As sustainability reporting becomes a business essential rather than a “nice-to-have,” ESG reporting challenges are surfacing across various industries. From data fragmentation and regulatory uncertainty to limited resources and inconsistent KPIs, sustainability teams are navigating complex terrain to deliver accurate, audit-ready reports.
Whether you’re preparing for CSRD, SEC climate disclosure rules, or voluntary frameworks such as GRI or TCFD, the reality is clear: ESG reporting is no longer optional, it has become strategic. This guide explores the most pressing ESG reporting challenges and provides actionable solutions to help sustainability managers streamline their reporting processes and future-proof their strategies.
What is ESG reporting and why it (still) matters these days
Environmental, Social, and Governance (ESG) reporting, has evolved from a “nice-to-have” transparency exercise into a strategic and regulatory necessity. At its core, it’s the process of collecting, analyzing, and disclosing sustainability-related data that demonstrates how responsibly a company operates. But these days, ESG reporting is no longer just about compliance; it’s about credibility, resilience, and long-term business success.
Today, companies face growing pressure from all sides:
- Regulators demand greater transparency through frameworks like the EU’s Corporate Sustainability Reporting Directive (CSRD) and the UK’s Sustainable Disclosure Requirements (SDR). These require granular, verifiable ESG disclosures that can stand up to audit scrutiny.
- Investors increasingly integrate ESG indicators into valuation models to identify risks and opportunities linked to climate, social impact, and governance practices.
- Customers as well as employees expect brands to prove - not just claim - their sustainability impact, influencing purchasing decisions and talent attraction.
As MSCI notes in its Sustainability and Climate Trends to Watch for 2026, ESG reporting has become “a lens through which the financial system evaluates resilience.” Transparency isn’t just about ticking boxes, it’s about earning trust and mitigating risks in a volatile global economy.
For sustainability managers, this means ESG reporting sits at the intersection of regulatory compliance, stakeholder communication, and corporate strategy. Done right, it helps companies:
- Meet several disclosure requirements (CSRD, SEC, IFRS S1/S2) efficiently.
- Identify and manage operational and climate risks.
- Build investor confidence through comparable, high-quality data.
- Strengthen brand reputation and long-term stakeholder relationships.
Yet despite its growing importance, many organizations still find ESG reporting complex, fragmented, and resource-intensive and that’s where the challenges begin.
The top ESG reporting challenges in 2026
Even as ESG reporting becomes mainstream, the road to credible, data-driven sustainability reporting is far from smooth. According to EY, “as ESG reporting evolves from voluntary disclosure to regulated accountability, complexity and data burdens continue to rise.” Below, we will explore the most pressing ESG reporting challenges organisations face in 2026 and how to overcome them.
1. Data collection: the foundational challenge
Data is the lifeblood of ESG reporting — but for many organisations, it’s also the weakest link. One of the most common ESG reporting challenges is fragmented, manual data collection across departments and geographies. TechTarget highlights that most companies still depend on spreadsheets, email chains, and outdated systems to compile data from procurement, HR, energy meters, and supplier reports.
This fragmented approach leads to:
- Inconsistent or incomplete data across business units.
- Difficulty obtaining supplier and Scope 3 information.
- Time-consuming manual validation and version control.
- Limited ability to maintain a reliable audit trail.
According to EY, data quality and availability remain top barriers for sustainability managers, who often spend up to 60% of their reporting time just gathering information. The challenge intensifies as ESG data comes from non-financial systems, such as environmental sensors, social impact trackers, and governance logs, which aren’t traditionally integrated into enterprise reporting workflows.
Solution: One could adopt AI-powered sustainability platforms that centralize and automate data collection. Tools using Optical Character Recognition (OCR) and automated emissions factor matching can extract relevant data from PDFs, invoices, and reports - dramatically cutting manual effort while improving accuracy and auditability. Integrating ESG software with finance and operations systems ensures a single source of truth, enabling faster, higher-quality disclosures.
2. Tracking scope 3 emissions: the hidden giant
Scope 3 emissions, the indirect emissions from a company’s value chain, are often the largest and most elusive component of corporate carbon footprints, accounting for up to 90% of total emissions according to the Institute of Sustainability Studies. Yet collecting reliable supplier data remains one of the biggest ESG reporting challenges.
Key obstacles include:
- Low data maturity among suppliers (especially SMEs).
- Inconsistent or incompatible reporting standards.
- Missing or unreliable emission factors for certain materials or regions.
- Reluctance to share sensitive operational data.
As EY points out, value chain transparency requires deep supplier engagement but few companies have built the systems or relationships to make that happen. Without this collaboration, Scope 3 calculations remain estimates at best.
Solution: You can move from transactional data collection to collaborative supplier partnerships. Use digital engagement platforms to streamline data requests, educate suppliers on carbon accounting, and automate validation processes. Embedding Scope 3 requirements into procurement contracts and supplier onboarding ensures sustainability expectations are clear from the start. Companies can also leverage industry databases and AI-driven estimations to fill data gaps responsibly when direct data isn’t available.
3. Limited resources and expertise
Another major ESG reporting challenge nowadays is the shortage of dedicated sustainability expertise. Many organisations rely on small ESG teams - sometimes a single sustainability officer that is expected to handle complex data management, compliance, and communication (internal and external) simultaneously.
According to EY’s global sustainability report, the demand for ESG talent has outpaced supply, with companies struggling to hire professionals fluent in frameworks like ESRS, GRI, and SASB. Meanwhile, competing internal priorities like finance, HR, procurement, and IT can lead to ESG reporting being deprioritised.
Solution: You can invest in internal training to build foundational ESG knowledge across several teams. Encourage cross-functional ownership, so sustainability reporting is shared across departments, not siloed. Automate repetitive tasks like data aggregation and benchmarking to free up human capacity for strategic work. And above all, secure senior leadership buy-in - because without executive sponsorship, sustainability reporting efforts risk losing momentum.
4. Inconsistent metrics and KPIs
Many companies still treat ESG reporting as an annual project, not a continuous management process. This approach leads to inconsistent metrics, siloed reporting, and a lack of year-round performance tracking.
The Institute of Sustainability Studies notes that without standardized ESG KPIs, it’s nearly impossible to compare performance internally or benchmark against peers. Metrics vary by department, region, or reporting framework, creating confusion and limiting strategic insights.
Solution: You can develop a unified ESG performance framework that aligns with global standards (ESRS, GRI, SASB, TCFD). Use integrated platforms that provide real-time dashboards for ongoing monitoring and progress tracking. Embedding ESG KPIs into business scorecards and even employee incentives ensures sustainability is measured, and managed, alongside financial performance.
5. Regulatory complexity
Finally, one of the most pressing ESG reporting challenges is regulatory overload. Since 2024, the sustainability disclosure landscape is undergoing its fastest-ever expansion.
- In Europe, the CSRD will apply to nearly 50,000 companies by 2026, requiring detailed reporting against ESRS standards.
- In the US, the SEC’s climate disclosure rules are set to align corporate emissions reporting with investor expectations.
- The International Sustainability Standards Board’s (ISSB) IFRS S1 and S2 frameworks are creating a global baseline for comparable reporting.
This overlapping patchwork of requirements creates confusion and redundancy for multinational firms. As EY highlights, the challenge isn’t just meeting each regulation, it’s ensuring consistency and interoperability across them.
Solution: You can select ESG software that supports multiple frameworks and automatically maps data across standards. Maintain a compliance roadmap to prioritise near-term regulatory deadlines while building flexibility for future changes. Regularly review evolving standards to stay ahead of the curve, because ESG regulations will continue to tighten through the decade.
Overcoming ESG reporting challenges: let’s have a look at some practical solutions
So how can sustainability managers move beyond box-ticking exercises and turn ESG reporting challenges into strategic and authentic opportunities? The key lies in shifting from reactive compliance to proactive integration - embedding ESG into the operational fabric of the business.
To do this effectively, three levers are crucial: technology, collaboration, and consistency.
1. Leverage AI and automation
Manual reporting processes are no longer suitable, neither in terms of time nor accuracy. As highlighted by TechTarget, automation and data analytics are now essential for managing the scale and complexity of modern ESG disclosure.
AI-powered tools can automatically collect and validate sustainability data from multiple sources such as finance systems, HR records, procurement platforms, and supplier databases, drastically reducing manual entry and human error. Automation also enables real-time monitoring, so sustainability teams can shift from “reporting the past” to predicting the future.
2. Standardise KPIs across frameworks
Another big ESG reporting challenge is inconsistency across data points and frameworks. By defining clear, standardised metrics aligned with leading standards such as ESRS, GRI, SASB, and TCFD, organisations can ensure comparability and credibility.
A consistent KPI framework helps companies track year-round progress, not just annual results. According to the Institute of Sustainability Studies, organisations that standardise ESG indicators experience a 25% improvement in reporting efficiency and stakeholder confidence.
3. Engage the entire organisation
Sustainability is not the responsibility of one department - it has to be a holistic team effort. Finance, HR, procurement, IT, C-Level and operations must work together to embed ESG goals into everyday decision-making. EY notes for instance that the most successful companies treat ESG reporting as a cross-functional process, supported by strong internal governance and senior leadership buy-in.
In practice, this means integrating ESG data into existing business systems, linking, for example, supplier sustainability scores with procurement decisions, or energy use with facility performance dashboards. Clear communication and training across teams are equally vital to ensure everyone understands their role in delivering high-quality disclosures.
4. Collaborate with suppliers
The so called hidden giant of Scope 3 data can only be tackled through collaboration. Digital supplier platforms enable real-time data exchange, automate sustainability questionnaires, and ensure traceability of emissions data.
Encouraging suppliers to share credible information and providing tools or templates to make it easier, strengthens the accuracy of your ESG reporting and enhances overall supply chain resilience. Long-term, this collaboration builds trust and mutual accountability.
5. Monitor continuously, not annually
Gone are the days when sustainability data could be updated once a year or less. Continuous monitoring allows organisations to track key ESG indicators, respond to issues in real time, and communicate progress transparently to investors and stakeholders.
By integrating data visualisation dashboards and predictive analytics, sustainability managers can identify trends before they become risks, transforming reporting from a compliance exercise into a strategic management tool.
So what could be the role of AI in ESG reporting?
One of the most transformative developments in overcoming ESG reporting challenges is the rise of AI-driven sustainability platforms. Artificial intelligence is reshaping how data is gathered, analysed, and reported and it’s doing so at unprecedented speed.
Take Zuno Sapient Reporting, a flagship feature developed by Zuno Carbon. This next-generation system uses Generative AI to automate and enhance every stage of the ESG reporting process. It doesn’t simply process data, it understands it.
Zuno Sapient reporting empowers sustainability teams by:
- Automating data collection across disparate systems and formats, ensuring completeness and consistency.
- Validating data accuracy using intelligent algorithms and contextual cross-checks to detect anomalies before they escalate.
- Generating narrative reports aligned with recognised frameworks such as CSRD, GRI, and SASB, ensuring regulatory compliance and readability.
- Reducing reporting time from months to weeks - freeing up teams to focus on strategy, stakeholder engagement, and innovation rather than data wrangling.
But the real differentiator lies in the system’s learning capability. Zuno’s AI continuously improves by analysing historical reports and identifying emerging data patterns. Over time, it helps companies forecast sustainability performance, anticipate risks, and make informed, forward-looking decisions. In a world where accuracy, transparency, and timeliness are paramount, AI-powered ESG reporting tools like Zuno Sapient and others transform complexity into clarity, empowering sustainability leaders to stay compliant while driving measurable impact.
Conclusion: let’s turn ESG reporting challenges into tangible opportunities
The ESG landscape is evolving faster than ever and with it, the expectations placed on sustainability leaders. Yet, each ESG reporting challenge presents a chance to strengthen corporate governance, enhance transparency, and elevate long-term value creation.
By combining AI-driven technology, standardised reporting processes, and cross-functional collaboration, sustainability managers can transform ESG reporting from a reactive obligation into a strategic advantage.
If your organisation is struggling with fragmented data, limited resources, or uncertainty around upcoming disclosure standards, Zuno Carbon provides the technology and expertise to guide you forward. Our AI-powered Sapient Reporting platform integrates:
- Taxonomy classification for transparent data mapping
- Due diligence tracking for streamlined risk management
- Automated data capture and validation for audit-ready accuracy
The result? ESG reports that are not just compliant, but credible, actionable, and future-ready.
Contact us for more information.
FAQs
1. What are the main challenges of today’s ESG reporting?
The biggest ESG reporting challenges go beyond technology—they’re organisational.
Many companies still struggle with fragmented data, inconsistent metrics, and limited resources, often relying on spreadsheets or manual tracking that make it difficult to consolidate accurate information across departments and suppliers.
Tracking Scope 3 emissions remains a particular pain point, as supplier data (sometimes worldwide) is often incomplete or unreliable. Meanwhile, the coexistence of multiple frameworks such as CSRD, GRI, SASB, and TCFD adds layers of complexity.
But perhaps the most underestimated challenge is ownership: ESG reporting can’t be driven by one sustainability manager alone. It requires strong leadership support, clear accountability, and cross-functional collaboration across finance, procurement, HR, and IT.
In short, ESG reporting is not just a data task, it’s a company-wide change in how information, responsibility, and values are managed.
2. How can companies overcome ESG data challenges?
To overcome ESG data challenges, companies need more than good software, they need strong collaboration, consistent processes, and leadership buy-in. AI-powered sustainability platforms can automate data collection, validate accuracy, and centralise information in one system. But technology alone isn’t enough.
Defining standardised KPIs aligned with frameworks like ESRS or GRI ensures clarity and comparability. More importantly, embedding sustainability into everyday business processes-from finance to operations - turns reporting from a yearly burden into an ongoing strategic activity.
Top-performing organisations also create cross-functional ESG teams and ensure executive sponsorship to maintain momentum. When employees understand their role in sustainability data and see its impact, ESG reporting becomes not just compliance, but credible and authentic.
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