The Compliance - Audit Gap in ESG and Financial Reporting

Environmental, social, and governance (ESG) reporting has evolved from a voluntary public-relations exercise into a regulatory and investor expectation. Companies now publish sustainability data alongside financial results to show commitment to responsible business practices. Yet a quiet problem has emerged that threatens to undermine those efforts: the compliance audit gap.

Compliance teams are rapidly building ESG disclosure programs to meet new rules. Internal auditors, however, are often constrained by legacy financial assurance methods that cannot fully verify nonfinancial data. The result is a credibility divide. ESG reports may appear compliant with frameworks and deadlines but lack verifiable assurance or evidence-based validation. As regulators, investors, and consumers demand greater transparency, this disconnect between compliance and audit has become one of the most critical governance challenges of the decade.