Sustainability is no longer an optional endeavour—it is a strategic imperative. Our latest report, Building a Sustainable Future: Investigating the Role of Finance Leaders, sheds light on the evolving landscape of ESG (Environmental, Social, and Governance) reporting. This blog reflects the key findings from our research and offers actionable recommendations for finance professionals striving to meet new regulatory expectations and create long-term value.
The Regulatory Shift: A Catalyst for Change
Our report outlines the significance of the UK’s upcoming adoption of the International Sustainability Standards Board (ISSB) guidelines, particularly IFRS S1 and S2. The UK Sustainability Reporting Standards (UKSRS) will align financial disclosures with sustainability goals, covering both climate-related and broader ESG risks. The government is set to formalise this shift in 2025, with implementation anticipated by 2026. This will primarily affect UK-listed entities initially, but its broader implications for all businesses are clear.
Finance leaders must act now to avoid being caught unprepared. Even businesses not immediately in scope can gain competitive advantage by embedding sustainability metrics early.
Current State of Sustainability Reporting
Our survey of 110 finance leaders across the Thames Valley revealed a varied picture:
- 71% are aware of sustainability reporting standards such as TCFD and SECR, but only 11% consider themselves highly familiar with the details.
- 29% of finance teams are actively involved in sustainability reporting, but only 36% of organisations produce Corporate Sustainability Reports (CSRs).
- Large firms lead in structured reporting, with 71% producing annual CSRs, while only 7% of small firms do the same.
These findings highlight that while awareness is increasing, deep familiarity and consistent action are still lacking, particularly among smaller businesses.
ESG Integration and Decision-Making
Sustainability scored 6.5 out of 10 in terms of importance in decision-making across organisations, with medium-sized firms rating it highest at 7.3. Medium-sized companies appear more agile, embedding sustainability into strategic planning. Larger firms face competing priorities despite having greater resources, while smaller organisations often prioritise short-term operational concerns.
This presents finance leaders with a challenge: to champion sustainability as a business enabler rather than an obligation. By doing so, businesses can unlock growth, improve resilience, and align with stakeholder expectations.
Benefits of Sustainability Reporting
Our report underscores the substantial value sustainability reporting brings:
- Transparency and Trust: Reporting builds investor confidence and strengthens relationships with stakeholders.
- Risk Management: Financial disclosures help businesses identify ESG-related risks and opportunities, fostering long-term resilience.
- Operational Gains: Tracking resource use often leads to efficiency improvements, driving cost savings.
- Market Competitiveness: Companies with strong ESG practices are better positioned to attract capital and secure partnerships.
Key Challenges and Recommendations
1. Strengthen Governance
Finance leaders must work closely with their boards to ensure ESG strategies are integrated into financial decision-making. Our findings show that 58% of ESG policies are led by senior leadership, indicating the importance of top-down accountability.
2. Build Data Capabilities
Reliable and consistent sustainability data is vital for effective reporting. Organisations should invest in data infrastructure to capture, analyse, and report on ESG metrics accurately.
3. Collaborate and Engage
Engaging with stakeholders—including employees, investors, and regulatory bodies—can improve ESG reporting and create shared value. Smaller firms, in particular, can benefit from external partnerships to bridge knowledge and resource gaps.
Preparing for Regulatory Changes
The path to compliance involves more than meeting deadlines—it requires embedding sustainability into organisational culture and strategy. Our report recommends the following steps:
- Conduct a Gap Analysis: Identify areas where current practices fall short of ISSB standards.
- Strengthen Cross-Functional Collaboration: Form cross-departmental teams to align ESG initiatives with operational goals.
- Monitor Regulatory Developments: Stay informed on updates from the FCA and government consultations.
Conclusion
The findings in our report illustrate both progress and ongoing challenges in sustainability reporting. While large firms often lead the way, small and medium-sized organisations have the opportunity to innovate and adapt. By embedding sustainability into core financial operations, finance leaders can drive resilience, enhance reputation, and seize new opportunities in an ESG-conscious economy.
The regulatory horizon presents challenges, but proactive preparation can turn compliance into a competitive advantage. As finance leaders, you are instrumental in shaping a sustainable future for your organisation and beyond.