ESG Reporting: What Finance Teams Must Prepare For

Environmental, social and governance (ESG) reporting has moved from a peripheral concern to a mainstream requirement, and finance teams increasingly find themselves at the centre of it. What began as voluntary disclosure by larger companies has developed into a more formal, more demanding and more widely applicable set of requirements, and the direction of travel is toward sustainability reporting becoming a standard part of corporate reporting much as financial reporting is. For finance teams, this means ESG reporting is something to prepare for — to understand what applies, to assess what is coming, and to build the capability to meet it — rather than something to address only when it becomes mandatory.

This guide is written for Financial Controllers and finance leaders. It covers why finance is increasingly involved, the direction of travel, the UK requirements in practice (Streamlined Energy and Carbon Reporting, climate-related financial disclosures, the UK Sustainability Reporting Standards and the EU regime for UK groups), greenhouse gas scopes, what finance teams will need to do, the Financial Controller’s role in data controls and assurance, the practical challenges and how to prepare. It is an orientation to a fast-moving area rather than a technical manual: the legislation, regulator rules and your auditors remain the references for the detail, and the position described here is as at late 2026.

Why Finance Is Increasingly Involved in ESG Reporting

ESG reporting was historically often handled outside finance — by sustainability teams, corporate affairs, or as a voluntary communications exercise — but it is increasingly becoming a finance responsibility. As it becomes more formalised, with standards, legal requirements and the expectation of reliable, assured information, it needs the rigour, controls and reporting discipline finance brings. Information that must be reliable, consistent and assurable needs the kind of process finance is built to run.

The integration of sustainability information with financial reporting is also drawing finance in. Climate disclosures sit in the strategic report alongside the financial statements; the ISSB-based standards are explicitly framed as sustainability-related financial disclosures, connected to the same reporting entity and period as the accounts. Much of the source data — energy invoices, fuel cards, travel bookings, purchase ledger spend — already flows through finance systems, and the assurance that sustainability reporting increasingly attracts parallels the external audit. A finance team should expect ESG reporting to become part of its remit rather than something handled entirely elsewhere.

The Direction of Travel

The direction of travel is toward more formalised, more demanding and more widely applicable requirements. Reporting has been moving from voluntary, varied disclosure toward standardised reporting, with standards and regulation formalising what must be reported and how. Requirements have been expanding in scope — covering more topics, demanding more reliable information — and in application, reaching more businesses as thresholds and rules develop.

That does not mean a straight line. In both the UK and the EU, 2025 and 2026 brought simplification as well as expansion: the EU narrowed and delayed its regime, and the UK government is consulting on a wider reform of company reporting. The prudent finance team therefore follows the developments, assesses what applies to its own business and when, and prepares for where reporting is heading rather than only where it is today.

The UK Requirements in Practice

Streamlined Energy and Carbon Reporting (SECR)

SECR has applied since financial years beginning on or after 1 April 2019. Quoted companies report their global Scope 1 and 2 greenhouse gas emissions and energy use; large unquoted companies and large LLPs (those meeting the Companies Act “large” tests) report UK energy use and associated emissions, covering at least gas, electricity and transport fuel. Both must give the prior-year comparative, at least one intensity ratio, the methodology used and the energy efficiency action taken in the year. Those consuming 40,000 kWh or less in the UK in the period can state that they are low energy users. The disclosure sits in the directors’ report (or the energy and carbon report for LLPs). The government’s Environmental Reporting Guidelines set out the detail. Note that the Companies Act size thresholds rose for financial years beginning on or after 6 April 2025, so check whether the business still falls in scope.

Climate-related financial disclosures (TCFD-aligned)

The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022, with equivalent regulations for LLPs, require climate-related financial disclosures in the strategic report for periods beginning on or after 6 April 2022. In broad terms they apply to traded, banking and insurance companies and AIM companies with more than 500 employees, and to other companies and LLPs with more than 500 employees and turnover above £500 million. The disclosures follow the four TCFD pillars — governance, risk management, strategy (including scenario analysis) and metrics and targets. Separately, the FCA’s listing rules have required TCFD-aligned disclosures from commercial companies on a comply-or-explain basis. Government guidance on climate-related financial disclosures explains the scope tests.

UK Sustainability Reporting Standards (UK SRS)

The UK SRS are the UK-endorsed versions of the ISSB’s IFRS S1 (general sustainability-related disclosures) and IFRS S2 (climate-related disclosures). After a consultation in 2025, the Department for Business and Trade published the final UK SRS S1 and S2 in February 2026. They are currently available for voluntary use; any mandatory requirement for companies generally would need future legislation (see the government’s UK SRS guidance and the ICAEW’s UK SRS resources).

For listed companies, the FCA has now confirmed rules (published at the end of September 2026) replacing its TCFD-aligned listing rule with UK SRS-aligned disclosures for accounting periods beginning on or after 1 January 2027, so first reports appear in 2028. As finalised, the substantive UK SRS disclosures, including Scope 3, operate on a comply-or-explain basis, with some transitional relief; issuers must also state whether they have obtained third-party assurance. Listed groups should check the detail with their advisers. For private companies, the government’s Modernising Corporate Reporting consultation (open until 30 November 2026) asks how company reporting should be restructured, so the shape of future requirements for large unlisted companies is still being decided.

EU CSRD for UK groups with EU operations

UK groups with EU subsidiaries or significant EU turnover may be caught by the EU Corporate Sustainability Reporting Directive, either through an EU subsidiary that meets the thresholds or, later, at non-EU parent level. The EU’s Omnibus simplification package has since raised the size thresholds and pushed back timelines, taking many groups out of scope. Because national transposition and final thresholds vary, a UK group with EU operations should confirm its position entity by entity with its auditors.

Greenhouse Gas Scopes 1, 2 and 3

Almost every framework above measures emissions using the Greenhouse Gas Protocol, so a Financial Controller needs the vocabulary:

• Scope 1 — direct emissions from sources the business owns or controls: gas boilers, company vehicles, refrigerant leaks, on-site fuel.
• Scope 2 — indirect emissions from purchased electricity, heat and steam, usually reported on both a location-based and a market-based method.
• Scope 3 — all other indirect emissions in the value chain across 15 categories, including purchased goods and services, business travel, employee commuting, upstream transport and use of sold products. It is usually the largest and hardest to measure, and is often estimated from spend data in the first instance.

The finance angle is that activity data for all three often sits in finance systems: utility invoices, fuel cards, expenses and the purchase ledger. Spend-based Scope 3 estimates depend directly on clean supplier coding, which is why data quality in the finance function is a sustainability issue as much as a reporting one.

What Finance Teams Will Need to Do

As requirements apply, finance teams will need to report the required information — gathering, measuring and disclosing it to the standard required, much as they report financial information. This is substantial, because ESG information often spans data the business has not previously captured in a reporting-ready way, requiring new collection, measurement and reporting processes.

Finance teams will also need the controls to make the information reliable, because sustainability reporting increasingly demands the reliability and assurance that financial reporting requires. And they will need to integrate it with the business’s wider reporting — the annual report timetable, the board calendar, budgets and capex appraisals that now include carbon — and to manage it as an ongoing obligation rather than a one-off project. It extends the finance function’s reporting role into a new domain.

The Financial Controller’s Role in Data Controls and Assurance

The Financial Controller is well placed to bring sustainability data up to the standard of the ledger. In practice that means:

• Defining the reporting boundary consistently with the financial statements (operational or financial control) and documenting it.
• A data inventory for each metric: source, owner, frequency, conversion factor and the person who reviews it.
• Controls like those over financial data: reconciliations of energy volumes to invoices, review and sign-off, segregation of duties, version control over emission-factor spreadsheets and an audit trail for estimates.
• A written methodology covering estimation, restatements and changes in emission factors, so the numbers are repeatable year on year.
• Assurance readiness: limited assurance is the common starting point, and the evidence an assurer wants — source documents, reconciliations, review evidence — is the same evidence a Financial Controller prepares for audit.
• Consistency checks between the sustainability narrative and the financial statements, such as climate assumptions in impairment reviews and asset useful lives, which the FRC has repeatedly highlighted in its corporate reporting reviews.

None of this is new to a good Financial Controller: the principles in our guide to designing financial controls apply directly to energy and emissions data, and the evidence file an assurer asks for looks much like the one described in Financial Controller audit preparation. Bringing the sustainability timetable into the year-end statutory accounts timetable avoids a last-minute scramble for numbers when the annual report is being finalised, and agreeing scope with the auditors early in the year makes the conversation at year end far easier.

The Practical Challenges of ESG Reporting

The data is the central challenge. ESG reporting requires data the business may not gather or hold in a reporting-ready form — environmental data, workforce data and governance information that has not traditionally been part of financial reporting. Establishing collection and measurement often needs new processes, systems and sources, and it is frequently underestimated; supplier data for Scope 3 is the classic example.

The evolving requirements are another challenge — standards and rules are developing, vary by jurisdiction and are genuinely complex, so keeping current is demanding. Measurement and methodology matter too, because environmental metrics involve estimates and judgements less established than financial measurement. And assurance raises the standard the information must meet. Anticipating these challenges lets a finance team build capability over time rather than confronting everything at once, and the data in particular rewards early attention because it takes time to establish.

How to Prepare

Preparation should be deliberate and in good time. The first step is to assess what applies to the business — SECR, the 2022 climate regulations, FCA listing rules, CSRD through EU entities, or customer and lender requests that often arrive before any legal duty — and when. Specialist input may be warranted, but the finance team should understand enough to scope its obligations and timing.

With obligations understood, build capability over time: a practical sequence is

• Map the requirements and voluntary requests (lenders, customers, investors) to the reporting calendar.
• Agree ownership between finance, operations, HR and any sustainability lead, with a named finance owner for the numbers.
• Build the data inventory and close the biggest gaps first, starting with Scope 1 and 2.
• Document the methodology and put controls around it, then run a dry-run year before disclosures become mandatory or assured.
• Consider systems, including whether the ERP or a carbon accounting tool should hold the data.

Where a system change is on the cards anyway, build the sustainability data requirements into it from the start; our page on Financial Controllers for ERP and system change covers that kind of project.

Stay current with the developments, because obligations may change. This is the Financial Controller’s view of what finance teams must prepare for; for group-wide reporting across several entities, our page on Financial Controllers for multi-entity groups covers the consolidation side.

ESG Reporting and the Finance Function’s Evolving Role

Finance’s growing involvement in ESG reporting is part of a broader evolution of the function’s role — broader reporting, broader analysis, a bigger part in decisions. As sustainability information becomes subject to the rigour, controls and assurance finance provides, finance becomes its natural home. ESG reporting is best seen not as an alien imposition but as an extension of the reporting role into a new and growing area.

The capabilities finance brings — reporting discipline, controls, data management, assurance-readiness — are exactly what the ESG domain needs, and finance professionals who can apply them become more valuable as requirements grow. For investor-facing businesses, see also Financial Controllers for investor reporting and governance and our guide to preparing statutory accounts, the reporting alongside which sustainability disclosures now sit. If you are hiring, our Financial Controller recruitment service covers permanent, interim and fractional Financial Controllers.

Frequently Asked Questions

Are the UK SRS mandatory?

Not for companies generally. They are available for voluntary use. The FCA’s UK SRS-aligned listing rules apply to in-scope listed issuers for periods beginning on or after 1 January 2027, largely on a comply-or-explain basis.

Does SECR apply to my company?

It applies to quoted companies and to unquoted companies and LLPs that meet the Companies Act definition of large. Smaller companies are not required to report, though lenders and customers increasingly ask for the same data.

Do we have to report Scope 3?

SECR does not require it. Under the UK SRS-aligned listing rules it is comply or explain, with transitional relief in the first year. Many businesses start with spend-based estimates.

Who should own ESG reporting — finance or a sustainability team?

Usually both: a sustainability lead owns strategy and targets, while finance owns the numbers, the controls and the link to the annual report.