CSRD.
They cover a wide range of environmental, social, and governance topics, including climate change, workforce issues, biodiversity, governance, and business conduct.
Organisations subject to CSRD use ESRS as the primary framework for preparing their sustainability disclosures.
3) VSME
The Voluntary Sustainability Reporting Standard for SMEs (VSME) was developed to support small and medium-sized enterprises that are not directly subject to CSRD requirements.
It offers a simplified approach to sustainability reporting while helping organisations respond to growing requests for ESG information from customers, investors, and supply chain partners.
4) GRI Standards
The Global Reporting Initiative (GRI) is one of the most widely used sustainability reporting standards worldwide.
GRI focuses on an organisation's impacts on the environment, society, and economy. It is often used by organisations seeking to communicate sustainability performance to a broad stakeholder audience.
5) SASB
The Sustainability Accounting Standards Board (SASB) Standards help organisations identify and disclose the sustainability topics that are most likely to affect their financial performance. Unlike broader sustainability frameworks, SASB focuses on financial materiality, helping investors understand how ESG risks and opportunities may influence enterprise value.
The standards provide industry-specific guidance across 77 industries, recognising that the sustainability issues most relevant to a bank, manufacturer, or energy company are not the same. This makes disclosures more consistent, comparable, and useful for investors and other financial stakeholders.
Today, the SASB Standards are maintained by the IFRS Foundation and can be used alongside the ISSB Standards to support decision-useful sustainability reporting.
6) ISSB
The International Sustainability Standards Board (ISSB) was established in 2021 to create a global baseline for sustainability-related financial disclosures. Its goal is to improve consistency and comparability by helping organisations report sustainability information that is relevant to investors and financial markets.
Its standards aim to improve consistency and comparability across markets by focusing on sustainability information that may affect enterprise value.
How ESG Reporting Works: A Step-by-Step Guide
Although reporting requirements may vary depending on the framework, most organisations follow a similar ESG reporting process.
The process typically starts with understanding what needs to be reported and ends with publishing disclosures and using the results to improve future reporting cycles.
A typical ESG reporting process includes:
Define the reporting scope
Determine which entities, business units, operations, and sustainability topics will be included. The scope may be influenced by reporting requirements, organisational structure, and stakeholder expectations.
Conduct a double materiality assessment
Identify the sustainability topics most relevant to the organisation from both an impact and a financial perspective. This helps focus reporting efforts on the topics that matter most.
Identify ESG data sources
Determine where ESG-related information exists across the organisation — finance systems, HR platforms, operational systems, procurement teams, energy management tools, suppliers, and other sources.
Collect and validate data
Gather the required information and verify its completeness, consistency, and accuracy. Data quality is a critical part of creating reliable ESG disclosures.
Calculate ESG metrics
Convert raw data into measurable ESG indicators and performance metrics required by the chosen reporting framework or standard.
Prepare disclosures and reports
Organise the information into the required reporting format and align disclosures with applicable ESG reporting frameworks, standards, or regulations.
Review and assurance
Conduct internal reviews and, where required, prepare for external assurance. This step helps strengthen confidence in the reported information.
Publish and improve
Release the report and use lessons learned to improve data collection, governance, reporting processes, and overall ESG performance in future reporting cycles.
While these steps may appear straightforward, the complexity often increases as organisations expand across multiple business units, reporting entities, systems, and supply chains.
ESG Data Management: The Foundation of Effective Reporting
Most ESG reporting challenges are not caused by reporting frameworks or regulations.
They start with data.
Sustainability information often comes from multiple departments, systems, and locations across an organisation. Emissions data may sit in operational systems, employee data in HR platforms, financial information in ERP systems, and supplier information across procurement tools, emails, and spreadsheets.
Bringing all of this information together is often one of the biggest challenges in the ESG reporting process.
Why ESG Data Is Difficult to Manage
Unlike financial reporting, ESG reporting requires information from many different parts of the business.
A single sustainability report may rely on data from ERP and finance systems, HR platforms, energy management systems, procurement and supplier databases, facility and operations teams, external partners, and spreadsheets maintained across multiple departments.
As reporting requirements expand, the number of data points continues to grow. Bringing all of this information together can be challenging, particularly when data is collected using different systems, methodologies, and reporting cycles.
Many organisations begin their ESG reporting journey using spreadsheets. While spreadsheets can support early-stage reporting, they often become difficult to manage as reporting requirements become more detailed and involve more stakeholders.
Common challenges include:
Multiple versions of the same dataset
Inconsistent calculation methods
Missing supporting evidence
Limited visibility across business units
Manual consolidation processes
Difficulty preparing for audits or assurance reviews
Without a structured approach to ESG data management, organisations can struggle to maintain consistency, accuracy, and traceability across reporting cycles.
These challenges often become more visible when organisations begin preparing for CSRD reporting or other assurance-based disclosure requirements.
Understanding Double Materiality for Better ESG Reporting in 2026
Double materiality is one of the core concepts within the European Sustainability Reporting Standards (ESRS) and plays a central role in CSRD reporting.
It helps organisations determine which sustainability topics should be included in their ESG reporting by assessing them from two different perspectives.
Impact Materiality
Impact materiality looks at how an organisation affects people, society, and the environment.
This includes topics such as greenhouse gas emissions, biodiversity, employee wellbeing, human rights, resource consumption, and supply chain impacts.
The question being asked is: "What impact does the organisation have on the world around it?"
Financial Materiality
Financial materiality looks at how sustainability topics can affect the organisation itself.
Examples may include climate-related risks, changing regulations, supply chain disruptions, resource scarcity, or reputational impacts that influence financial performance.
The question being asked is: "How could sustainability-related issues affect the organisation's financial position, performance, or future value?"
Why Double Materiality Matters
A topic can be material from either perspective or from both.
For example, climate change may create financial risks for an organisation while also representing a significant environmental impact. In that case, it would be considered material under both dimensions.
This assessment helps organisations:
Identify which ESG topics require reporting
Prioritise data collection and reporting efforts
Align sustainability reporting with ESRS requirements
Focus resources on the issues that matter most to stakeholders
Because reporting requirements continue to expand, a well-structured double materiality assessment often becomes the starting point for effective ESG reporting, helping organisations decide what information should be collected, managed, and disclosed.
Want to learn more? Read our complete guide to Double Materiality Assessments, including stakeholder engagement, scoring methodologies, and ESRS requirements.
Common ESG Reporting Challenges in 2026
While ESG reporting frameworks and requirements are becoming more established, reporting itself remains a challenge for many organisations.
The difficulty often lies not in understanding what needs to be reported, but in gathering reliable information from across the business and transforming it into consistent, audit-ready disclosures.
Some of the most common ESG reporting challenges include:
1) Data Quality and Consistency
ESG data often comes from multiple departments, systems, and external stakeholders. Without clear definitions and validation processes, organisations may encounter inconsistent calculations, missing information, or conflicting figures across reporting periods.
2) Data Availability
Not all sustainability information is readily available. Some metrics require new collection processes, while others depend on suppliers, business partners, or operational teams that have not historically been involved in reporting activities.
3) Multi-Entity Reporting
Large organisations frequently need to consolidate ESG data from multiple business units, subsidiaries, facilities, or geographic regions.
Differences in systems, methodologies, and reporting practices can make standardisation difficult.
4) Audit Readiness and Assurance
As sustainability reporting becomes subject to greater scrutiny, organisations need confidence that reported information can be traced back to its source.
Maintaining supporting evidence, calculation methodologies, and audit trails is becoming increasingly important.
5) Evolving Reporting Requirements
The ESG reporting landscape continues to change as new regulations, reporting frameworks, and disclosure requirements emerge. Organisations must continuously monitor developments to ensure reporting remains aligned with current expectations.
6) Supplier Data Collection
Many ESG disclosures rely on information from suppliers and value chain partners.
Collecting complete and reliable supplier data can be one of the most time-consuming aspects of the reporting process, particularly for organisations with complex global supply chains.
While these challenges are common, they are often easier to address when organisations establish clear governance structures, strong ESG data management practices, and consistent reporting processes.
ESG Reporting Software: When Do You Need It?
Many organisations begin their ESG reporting journey with spreadsheets, email-based data collection, and manual reporting processes.
For smaller reporting requirements, this approach can often be sufficient. However, as reporting obligations expand and more stakeholders become involved, manual processes can become increasingly difficult to manage.
Common signs that organisations may need dedicated ESG reporting software include:
Sustainability data is collected across multiple spreadsheets and systems
Reporting involves multiple entities, facilities, or business units
Data needs to be gathered from finance, HR, operations, procurement, and suppliers
Reporting requirements continue to expand year after year
Audit trails and supporting evidence become difficult to maintain
Teams spend significant time manually consolidating information
As organisations prepare for requirements such as CSRD reporting, the importance of data governance, traceability, and reporting consistency continues to grow.
Rather than focusing solely on report creation, ESG reporting software helps organisations establish structured processes for collecting, managing, validating, and reporting sustainability information.
How Terra Reporting Supports ESG Reporting
Terra Reporting is designed to help organisations manage the entire ESG reporting process from a single platform.
Built on Microsoft Cloud for Sustainability, the platform helps organisations centralise sustainability data, streamline reporting workflows, and improve reporting readiness across teams.
Key capabilities include:
Integration with multiple data sources across finance, HR, operations, energy management, and other business systems
Structured ESG workflows that support collaboration across departments
Centralised ESG data management with clear ownership and traceability
Audit-ready reporting supported by validation processes and supporting evidence
Alignment with evolving reporting requirements, including CSRD and ESRS disclosures
Dashboards and reporting insights that support both operational teams and executive decision-makers
By bringing data, workflows, and reporting activities together, organisations can reduce manual effort, improve data quality, and create a stronger foundation for sustainability reporting.