What industrial companies need to know about ESG reporting

The obligation to report ESG information stems primarily from European Union regulations supporting the EU's climate policy, including the Corporate Sustainability Reporting Directive (CSRD) and the Fit for 55 legislative package. The most significant legal act is the Corporate Sustainability Reporting Directive (CSRD), which replaced the previous Non-Financial Reporting Directive (NFRD). The objective of the CSRD is to standardise ESG reporting and improve the quality, consistency, and comparability of sustainability-related disclosures.

The regulations that entered into force in 2024 significantly broaden the range of entities subject to mandatory sustainability reporting. In practice, this means that ESG reporting is no longer limited to the largest listed corporations but also extends to a substantial number of medium-sized industrial companies. Sustainability reports must be prepared in accordance with the European Sustainability Reporting Standards (ESRS), which specify in detail the information, metrics, and disclosures that companies are required to provide.

It should be noted that the CSRD and ESRS framework is currently undergoing further simplification at the European Union level. For this reason, companies should always verify the latest regulatory requirements applicable to their specific circumstances before commencing the reporting process.

Sustainability statements are also subject to external assurance by a statutory auditor. Consequently, all information included in the report must be supported by reliable evidence, fully traceable, and capable of being independently verified.

The obligation to prepare sustainability reports is being introduced gradually and has recently been modified by the EU's "Stop-the-Clock" Directive and the Omnibus I package, which postponed the implementation timeline for most companies.

The current reporting schedule is as follows:

• For the 2024 financial year, the reporting obligation applied to the largest public-interest entities, including listed companies, banks, and insurance companies with more than 500 employees, that were previously subject to the Non-Financial Reporting Directive (NFRD).
• For financial years beginning in 2027, the reporting obligation will extend to the remaining large undertakings and parent companies of large groups that continue to fall within the scope of the CSRD following the legislative amendments. Their first sustainability reports will be published in 2028. In practice, this will apply primarily to the largest companies meeting the revised thresholds introduced under the Omnibus I package.
• Listed SMEs that were originally expected to begin reporting under the previous implementation timetable have also been affected by the Omnibus reforms. Under the current legislative framework, they are no longer subject to mandatory CSRD reporting, although they may choose to report voluntarily using the Voluntary Sustainability Reporting Standard for SMEs (VSME).

For industrial companies, this means that mandatory ESG reporting will primarily apply to the largest organisations. Nevertheless, many smaller businesses will also need to collect environmental and social data to meet the requirements of their customers, financial institutions, or business partners. Increasingly, large companies require suppliers to provide information on greenhouse gas emissions, energy consumption, and environmental performance, regardless of whether those suppliers are themselves legally required to publish sustainability reports.

As the CSRD framework continues to evolve through the Omnibus legislative package, companies should closely monitor both national implementing legislation and future amendments that may affect the scope of entities subject to mandatory reporting.

The industrial sector accounts for a significant share of Europe's total energy consumption and greenhouse gas emissions. In many industries, process-related and energy-related emissions are among the key factors influencing business competitiveness. This is particularly true for sectors such as:

The scope of ESG reporting is extensive and covers both quantitative and qualitative information. Although the term "ESG report" is widely used in business practice, under the CSRD the formal requirement relates to the Sustainability Statement, which forms part of a company's management report.

For industrial companies, the environmental section is typically the most comprehensive part of the report. It should include, among other things:

• total energy consumption and the breakdown of energy sources,
• greenhouse gas emissions, including the company's carbon footprint and Scope 1, Scope 2, and Scope 3 emissions,
• fuel and water consumption,
• waste generation and recycling rates,
• the company's environmental impacts,
• measures taken to reduce emissions, investments in energy efficiency, and the use of renewable energy sources,
• the company's climate-related targets.

One of the most important aspects of the environmental section is the disclosure of CO₂ emissions, which should be reported across three categories.

• Scope 1 – direct emissions, for example from the combustion of natural gas in process boilers or other on-site fuel combustion sources,
• Scope 2 – indirect emissions associated with purchased energy, particularly electricity, heat, steam, or cooling,
• Scope 3 – indirect emissions generated across the company's value chain, including those related to purchased materials, transportation, business travel, product use, and other upstream and downstream activities.

The social section of the report typically covers:

• occupational health and safety,
• workplace accident rates,
• employee turnover,
• workforce composition,
• employee training and development,
• remuneration policies,
• human rights,
• relationships with local communities,
• workforce diversity.

In industrial facilities, particular attention is paid to process safety, occupational health, and measures implemented to reduce workplace risks and prevent accidents.

The governance section includes information on, among other topics:

• the company's governance structure,
• ESG oversight and accountability,
• compliance policies,
• anti-corruption measures,
• risk management,
• business ethics,
• procurement policies,
• the responsibilities of the management board in achieving climate-related objectives.

Companies are also increasingly expected to explain how climate-related risks are integrated into their overall business strategy, including emissions reduction targets and long-term energy and climate transition plans.

One of the fundamental concepts underpinning ESG reporting is the principle of double materiality. It requires companies to assess both the impact of their operations on the environment and society, and the impact that environmental and social issues may have on the company's financial performance. In practice, this means that businesses must evaluate not only how their activities affect the outside world but also how external factors - such as rising energy prices, increasing carbon costs, climate-related risks, or regulatory changes - may influence their operations, profitability, and long-term resilience.

Preparing an ESG report requires companies to collect and organise a substantial amount of technical, environmental, and operational data. In industrial enterprises, this primarily includes information on energy and utility consumption, energy load profiles, operating parameters of production facilities, and production data necessary to assess process efficiency.

Other essential datasets include greenhouse gas emission factors, information required to calculate the company's carbon footprint, waste management records, and environmental documentation such as permits, licences, and statutory registers. These data are typically sourced from ERP, EMS, and BMS platforms, utility monitoring systems, production management systems, and on-site metering equipment.

Given the breadth of information required, many industrial companies begin preparing for ESG reporting by carrying out an energy audit, a greenhouse gas emissions inventory, or a carbon footprint assessment. These activities help identify data gaps, establish robust data collection processes, and prepare the organisation for ongoing reporting in accordance with the applicable sustainability reporting standards.

ESG reporting can serve as a tool supporting cost management, risk management, and investment planning. It enables companies to identify processes that generate the highest emissions and energy consumption, as well as to monitor progress in decarbonisation efforts and the broader energy transition within industrial facilities.

In industrial companies, ESG reporting also supports improvements in energy efficiency. Analysing energy consumption, equipment performance, heat recovery potential, and renewable energy integration helps reduce both operating costs and CO₂ emissions. In practice, ESG becomes a tool that supports both regulatory compliance and enhanced competitiveness.

ESG reporting will become one of the key elements of industrial operations in Europe in the coming years. As investor expectations and financial institutions’ requirements continue to grow, the importance of environmental, energy, and social data will steadily increase. For many companies, this will require the implementation of new processes related to monitoring energy consumption, CO₂ emissions, and the overall efficiency of industrial operations.

In practice, preparing for ESG reporting requires combining environmental, technical, and financial expertise. Particular importance is placed on data related to energy efficiency, carbon footprint, and process emissions, as these areas have the greatest impact on the operating costs of energy-intensive industries. Increasingly, ESG reporting is also becoming a starting point for investment decisions related to decarbonisation, energy recovery systems, cogeneration, and the use of renewable energy sources.

For the industrial sector, ESG is no longer merely a compliance requirement, but a tool for building competitive advantage and long-term resilience against market and energy-related changes. Companies that begin analysing environmental data and implementing optimisation measures early will be better prepared for future regulations and will also be more likely to benefit from available funding programmes.