Working paper/research report

Authors list: Bannier, Christina E.; Flach, Henry

Publication year: 2024

DOI Link: https://doi.org/10.2139/ssrn.4736435

Abstract: 

European companies in scope of the new Corporate Sustainability Reporting Directive (CSRD) will have to report on all sustainability topics that are either financially-material or impact-material (or both) to them. Determining materiality in an extensive individual analysis, however, proves to be an expensive undertaking that will encumber resource-constrained and smaller companies in particular. To offer an easily applicable auxiliary tool, we create a comprehensive sector-specific Financial Materiality Compass (FMC) along the lines of the European Sustainabil-ity Reporting Standards (ESRS). The FMC relies on an extensive three-step analysis where we combine panel regression results on financial performance data with self-identified materiality assessments from large corpora-tions and expert interview evaluations in a European setting. We find that for companies in the consumer staples and energy sector nine out of 10 ESRS categories are financially material, but only one, respectively two, of these categories show a strong materiality. For companies in the health care, information technologies and real estate sector, in contrast, we report the lowest number of financially material ESRS categories in total. Against the back-drop of significant reporting costs, our results hence provide companies with a robust, science-based orientation in determining their sustainability reporting requirements and corresponding data collection needs.

Harvard Citation style: Bannier, C. and Flach, H. (2024) European corporate sustainability reporting - The Financial Materiality Compass as an auxiliary tool. SSRN. https://doi.org/10.2139/ssrn.4736435

APA Citation style: Bannier, C., & Flach, H. (2024). European corporate sustainability reporting - The Financial Materiality Compass as an auxiliary tool. SSRN. https://doi.org/10.2139/ssrn.4736435