ESG reporting: A compliance necessity or a business opportunity?
Mark Lumsdon-Taylor · Posted on: April 4th 2025 · read
As businesses worldwide face increasing demands for ESG transparency, a fundamental question arises: has reporting simply become a regulatory burden, or could it soon offer businesses significant long-term benefits?
At the recent Sustainable Foods conference in January, experts from various industries discussed these issues, emphasising both the risks of non-compliance and the opportunities available for companies that make ESG a central part of their strategy.
The growing necessity for ESG compliance
The regulatory framework for ESG reporting has changed significantly, and companies, especially those in industries with substantial environmental impacts, are now facing heightened scrutiny.
The introduction of regulations like the Corporate Sustainability Reporting Directive (CSRD) in Europe and the SEC’s proposed climate disclosure rules in the U.S. highlights this shift. While many businesses have resisted these demands, arguing that they are unnecessary or overly complex, the reality is that failure to comply with these regulations can expose companies to substantial legal and financial risks.
In addition to legal consequences, businesses that fail to prioritise ESG compliance may find themselves excluded from investment opportunities. As Alan Wilkinson, Head of Agrifoods at HSBC UK, highlighted, “ESG is becoming a crucial factor for investors. Companies with robust ESG practices are better positioned to attract capital, while those who ignore these issues risk being left behind.”
From Compliance Burden to Strategic Advantage
"Although the shift towards comprehensive ESG reporting may seem daunting, businesses that take a proactive approach can unlock a host of strategic advantages. By treating ESG as part of their long-term strategy, companies can improve resilience, reduce risks and drive growth."
Many companies have integrated sustainability practices from the outset, seeing these practices not as an additional burden but as a core component of their operational model. Emer Fardy, Group Sustainability & Human Rights Director at Hilton Foods, explained
When we first introduced sustainability into our business model, it wasn’t just about meeting regulatory requirements. It was about ensuring that we were well-prepared for the future, addressing risks before they became liabilities, and creating long-term value for our stakeholders.
This strategic engagement can demonstrate a company’s strength in the face of shifting market conditions and regulatory environments. Adopting sustainable practices allows businesses to safeguard their operations and remain competitive. By proactively addressing ESG risks such as climate change, resource scarcity and evolving regulations, companies can not only protect their operations but also identify opportunities for growth.
Leveraging ESG for competitive advantage
Businesses that engage in ESG reporting can also open up new market opportunities. For example, companies that meet ESG standards are more likely to enter higher-margin sectors, where sustainability plays an increasingly important role in consumer and investor decisions. Furthermore, organisations that can quickly respond to inquiries about their ESG practices are more likely to stand out in a crowded marketplace.
According to Catherine Howarth, “Being able to show effective management of ESG risks and opportunities builds trust with investors and consumers. It positions companies as leaders in sustainability, giving them an edge over competitors who may be lagging behind in their ESG practices.”
Moreover, actively engaging in ESG can improve employee retention and attract top talent. Today’s workforce, especially younger generations, is focused on working for organisations that prioritise social responsibility and sustainability. By adhering to ESG practices, companies can build a stronger connection with their employees, enhancing overall morale and loyalty.
Practical benefits: Saving money and reducing risk
The reality is that adopting sustainable practices can lead to significant cost savings in the long run. By focusing on reducing resource use, improving operational efficiency and lowering environmental impact, businesses can cut operational costs and increase profitability. Moreover, the potential for reducing fines and insurance premiums due to sustainability practices should not be overlooked.
Materiality is crucial for small and medium-sized enterprises (SMEs). SMEs often face resource constraints when it comes to ESG compliance, so it’s essential for them to concentrate on the most important issues that directly affect their business. For example, manufacturing companies might prioritise reducing their environmental impact, while service-based companies might focus on employee diversity and governance practices. As Emer Fardy emphasised, “The challenge for SMEs is often not about doing everything but about focusing on what matters most to their business—what is important to their operations and stakeholders.”
Preparing for Future Regulations
"Looking ahead, it’s clear that ESG regulations will continue to gain momentum, and businesses must be ready for even stricter compliance requirements. The growing demand for more extensive ESG reporting will likely extend to SMEs in the future. Catherine Howarth urges businesses to begin now, saying, “The regulatory environment is only going to become more demanding. It’s essential that businesses take action now to align their practices with the future of ESG reporting. The earlier you start, the better prepared you’ll be.”"
ESG as a strategic imperative
As businesses increasingly recognise the value of actively engaging with ESG issues, those that adopt these practices will position themselves for long-term success. ESG compliance is not merely a regulatory requirement; it is an opportunity for businesses to reduce risks, increase profitability and build a stronger reputation among investors, consumers and employees.
The time to act is now - those who do will reap the rewards for years to come.
