Non-Financial Reporting – An Analysis of the Legal Instruments for Promoting Reporting and Disclosure Requirements Regarding ESG Factors in the European Union

Abstract

While environmental law in the European Union (EU) has been the main legal instrument on the road towards sustainable development, this road has been widened to also include specific reporting and disclosure requirements, especially concerning environmental, social, and governance (ESG) factors, to reach international sustainability targets. Through an analysis of the development of EU environmental law and its current status regarding ESG reporting requirements, this thesis evaluates this framework and identifies gaps within it. ESG reporting means that specific entities in the EU need to publish reports on non-financial information under the Non-Financial Reporting Directive (NFRD) (2013/34/EU), which is followed by the Corporate Sustainability Reporting Directive (CSRD) (2022/2464/EU). The aim of the CSRD is the extension of requirements to a larger number of entities of a certain size, and of topics that need to be reported on, which ultimately puts new and more burdens on entities in the EU. The aim of this thesis is to consider the scope, criticism, and gaps of non-financial reporting requirements regarding ESG factors to answer the question if more stringent reporting requirements positively influence corporate commitment to sustainable behavior. Put more precisely, the aim is to assess if the requirements lead to corporate sustainable behavior beyond the legal requirements.