Why ESG reporting is becoming mandatory
For most large and mid-market companies, ESG reporting is no longer optional. A wave of regulation since 2023 has converted voluntary sustainability disclosure into a legal obligation — with assurance, penalties and supply-chain knock-on effects.
EU — CSRD (Corporate Sustainability Reporting Directive)
Replaces the older NFRD. Phased in from 2024 reporting (large EU public-interest entities) through 2026/2028 (large companies, listed SMEs and non-EU groups with significant EU revenue). Requires disclosure against the ESRS standards with mandatory limited assurance, moving toward reasonable assurance.
EU — CSDDD and CBAM
- CSDDD (Corporate Sustainability Due Diligence Directive) requires in-scope companies to identify, prevent and remediate human-rights and environmental harms in their operations and value chain.
- CBAM (Carbon Border Adjustment Mechanism) puts a carbon price on imports of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen — exporters into the EU must report embedded emissions.
United States — SEC and California
- The SEC adopted climate-related disclosure rules in 2024 (subject to ongoing legal challenges) requiring large filers to disclose material climate risks and Scope 1/2 emissions.
- California SB 253 and SB 261 require large companies doing business in the state to disclose Scope 1/2/3 emissions and climate-related financial risks.
United Kingdom
TCFD-aligned disclosures are mandatory for premium-listed companies, large private companies and LLPs. The UK is consulting on UK Sustainability Reporting Standards aligned with ISSB.
Even when not legally required: customer pressure
Banks request ESG data for sustainability-linked loans. Large customers (especially in automotive, retail and tech) require Scope 3 data from suppliers. Procurement teams use EcoVadis, CDP and supplier questionnaires. Tenders increasingly score ESG performance.
What this means for mid-market companies
If you sell to a CSRD-in-scope customer, you will be asked for ESG data even if you are not directly in scope. Starting now — with a defensible baseline year — is far cheaper than scrambling 6 months before a tender deadline.
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