Regulatory frameworks are adapting to reflect this changing reality. The European Commission’s first ‘Omnibus’ legislative package, introduced in February this year, proposes key reforms to simplify ESG reporting, reduce compliance complexity for SMEs and focus regulatory requirements on the largest businesses with the greatest environmental impact.

This is the EU’s push to ease the administrative burden on companies while maintaining high ESG standards, a critical balance for businesses operating in an increasingly competitive global market.

For CFOs, this shift presents both an opportunity and a challenge. As ESG reporting becomes more structured and embedded in financial governance, the expectation is clear: it must be as rigorous and reliable as financial reporting itself.

A strategic imperative, not a regulatory burden

The CFO’s role has traditionally centred on managing aspects such as cash flow, financial reporting and resource allocation. ESG was a separate function handled by roles like the CSO to ensure regulatory compliance and investor confidence instead of ‘directly’ contributing to company performance. However, the two areas are inextricably linked.

The core tenets of ESG have moulded into strategic imperatives. Sustainability directly impacts a company’s finances and, therefore, should be treated as part of the finance function. How so?

ESG initiatives naturally require resources and capital, which in turn impact business performance, whether that’s from receiving a return on the investment (such as funding sustainable practices that reduce costs over time or schemes that nurture future talent) or boosting brand reputation and consumer confidence.

Leading tech companies are prime examples. They are heavily investing in renewable energy and energy-efficient data centres, a strategy that will not only lead to cheaper operational costs in the long term but also improve reputation and performance in the near term. In a sign of this approach, Microsoft has committed to becoming carbon negative, water positive and zero waste by 2030.

Building this approach for mid-market companies

For medium-sized companies with fewer resources, switching or investing in suppliers can provide a cost-effective approach that also benefits the sector.

Take a CFO at a successful food company. They may spot the value in investing in regenerative farming practices for the products they use to optimise costs. This builds long-term resilience in the supply chain, all while contributing to sustainable farming more widely. But to maximise this impact, ESG has to lie firmly within corporate strategy.

In particular, accurate ESG reporting is essential to counteract greenwashing narratives; it enables CFOs to allocate the necessary resources and capital to contribute to tangible change. This data and reporting are key to brand credibility and proving the value of ESG initiatives.

But accurately measuring these results relies on investing in technology and processes to improve ESG data collection, analysis and reporting. Does the finance function have software that can integrate with other business critical systems to create a real-time overview of financial performance?

If so, the CFO can then monitor how an ESG initiative has impacted a department, product, location, or the overall brand. They can use data to paint a picture of how the company’s ESG programmes are contributing to both shareholders’ value and natural and social capital.

What about the impact of the European Commission’s package?

​The Omnibus Package proposes significant modifications to the EU's sustainability reporting and due diligence directives, aiming to reduce administrative burdens and enhance global competitiveness for SMEs.

One of the key changes in the proposal regards the Corporate Sustainability Reporting Directive; it aims to increase the reporting requirement threshold to 1,000 employees instead of 250, which means approximately 80% of medium enterprises would be exempt from reporting. The idea is that less mandatory regulation can encourage these companies to view ESG as an asset rather than a regulatory burden.

Furthermore, the proposal emphasises that the European Commission is not fundamentally altering the substance of the regulations themselves – an issue of concern considering many SMEs have already invested significantly in their reporting capabilities – but is instead making them more streamlined and efficient.

Yet, even though there is reduced regulatory pressure, the proposals encourage the voluntary reporting of sustainability and taxonomy activities. As such, the onus is on companies to demonstrate their commitment to sustainability.

CFOs should, therefore, consider how voluntary reporting and ESG integration can position their organisations favourably in the eyes of investors and consumers.​ By adopting such a proactive and transparent approach, they can enhance long-term value creation and stakeholder trust.​

The CFO as the ESG motivator

As sustainability is tied into investment and strategy, today’s CFO is at the forefront of integrating ESG into financial planning, reporting and decision making. How do they target ESG investments that support long-term sustainability and growth?

The first step is to incorporate ESG considerations into budgeting, forecasting and risk management. With this setup, they should then establish clear, measurable sustainability KPIs and align them with business objectives and regulatory requirements.

Crucially, to create this transition, the CFO must set the example and provide a top-down influence. They can motivate employees to explore ESG options and make sustainability goals obligatory in performance metrics. They can act as the linchpin for ESG communication between the C-suite, departments, suppliers, operations, marketers and consumers.

Ultimately, if they have access to the right tools and insights, CFOs are in a prime position to integrate ESG into corporate strategy. And from a broader, more ethical viewpoint, they can directly impact how their sector contributes to climate goals and net-zero targets.

ESG: a fundamental to corporate finance

ESG reporting has often got the wrong look. Seen as a compliance box-ticking exercise rather than holding tangible value to business growth, this perception is now looking increasingly dated. The potential reduction in mandatory regulatory compliance like the Omnibus package can act as a trigger to reevaluate ESG’s role in a business – and the CFO is at the heart of this approach.

ESG is no longer just a responsibility of sustainability teams; it’s a fundamental part of corporate finance, influencing everything from investor confidence to capital allocation. The CFOs who take on this position will position their companies as the benchmark for ESG initiatives and long-term sustainable growth.

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