SCHOLARS' CORNER

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CBS LINE

Volume 4(2)

Odane Brooks

PhD Scholar

Centre for Budget Studies,CUSAT

ESG is redefining business reporting. The shift reflects a broader change in how firms understand performance, accountability, and long term value creation. For years, reporting focused mainly on financial statements, profitability, and shareholder returns. While these indicators remain important, they no longer capture the full range of risks confronting businesses. Investors, regulators, and the public now expect firms to explain how environmental, social, and governance factors influence performance and sustainability.

At its core, ESG reporting expands the scope of corporate disclosure. Environmental indicators examine climate exposure, emissions, and resource use. Social indicators assess labour practices, workforce wellbeing, and community impact. Governance indicators focus on leadership accountability, ethical conduct, and oversight structures. Together, these dimensions provide a broader understanding of how firms create value and manage risk over time. Business reporting therefore moves beyond historical financial performance and toward a more comprehensive assessment of resilience and long term strategy.

Regulatory developments have accelerated this transition. Governments and international standard setting bodies increasingly require firms to disclose sustainability related information in measurable and comparable ways. Regulators now recognize that environmental and social risks carry financial implications. As a result, ESG reporting is moving from voluntary disclosure to a formal governance requirement. Firms must now build systems capable of collecting reliable data and communicating performance with greater transparency.

Investor behaviour has further strengthened the importance of ESG reporting. Institutional investors increasingly integrate ESG data into risk assessment and investment decisions. Firms with weak governance structures or poor environmental performance face greater scrutiny, while firms with strong ESG practices are viewed as better prepared for future uncertainty. ESG reporting therefore serves as a mechanism through which companies demonstrate preparedness, strengthen credibility, and improve access to capital.

Beyond external pressures, ESG reporting reshapes internal organizational behaviour. Measuring and reporting sustainability indicators requires firms to strengthen data systems, improve oversight, and align operational decisions with long term objectives. Tracking emissions or supply chain practices reveals operational risks that may otherwise go unnoticed. Monitoring workforce indicators highlights gaps in culture and performance management. Reporting becomes both a compliance obligation and a management tool that supports strategic decision making.

Stakeholder expectations also influence this shift. Employees increasingly seek organizations that demonstrate ethical leadership and social responsibility. Consumers pay closer attention to corporate conduct and sustainability commitments. Civil society actors demand transparency regarding how firms operate and manage impact. ESG reporting provides a structured way for businesses to communicate their practices and build trust across a wider set of stakeholders.

Challenges remain. Standardization across reporting frameworks continues to limit comparability, and data quality remains uneven across sectors. Greenwashing also poses a risk when firms emphasize selective achievements while ignoring structural weaknesses. Strong governance oversight, transparent disclosure, and independent assurance are therefore critical to maintaining credibility and strengthening confidence in ESG reporting.

For smaller firms, ESG reporting creates both pressure and opportunity. While reporting demands new capacity and resources, strong disclosure increasingly influences access to finance and participation in global supply chains. As lenders and corporate partners integrate sustainability criteria into decision making, transparent reporting becomes a competitive advantage.

Ultimately, ESG is reshaping the purpose of business reporting. Financial performance alone no longer defines success. Reporting now seeks to explain how firms generate value while managing environmental and social impact responsibly. The direction is clear. Business reporting is evolving toward an integrated model where financial outcomes and sustainability performance are viewed as interconnected drivers of long term resilience and legitimacy.

 

Odane Brooks

PhD Scholar

 


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