ESG disclosure: what finance teams need to know

ESG disclosure: what finance teams need to know

ESG disclosure has moved from a niche reporting exercise to a core finance function in a remarkably short space of time. What was once handled informally, or delegated entirely to sustainability teams, now sits firmly within the scope of group finance, audit committees, and CFO offices. For finance teams managing complex, multi-entity organisations, understanding what ESG disclosure actually requires, and how to build a process that holds up, is no longer optional.

This post breaks down the regulatory context, the frameworks shaping ESG reporting today, and the practical steps finance teams can take to get ahead of the complexity rather than react to it.

The Regulatory Landscape Driving ESG Disclosure

Regulatory pressure is the primary force accelerating sustainability disclosure requirements across markets. In the EU, the Corporate Sustainability Reporting Directive (CSRD) has significantly expanded the scope of mandatory non-financial reporting, bringing thousands of companies into scope that were previously exempt. The European Sustainability Reporting Standards (ESRS) sit beneath CSRD and define exactly what must be disclosed, covering everything from climate-related risks to social and governance metrics.

Beyond Europe, the International Sustainability Standards Board (ISSB) has published its IFRS S1 and S2 standards, which are being adopted or referenced by regulators in multiple jurisdictions. In the UK, mandatory climate-related financial disclosures aligned with TCFD recommendations are already in effect for many organisations. The overall direction is clear: ESG compliance is becoming a legal obligation, not a voluntary commitment, and the pace of change is not slowing down in 2026.

Key ESG Frameworks Finance Teams Work With

Several frameworks shape how organisations structure and present their ESG reporting, and finance teams need to understand which ones apply to their business. The most widely used include the Global Reporting Initiative (GRI), which focuses on impact-based disclosure; the ISSB standards, which take a financial materiality approach; and the Task Force on Climate-related Financial Disclosures (TCFD), which specifically addresses climate risk within financial reporting.

The practical challenge is that these frameworks overlap but are not identical. A company reporting under CSRD using ESRS will find some alignment with TCFD and GRI, but meaningful differences in scope, definitions, and data requirements remain. Finance teams increasingly need to map their data collection against multiple frameworks simultaneously, which places real demands on how information is gathered, validated, and stored across the group.

Where Finance Teams Fit Into ESG Reporting

Finance teams are not peripheral to ESG reporting; they are central to it. Sustainability disclosure increasingly requires the same rigour applied to financial statements: consistent methodology, audit trails, internal controls, and sign-off processes. Regulators and auditors are beginning to treat ESG data with the same level of scrutiny as financial data, which means the informal spreadsheet-based processes many organisations have relied on are no longer sufficient.

The finance function brings something critical to ESG reporting that other departments often lack: a culture of data integrity, reconciliation discipline, and structured governance. Group finance teams are well-placed to own the consolidation of ESG data across subsidiaries, apply consistent definitions and conversion factors, and ensure that what gets disclosed externally is traceable back to source data. This is where the skills and systems already used for financial consolidation become directly applicable to sustainability reporting.

Common Data Challenges in ESG Disclosure

The data side of ESG disclosure is where most organisations hit friction. Unlike financial data, which flows through established ERP systems and general ledgers, ESG data is often scattered across operational systems, spreadsheets, and manual submissions from different parts of the business. Collecting it consistently across multiple entities, in different countries, with different reporting cycles, is a significant operational challenge.

Inconsistent definitions and methodologies

One of the most persistent problems is that the same metric, such as energy consumption or headcount, can be defined and measured differently across subsidiaries. Without a centralised approach to definitions and conversion factors, consolidated ESG figures can be unreliable even when individual entity data is accurate. This creates audit risk and undermines the credibility of the disclosure.

Data gaps and estimation

Many organisations simply do not have systems in place to capture all the data that ESG frameworks require. Where data is missing, estimation methodologies must be applied and documented. This is manageable when done systematically, but becomes a liability when it is inconsistent or undocumented. Finance teams need clear policies for how gaps are handled and how estimates are disclosed.

Building an ESG Disclosure Process That Holds Up to Scrutiny

A credible ESG disclosure process shares more in common with a financial close process than most organisations initially expect. It requires defined data owners at entity level, a structured collection and validation workflow, reconciliation checks, and a clear audit trail from source data to the final reported figure. Building this from scratch is possible, but it requires deliberate design rather than ad hoc responses to regulatory deadlines.

The starting point is usually a materiality assessment, which determines which ESG topics are relevant to the business and therefore which data points need to be collected. From there, the process needs to define who collects what, when, and how it gets reviewed before consolidation. Governance matters here: the same discipline applied to financial sign-off should apply to ESG data sign-off at entity and group level.

For finance teams already managing group consolidation across multiple legal entities, the infrastructure for ESG disclosure does not need to be built in isolation. AARO Disclosure is our purpose-built solution for exactly this challenge, extending the structured, audit-ready consolidation approach we apply to financial reporting into the ESG domain. Rather than managing sustainability data through disconnected tools, teams can bring ESG collection and consolidation into the same controlled environment used for financial close.

The organisations that will handle ESG disclosure most effectively in 2026 and beyond are those treating it as a reporting discipline rather than a communications exercise. That means investing in process, governance, and the right infrastructure now, before regulatory deadlines force reactive and fragile workarounds. Finance teams are uniquely positioned to lead that work, and the groundwork many have already laid in financial consolidation is a stronger foundation than most realise. Explore how AARO Disclosure can support your team in building that process with confidence.