Five questions CFOs and Boards should ask before signing off non-financial disclosures

As many UK companies prepare, finalise or review their annual reports, the quality of non-financial information is coming under greater scrutiny.
 

ESG reporting has moved on. It is no longer enough to include a sustainability section and make broad statements about climate, people, governance or social responsibility. Investors, lenders, customers, regulators, auditors and procurement teams are increasingly reading non-financial information as part of their wider assessment of the business.
 

The issue I often see is not that companies are ignoring ESG. Most are not. The issue is that the information included in reports is sometimes too generic, too disconnected from the business, or not supported by the right evidence. Below are five common mistakes that can weaken the credibility of ESG and non-financial information disclosures.
 

1. Generic statements that could apply to any company
Many reports still include statements such as “we are committed to sustainability”, “we care about our people” or “we take climate change seriously”. These statements may be true, but they often tell the reader very little.
 

A good ESG disclosure should explain what the issue means for that specific company. For example, how does climate change affect its operations, costs, customers, suppliers or long-term resilience? How do people-related matters affect retention, service quality or delivery? How does the supply chain create risk? If the wording could be copied into another company’s annual report without much change, it is probably too generic.
 

2. No clear connection with the financial statements
 Companies often discuss climate risk, energy costs, regulation, supply-chain pressure or emissions commitments in the ESG section, but there is no clear link with the financial statements, principal risks, business model or strategy.
 

That creates a gap. If an issue is described as important, the reader should understand how management has considered it. Does it affect costs, future investment, asset values, insurance, financing, procurement, regulatory exposure, margins or long-term resilience?
 

Not every ESG issue will have a direct accounting impact. However, where ESG risks or commitments are material, the report should show some connection between the narrative and the financial reality of the business. Otherwise, ESG reporting becomes a separate story sitting next to the financial statements, rather than part of the overall business report.
 

3. Overcommitting without reliable data or a credible plan
Another common mistake is making ambitious commitments before the company has the data, systems or governance to support them. This is especially relevant for emissions reductions, net zero targets, supplier commitments and climate-related statements.
 

A target is only useful if the baseline is clear. The company should be able to explain what is included, what is excluded, what methodology was used, whether estimates were applied, and how progress will be measured.
 

The risk is that companies make commitments based on weak emissions data or incomplete baselines. Later, when the data improves, the target becomes difficult to defend or needs to be restated. That does not look good.
 

It is better to be transparent about data limitations and show a clear improvement plan than to make commitments that are not yet properly supported.
 

4. Scenario analysis that has no real connection to the business
Climate scenario analysis is another area where reports can look sophisticated but say very little. Some companies describe different climate scenarios, but the analysis is not linked to their actual business activities.
 

The question is not whether a company has used a 1.5°C, 2°C or higher warming scenario. The question is what that scenario means for the business. Could carbon pricing affect costs? Could extreme weather disrupt operations? Could regulation change customer demand? Could insurance become more expensive? Could assets become less resilient? Could suppliers be affected?
 

If scenario analysis does not connect to the company’s assets, supply chain, customers, regulation, costs or financial planning, it becomes a theoretical exercise. For scenario analysis to be useful, it should help the board and management understand risk and make better decisions.
 

5. No continuity with previous years’ disclosures
ESG reporting should not restart every year. Readers need to understand what changed from the previous year. Were emissions reduced, or did the reporting boundary change? Was a target achieved, or quietly removed? Were previous risks followed up? Were KPIs changed? Was the baseline restated? Were prior commitments updated?
 

This is often missing. A report may look fine when read in isolation, but if you compare it with previous years, you sometimes see gaps. Targets disappear. Metrics change. Commitments are not followed up. Risks are rewritten without explanation.
 

That weakens credibility. Good reporting should create a clear thread between previous disclosures, current performance and future commitments. If something changed, explain why.
 

The governance test
Behind many of these issues lies a more fundamental question: who owns the information? If ESG information is included within the annual report, it should be subject to clearly defined ownership, formal review processes, and appropriate challenge mechanisms. The board or senior management should understand what is being reported, what assumptions are being used, and whether the information is consistent with the wider business strategy.
 

It is not enough to say that the board oversees ESG. The report should show how ESG matters are reviewed and whether they influence decisions.
 

Why this matters
Poor ESG reporting is not just a communication issue. It can affect investor confidence, lender discussions, procurement scoring, regulatory scrutiny and stakeholder trust. It can also expose weaknesses in data, governance, internal controls and risk management.
A credible ESG report should answer five basic questions:
1) Is the information specific to the business?
2) Is it connected to the financial statements and strategy?
3) Is it supported by evidence?
4) Is there clear governance and ownership?
5) Can progress be tracked year-on-year?

If you would like an independent review of your ESG report, climate disclosures or non-financial information, our team can help identify gaps, improve disclosure quality and strengthen alignment with established reporting expectations.