Corporate Sustainability Reporting in Europe: A Scoping Review

ABSTRACT

This paper provides a scoping review of European sustainability reporting studies. Previous sustainability studies do not offer a comprehensive discussion of features key to the European setting. Despite their important role in the European economy, research on small and medium-sized enterprises (SMEs) and financial institutions (i.e. insurers and banks) is limited. Furthermore, regions in southern and particularly eastern Europe, which are critical given regulators’ objectives for European Union-wide and global sustainability standards, are neglected. Finally, studies on non-financial effects of sustainability reporting are also limited, and only a few studies differentiate between stakeholder- and shareholder-oriented countries. This is needed for a holistic view on sustainability beyond financial performance. Based on material issues identified for the European context, our study provides a research agenda based on comprehensive and rigorous scientific evidence on the state of the art of sustainability research in Europe.

Keywords:

• CSR
• ESG
• European corporate reporting
• scoping review
• sustainability reporting

Acknowledgements

We thank the European Parliament's Committee on Economic and Monetary Affairs (ECON) for funding a related earlier research report of which this study is an extension. We also thank Andrei Filip (Editor in Chief), Francesco Mazzi (Associate Editor), one anonymous reviewer, Giovanna Michelon and Judith Stroehle, for their valuable comments on this paper as well as workshop participants at the University of St.Gallen, the 44th European Accounting Association Annual Congress 2022 and the 9th International Conference of the Journal of International Accounting Research 2022.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1 As firms have begun disclosing information on their environmental and social policies not only in their annual reports but in stand-alone reports, one often refers to so-called ‘CSR reports’ (Michelon et al., 2015).

2 This ‘ESG investing eco-system’ can also be considered critical given the debatable underlying motives of such parties (Adams & Abhayawansa, 2022).

3 Owing to the NFRD, large EU public-interest companies have been required to disclose non-financial information since 2018 but without a mandate to use specific standards or a particular framework.

4 In September 2020, the five organisations including the Carbon Disclosure Project (CDP), Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB) announced that they would work together (Carbon Disclosure Project et al., 2020), and the World Economic Forum (WEF) published a set of universal sustainability metrices and disclosures (World Economic Forum, 2020). Furthermore, in November 2020, the IFRS Foundation Trustees announced the International Sustainability Standards Board (ISSB) to set international sustainability standards (IFRS Foundation, 2021). They created the Technical Readiness Working Group (TRWG), designed to integrate and build on the work of initiatives and provide technical recommendations for consideration by the ISSB (Technical Readiness Working Group, 2021). In August 2022, the consolidation of the Value Reporting Foundation (previously the SASB Foundation and the IIRC) into the IFRS Foundation was completed (IFRS Foundation, 2022).

5 The number of companies in the EU required to follow EU sustainability reporting standards will increase from 11,000 to nearly 50,000 (European Commission, 2021d).

6 We limited our analysis to the CO₂ intensity of GDP; it is a factor of environmental and resource productivity that, together with the energy, non-energy material and environmentally adjusted multifactor productivity are part of the Organisation for Economic Cooperation and Development (OECD) Green Growth Indicator ‘environmental and resource productivity’. This indicator captures ‘whether economic growth is becoming greener with more efficient use of natural capital’ and ‘aspects of production which are rarely quantified in economic models and accounting frameworks’ (OECD. Stat., 2021). Though this rather crude measure has limitations, it provides important insights into cross-country differences.

7 The SDG index score is a measure of a country’s total progress towards the achievement of the 17 SDGs (a maximum of 100 indicates all goals have been achieved).

8 Non-EU companies having at least one subsidiary or branch in the EU and generating a net turnover of €150 million in the EU are also subject to the CSRD (cf. European Council, 2022b).

9 Before excluding studies with a non-European focus, our sample consisted of more than 200 studies. This is comparable to Christensen et al. (2021) who analyse 380 studies, but with no geographic or time restrictions as in our scoping review. The specific focus on the European setting explains the fairly low number of studies to date and shows the potential for future research.

10 Going beyond Europe, there are more international studies using textual analysis in sustainability reporting research (e.g. Caglio et al., 2020; Clarkson et al., 2020; De Franco et al., 2015; Lang & Stice-Lawrence, 2015).

11 One of the few studies employing an interview research design while focusing on the external perspective is the paper by Slack and Tsalavoutas (2019), which provides evidence on how useful 22 equity market actors consider integrated reporting.

12 In a recently published paper, Hummel and Szekely (2022) analyse the SDG disclosures in the annual reports of European companies using content analysis. They show that SDG reporting quality substantially increased over time, and is associated with environment-related public pressure, customers and socially responsible investors.

13 The Equator Principles are a voluntary framework that intends to support ‘financial institutions to identify, assess and manage environmental and social risks when financing projects’ (Equator Principles Association, 2022). Of the other studies reviewed in our sample, excluding O’Sullivan and O’Dwyer (2015), only Hummel et al. (2021) consider the Equator Principles in their analyses but as a control variable.

14 Hummel et al. (2021) measure environmental and social performance of 50 European banks according to five categories: GRI reporting, issuance of sustainability report, specification and quantification of greenhouse gas emissions, products or services with societal respective ecological benefit as well as positive and negative environmental and social screening of assets. However, the overall sustainability quality of the lending portfolio is not considered.

15 Haller et al. (2018) analyse the value-added information disclosed based on a sample of 122 listed and 52 non-listed companies (17 firms not classified), of which 162 are large or multi-national companies and 20 are SMEs (9 firms not classified).

16 As the study was published after the cut-off for our analysis, that is, early June 2021, it is not considered in supplementing tables and appendices. Findings are presented here for completeness.

17 C.f. footnote 16.

18 Given that the EU Emission Trading Scheme has been in operation since 2005, there are several studies on the topic published pre-2015. These discuss accounting and reporting issues of carbon trading or analyse allowance prices amongst others (e.g. Bebbington & Larrinaga-González, 2008; Daskalakis et al., 2009; Giner, 2014; Paolella & Taschini, 2008). A comprehensive discussion of these studies is out of the scope of this review.

19 According to Aguilera et al. (2006) as cited in Ayuso et al. (2014), UK is an exception to the scheme, potentially owing to the high pressure from the government or institutional investors to integrate sustainability into corporate activities.

20 Cooperative bank members include employees, customers and local community members.

21 Furthermore, despite the studies reviewed focusing on stakeholders, there is some literature on the role of the company in society that analyses external social accounting (i.e. counter and shadow accounts) (e.g. Boiral, 2013; Laine & Vinnari, 2017; Ruffing, 2007). A comprehensive discussion on this literature stream is beyond the scope of this study.

22 In the governance literature, four governance mechanisms are commonly used: board, compensation and ownership, audit and anti-takeover provisions (e.g. Aggarwal et al., 2011; Gao et al., 2016).

23 As of 2023, companies falling under the regulation have a due diligence obligation to identify, prevent or minimise environmental and social risks along the supply chain. Companies will need to integrate these risks into management systems and are required to report on those (German Federal Ministry of Labour and Social Affairs, 2021).