ESG Reporting in Consumer Goods: Challenges, Compliance, and Best Practices

Consumer goods companies operate in the intersection of complex global supply chains and heightened consumer visibility. As ESG (Environmental, Social, Governance) issues become more prominent, companies' stakeholders require evidence of results from corporate social responsibility reporting. This reporting has evolved from voluntary disclosure to a compliance-driven requirement. It is now monitored by regulators, investors, consumers, and civil society.

For consumer goods companies, ESG reporting is no longer just a tool for reputation management. It has become necessary for market access, regulatory compliance, and investor confidence. Companies must now navigate an increasingly strict landscape with greater disclosure quality and accountability expectations.

The Regulatory Landscape

ESG compliance is shaped by a growing set of rules across jurisdictions:

• EU Corporate Sustainability Reporting Directive (CSRD): This directive broadens the disclosure obligations to include approximately 50,000 companies, encompassing non-EU entities with substantial operations in Europe. Companies are required to publish audited sustainability information alongside their financial statements.

• German Supply Chain Due Diligence Act (LkSG): This act compels large corporations to oversee human rights and environmental practices throughout their supply chains, imposing penalties for any breaches.

• EU Deforestation Regulation (EUDR): This regulation mandates that businesses importing commodities like cocoa, palm oil, and coffee must demonstrate that their products are not associated with deforestation.

• Uyghur Forced Labour Prevention Act (UFLPA): Implemented in the United States, this legislation assumes that goods originating from Xinjiang are produced using forced labour unless proven otherwise, affecting sectors such as textiles, food, and electronics.

• India's Business Responsibility and Sustainability Report (BRSR): This requirement targets the top 1,000 publicly listed companies, necessitating comprehensive ESG disclosures that align with the National Guidelines on Responsible Business Conduct.

• Proposed SEC Climate Disclosure Rules (US): While these rules are still in development, they are anticipated to require publicly listed companies to report on Scope 1, 2, and, in certain instances, Scope 3 emissions, thereby increasing compliance challenges.

  
  

These overlapping regulations create compliance burdens but also provide opportunities. Firms that invest early in robust ESG systems gain an advantage in meeting diverse requirements and building trust.

ESG in Action

Examining how leading consumer goods companies implement ESG initiatives provides practical insights into both successes and challenges. The following cases highlight concrete strategies, measurable outcomes, and lessons learned across environmental, social, and governance dimensions.

Nestlé: Packaging and Palm Oil Sourcing

Nestlé S.A., the world's largest food and beverage company, has faced scrutiny over its packaging commitments. In 2018, the company committed to ensuring that all its packaging would be recyclable or reusable by 2025. However, in 2022, this pledge was altered to state that packaging would be '100% designed for recycling,' a modification that drew criticism because many multilayer plastics are still not recyclable in practice.

In a separate development, Nestlé ceased its procurement from Astra Agro Lestari, an Indonesian palm oil supplier, after facing allegations related to land rights and human rights violations. This decision underscored the necessity of conducting supplier audits and implementing grievance mechanisms to ensure compliance with ESG standards.

Key takeaway: Commitments must be explicitly defined and supported by verifiable supplier engagement to prevent allegations of greenwashing or complicity.

Unilever: Assurance and Supplier Engagement

Unilever, a British multinational consumer goods company headquartered in London, has set benchmarks in ESG reporting by publishing sustainability reports with independent assurance from PwC. Its Supplier Climate Programme involves approximately 300 key suppliers, accounting for nearly 50% of its Scope 3 emissions. By establishing reduction goals and providing support, Unilever enhances compliance and trustworthiness.

Takeaway: Independent assurance and targeted supplier engagement can drive meaningful ESG impact across value chains.

Mars and Nestlé: Cocoa Supply Chain Challenges

Mars is a global confectionery, pet care, and food product manufacturer. Nestlé also has a primary cocoa business through its confectionery and beverage divisions. Despite their commitments to sustainability, both companies failed to guarantee living wages for many cocoa farmers, according to a 2023 report by Ethical Consumer. Many smallholder farmers are underpaid despite the existence of certification programs.

Takeaway: Social metrics such as fair wages and labour rights are as crucial as environmental commitments in ESG compliance.

Procter & Gamble (P&G): Water and Plastic Reduction

Procter & Gamble is one of the world's largest consumer goods corporations. Its 2023 ESG report notes a 24% improvement in water-use efficiency per unit of production toward its goal of a 35% reduction by 2030. The company has also pledged to cut virgin petroleum plastic in its consumer packaging by 50% per production unit by 2030, with a 13% progress achieved since its 2017 baseline. In addition, P&G aligns its reporting with GRI and SASB standards.

Takeaway: Aligning disclosures with international standards provides consistency, strengthening investor confidence.

Challenges in ESG Reporting and Compliance

While ESG reporting has become a critical expectation in the consumer goods sector, it faces significant hurdles. Companies must navigate operational, regulatory, and reputational pressures that complicate their ability to deliver on stated commitments. The following challenges highlight where gaps often emerge in ESG reporting and compliance.

• Data reliability: Gathering precise ESG data from fragmented global supply chains poses significant challenges, particularly in cases where suppliers lack digital infrastructure or resources.

• Infrastructure gaps: Merely designing recyclable packaging is inadequate if local waste management systems cannot process it. Companies may risk over-promising without considering end-of-life realities.

• Regulatory complexity: Varied global regulations lead to overlapping obligations, escalating compliance costs, and potential errors.

  
  

• Changing commitments: Altering targets without clear justification can jeopardise credibility, as Nestlé's packaging controversy illustrates.

• Reputational risk: Mistakes in ESG practices can swiftly attract negative scrutiny from NGOs, media, and consumers, jeopardising years of investment in sustainability.

  
  

Best Practices for ESG Reporting

To strengthen credibility and ensure meaningful impact, consumer goods companies must move beyond compliance checklists toward robust, transparent ESG practices. The following best practices offer a roadmap for building reliable, investor-grade ESG reporting:

• Materiality assessments: Recognise and prioritise ESG issues pertinent to core operations and stakeholders.

• Measurable targets: Establish time-bound, achievable goals with interim milestones to monitor progress.

• Supplier traceability: Enhance upstream compliance through certifications, audits, grievance mechanisms, and capacity development.

• Third-party assurance: Involve independent auditors to validate ESG data and ensure its credibility.

• Standardised frameworks: Implement global frameworks like GRI, SASB, and TCFD for uniformity and benchmarking.

• Transparent communication: Clearly articulate any adjustments to targets or changes in scope to uphold stakeholder trust.

• Governance integration: Incorporate ESG oversight at the board level, tie executive compensation to ESG performance, and weave ESG risks into enterprise risk management.

  
  

Conclusion

Consumer goods have shifted from voluntary sustainability initiatives to mandatory ESG reporting and compliance, where companies not only disclose, but are required to demonstrate tangible progress on environmental, social, and governance priorities, with cases demonstrating both success and failure: from Nestlé, Unilever, Mars, and Procter & Gamble show both achievements and pitfalls - ambitious commitments must be matched with verifiable results, supplier engagement, and transparent communication.

The regulatory landscape will continue to expand, covering climate risk disclosures, labour rights, and supply chain traceability. Companies that invest early in robust ESG frameworks, adopt international reporting standards, and ensure third-party verification will be best equipped to navigate complexity. More importantly, they will protect brand trust, secure investor confidence, and drive long-term value creation in a sector where consumer expectations are only rising.