Environmental, Social, and Governance (ESG) reporting has become one of the most significant developments in corporate responsibility over the past decade. Once viewed as voluntary or “nice-to-have,” ESG reporting is now firmly embedded in the expectations of regulators, investors, employees, customers, and supply chain partners.

For UK businesses, ESG disclosures are no longer limited to sustainability-focused companies or global corporations. Today, organisations of all types, from large listed companies to growing SMEs, need to understand the regulatory requirements and prepare to report clearly, transparently, and in line with best practice.

Fortunately, this guide breaks down all the essentials. Whether you’re building your first ESG report or refreshing an existing strategy, this is your starting point.

We’ll discuss:

• What is ESG and why does it matter?
• Why ESG reporting is becoming essential in the UK
• The core ESG reporting requirements in the UK
• Voluntary frameworks that strengthen ESG reporting
• How to get started with ESG reporting: A step-by-step roadmap
• Common challenges (and how to overcome them)
• The future of ESG reporting in the UK

Let’s start from the top.

What Is ESG and Why Does It Matter?

ESG stands for Environmental, Social, and Governance: three core pillars that reflect how responsibly and sustainably a business operates.

Environmental

• How a company impacts the planet.
• Examples: carbon emissions, waste, pollution, resource use, and biodiversity.

Social

• How a company treats people.
• Examples: employees, community engagement, human rights, supply chain ethics.

Governance

• How a company is run.
• Examples: board structure, diversity, ethics, risk management, transparency.

Why ESG Reporting Is Becoming Essential in the UK

Several forces are driving the rise of ESG disclosures:

Investor expectations

Modern investors are clear: they prioritise sustainable and well-managed companies. In fact, 63% of investors avoid companies with poor ESG performance, even if the financial outlook is strong. If companies can prove sustainability action and credentials, they may gain better access to investment and lending, while those without credible disclosures face higher risk ratings.

Customer behaviour

Consumers care deeply about sustainability and ethics, with three-quarters of customers expecting companies to actively address ESG issues. Brand preference, loyalty, and purchasing decisions are increasingly influenced by sustainability.

Supply chain pressure

Large companies are pushing ESG expectations down the supply chain. That means SMEs are often required to provide carbon data, diversity information, or sustainability policies before winning tenders or contracts.

Global alignment

With new and emerging global frameworks, from TCFD to the EU’s CSRD (more on this later), reporting is becoming more standardised and detailed. UK organisations with EU operations, international investors, or global supply chains are expected to keep pace.

A shift in corporate accountability

There is increasing recognition that a company’s sustainability performance is directly linked to its financial performance and risk profile. 

The Core ESG Reporting Requirements in the UK

The UK does not have one single ESG law. Instead, ESG reporting requirements sit across a number of regulations. Below is a clear overview of each: who they apply to, what they require, and why they matter.

Companies Act 2006: Strategic/Directors’ Report Requirements

Many UK companies must produce a Strategic Report or Directors’ Report as part of their annual accounts. These reports must include certain non-financial disclosures relating to ESG matters.

What needs to be included?

Companies must detail how they manage:

• Environmental impacts
• Human rights
• Social and community involvement
• Diversity at the board, senior management, and company levels
• Key risks and how they are mitigated
  

For many organisations, this is the baseline for ESG reporting and a requirement that extends far beyond sustainability-focused industries.

Streamlined Energy and Carbon Reporting (SECR)

SECR is one of the most significant ESG-related requirements in the UK, ensuring transparent reporting of energy use and carbon emissions. SECR is often a company’s first formal step into carbon accounting and provides a foundation for broader sustainability reporting.

Who does SECR apply to?

• All quoted companies (a company whose shares are traded on a stock exchange)
• Large unquoted companies
• Large LLPs
  

A company is considered “large” if it meets any two out of three criteria for two consecutive years:

• Turnover £36 million or more
• Balance sheet total £18 million or more
• 250+ employees

What must be reported?

Requirements differ slightly between quoted and unquoted entities. 

Quoted companies must report:

• Global energy use
• GHG emissions (scope varies)
• Energy efficiency actions
• Methodologies used
• At least one intensity ratio
  

Large unquoted companies and LLPs must report:

• UK energy use (if exceeding 40MWh)
• Associated GHG emissions
• Intensity ratios
• Methodologies
• Energy efficiency improvements
  

Reports must be included in the company’s Directors’ Report, ensuring they are publicly accessible.

Climate-related Financial Disclosures 

Reporting on climate change has moved beyond carbon footprinting and now requires strategic-level consideration of climate-related financial risks and opportunities: a crucial area for investor confidence. 

Who must comply?

The recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) are now incorporated into the Financial Conduct Authority (FCA) UK Listing Rules and apply to: 

• Equity shares (commercial companies)
• Equity shares (international commercial companies secondary listing)
• Non-equity shares and non-voting equity shares
• Equity shares (transition)

TCFD-aligned reporting is mandatory for:

• UK Public Interest Entities (>500 employees)
• AIM companies (>500 employees)
• Other UK companies (over 500 employees and £500m turnover)

Additionally, many organisations now voluntarily adopt TCFD because of investor expectations.

What must companies disclose?

TCFD reporting focuses on four pillars:

1. Governance: how climate issues are overseen
2. Strategy: climate risks, opportunities, and resilience
3. Risk management: how risks are identified and managed
4. Metrics & targets: emissions, science-based targets, climate KPIs

Energy Savings Opportunity Scheme (ESOS)

ESOS is a mandatory energy audit scheme for the UK’s largest businesses. While not strictly carbon reporting, it plays a critical role in ESG strategy. ESOS forces companies to understand their energy waste, often revealing opportunities that pay for themselves quickly.

Who does ESOS apply to?

Most organisations with:

• 250+ employees, or
• £44m+ turnover and £38m+ balance sheet total

What do companies need to do?

Every four years, qualifying companies must:

• Conduct comprehensive audits of all energy use
• Identify cost-effective savings opportunities
• Notify the Environment Agency
• Maintain an evidence pack
• Ensure certification or lead assessor sign-off

Non-Financial Reporting Directive (NFRD) and Corporate Sustainability Reporting Directive (CSRD)

While these originate from the EU, they still impact many UK businesses. This is because even for UK companies not directly in scope, supply chain pressure means CSRD-aligned data collection is becoming essential.

NFRD (the older framework)

The NFRD required around 11,000 large EU companies to publish environmental and social information. However, it lacked consistency and comparability.

CSRD (the new, significantly expanded framework)

The CSRD increases the number of companies required to report from 11,000 to an estimated 50,000. It introduces:

• Mandatory reporting under the new European Sustainability Reporting Standards (ESRS)
• Double materiality assessments
• Detailed environmental and social disclosures
• Digital tagging (XBRL)
• Limited assurance requirements

Which UK companies are affected?

You must comply with CSRD if you are:

• A UK company with an EU subsidiary meeting CSRD thresholds
• A UK company listed on an EU-regulated market
• A UK parent of a group with significant EU activity
• A supplier to organisations that must comply (practically, this includes thousands of SMEs)

Emerging Frameworks

UK Sustainability Reporting Standard (SRS)

The UK government is seeking to standardise ESG reporting and has set an intention to implement a UK-endorsed ISSB reporting standard under the UK SRS. This is proposed to incorporate the following disclosures:

• IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information
• IFRS S2: Climate-related Disclosures

This will initially be voluntary, but this will likely become mandatory for certain entities.

Voluntary Frameworks That Strengthen ESG Reporting

In addition to mandatory regulations, many companies choose to report against voluntary ESG frameworks that strengthen transparency and benchmarking. Companies often combine these voluntary standards with mandatory reporting for a more robust and credible ESG approach. 

These include…

GRI (Global Reporting Initiative)

The most widely used ESG reporting standard globally. It provides comprehensive, multi-topic disclosure guidance.

SASB Standards

Industry-specific standards that help companies disclose financially material sustainability information.

SBTi (Science-Based Targets Initiative)

Used to set validated carbon reduction targets aligned with climate science.

B Corp Certification

A holistic, demanding framework that evaluates social and environmental performance.

ISO Standards (e.g., ISO 14001, ISO 50001, ISO 14064)

Used to formalise environmental and energy management processes.

CDP (formerly Carbon Disclosure Project)

Focus on environmental issues including climate change, water security, and supply chain sustainability.

How to Get Started With ESG Reporting: A Step-by-Step Roadmap

If ESG reporting feels overwhelming, this simplified process will help you begin with clarity and confidence.

Step 1: Determine which regulations apply to you

Map out your obligations under SECR, TCFD, ESOS, the Companies Act, and CSRD.

Step 2: Collect your baseline data

Gather environmental, social, and governance data across:

• Energy use
• Carbon emissions (scopes 1, 2, and relevant scope 3)
• Employee demographics and wellbeing
• Diversity and inclusion metrics
• Anti-corruption practices
• Community involvement
• Supply chain risks
• Policies and governance structures

Step 3: Conduct a materiality assessment

Identify which ESG topics matter most to your business and your stakeholders. This ensures your reporting focuses on what is relevant and impactful.

Step 4: Set realistic goals and KPIs

Good goals are measurable, time-bound, and aligned to your business strategy. Examples include:

• Achieving net-zero by a specific year
• Improving board diversity
• Reducing waste by X%
• Increasing community investment

Step 5: Develop an ESG strategy or roadmap

Use your data and goals to build a structured plan that outlines:

• Priorities
• Timelines
• Responsible teams
• Investment needs
• Governance oversight

Step 6: Consider external verification

Independent assurance builds trust in your data and strengthens accountability, especially for investor relations. Of course, here at Hope Solutions we are available to support businesses through this whole process (find out how here!)

Step 7: Communicate your findings

Your ESG report should be:

• Transparent
• Data-driven
• Honest about challenges
• Clear about progress and next steps
  
  

Consistency is key. ESG reporting should become part of your annual cycle, not an isolated task.

Common Challenges (and How To Overcome Them)

ESG reporting is still new territory for many organisations. Here are some frequent challenges and ways to address them.

Data collection is difficult

Many companies lack systems to collect reliable ESG data. Start small, focus on core metrics, and invest gradually in systems that automate data collection.

ESG feels overwhelming

Frameworks and regulations can appear complex. Prioritise what’s mandatory first, then build from there (a phased approach works best).

Limited resources or expertise

Smaller organisations often lack in-house sustainability specialists. Work with external partners (like Hope Solutions) to guide the process, build frameworks, and upskill your internal team.

Fear of criticism or greenwashing

Companies worry about publicly disclosing imperfect data and yet, transparency beats perfection. Stakeholders prefer evidence of progress over silence.

The Future of ESG Reporting in the UK

ESG reporting in the UK is evolving rapidly, bringing greater clarity to what it means to be a truly responsible business. As frameworks and standards become more aligned, companies now have clearer expectations to follow and a more consistent benchmark for best practice. This alignment is helping organisations move from simply reporting sustainability data to taking meaningful, measurable action.

One significant shift is the growing emphasis on social impact. Traditionally, the “S” in ESG has been harder to quantify, but improvements in data collection and reporting tools are making it easier for organisations to demonstrate the broader value they create - for employees, for communities, and for society as a whole - beyond financial performance.

Environmental reporting is also expanding. New requirements around climate-related financial risks, nature, and biodiversity mean organisations will need to take a more forward-looking approach. By assessing both current and potential future risks, businesses can strengthen their resilience and give investors the information they need to make well-informed decisions.

In parallel, more organisations across the UK are adopting ESG reporting, creating an opportunity for larger businesses to support smaller partners. Sharing tools, knowledge, and best practices can help SMEs (who often have fewer resources) meet rising expectations and drive sustainability improvements across entire supply chains.

As ESG reporting becomes more sophisticated and widespread, it will enable better decision-making, increase transparency, and build trust with investors, stakeholders, and communities. Ultimately, these advancements will help drive sustained positive impact for people, businesses, and the environment.

Conclusion

ESG reporting is reshaping corporate responsibility in the UK. Whether driven by regulation, customer expectations, investor scrutiny, or internal values, businesses that embed ESG principles into their decision-making will thrive in an increasingly transparent and sustainability-focused world.

The key is to start early, build reliable processes, and treat ESG as an ongoing journey: not a one-off exercise.

If you’d like help developing your ESG strategy, gathering data, or preparing disclosures, we’re here to support you at every step.

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