Guest editorial: Toward a new mandatory sustainability reporting landscape in Europe: challenges and opportunities

Unofficial AI-generated summary based on the public title and abstract. Not an official translation.

🔬研究者:Provides a comprehensive literature review and research agenda on mandatory sustainability reporting regulation in Europe.

🏢実務担当者:Highlights key implementation challenges (double materiality, SME burden) and upcoming regulatory changes (Omnibus) for compliance planning.

🏛政策担当者:Offers lessons from EU's regulatory transition, useful for jurisdictions designing or refining their own sustainability disclosure mandates.

The last decade has brought unprecedented developments in sustainability reporting regulations in Europe, introducing significant changes to disclosure requirements and creating a turbulent and complex environment for regulators, practitioners, and researchers.The Directive 2014/95/EU, called the Non-Financial Reporting Directive (NFRD), represented the European Union (EU)'s major shift from a voluntary to a mandatory regime of sustainability reporting (La Torre et al., 2018). It required large public interest entities to disclose information on environmental, social, employee, human rights, and anti-corruption matters starting from the 2017 financial year (EU, 2014). Despite its significance, the NFRD soon attracted substantial criticism. The European Commission (EC) acknowledged that the causes of the problems included insufficiently detailed NFRD requirements, a myriad of overlapping and sometimes inconsistent private non-financial reporting frameworks and standards, as well as the lack of enforcement (EC, 2020; Zarzycka and Krasodomska, 2022; Nicolò et al., 2025). Similar concerns were also raised in academia. Several studies evidenced limited effects from the transposition of NFRD on non-financial reporting, in particular, insufficient clarity on the definition of materiality (Mio et al., 2021); the abuse of the “comply or explain” principle (Pizzi et al., 2020; Venturelli et al., 2020); the coexistence of several inconsistent reporting frameworks and the lack of specific requirements for reporting standards (La Torre et al., 2018); the excessive flexibility left to the member states to impose state-specific requirements on companies (Aureli et al., 2019) and the absence of mandatory assurance requirement (Aureli et al., 2020).To address these weaknesses, the EC initiated a revision process, which led to Directive 2022/2464EU, referred to as the Corporate Sustainability Reporting Directive (CSRD), applied for the first time in the 2024 financial year. The CSRD, closely aligned with prior recommendations from the European Financial Reporting Advisory Group (EFRAG) (Giner and Luque-Vilchez, 2022), significantly strengthened the regulatory framework. It replaced the term “non-financial reporting” with more accurate “sustainability reporting”, clarified further the concept of double materiality, broadened the scope of reporting to all large and listed companies (excluding listed micro-entities), mandated detailed and standardized disclosures to be included within the management report rather than in separate reports, and required assurance of sustainability information (Di Tullio et al., 2026; Hummel and Jobst, 2024; Nicolò et al., 2025). Another significant development regarding the CSRD is that it extends the scope of reporting requirements not only to value chains but also to non-EU companies (Pizzi and Caputo, 2026).As La Torre et al. (2018) argued, achieving consistency and comparability in sustainability disclosures across the EU required reporting standards based on regulation. To achieve this and operationalize the CSRD, the European Sustainability Reporting Standards (ESRS) were developed by EFRAG. The ESRS framework includes two cross-cutting standards -setting out general principles and governance-related disclosures- and ten topical standards covering environmental (E), social (S), and governance (G) matters (EU, 2023; Nicolò et al., 2025). These standards provide detailed, consistent, and comparable reporting requirements; however, due to their novelty and complexity, their implementation by companies is a demanding process, also influenced by their size, industry, or sustainability reporting practice before the ESRS implementation (Fedee et al., 2025; Raimo et al., 2026).Literature suggests that the CSRD implementation might contribute to a decrease in the Environmental, Social and Governance (ESG) disclosure (Mahmood et al., 2026). Similarly, Di Tullio et al. (2026) argue that it might not necessarily lead to greater transparency; instead, it could shift the focus from corporate social responsibility to legal accountability and raise questions about the effectiveness of mandatory assurance, supported and encouraged by prior studies (Krasodomska et al., 2023, 2025).The transition from NFRD to CSRD involved both psychological and functional barriers for some stakeholders (Damiano and Valenza, 2026). Moreover, it is not a cost-free endeavour, particularly for small and medium-sized enterprises (SMEs), which can be affected both directly and indirectly, as the CSRD requires reporting along value chains (Pizzi and Coronella, 2024; Di Tullio et al., 2026). SMEs are the backbone of the European Union's economy. This lack of understanding hinders SMEs from recognizing the long-term benefits of sustainability, leaving them less prepared for effective data collection and management (Krasodomska, 2025). Therefore, sustainability reporting in the SME sector is often limited (Paoloni et al., 2026), and legal and tax-related issues, sustainability reporting expertise, and accounting infrastructure are important factors that might influence its development (Albu et al., 2026). Especially, SMEs in Central and Eastern European member states might find it difficult to align with the CSRD requirements due to their limited awareness of and engagement in sustainability initiatives, partly because of insufficient communication and education (Krasodomska, 2025).Another important and challenging issue is the double materiality concept, which forms the basis for sustainability reporting under CSRD (cf. Reimsbach et al., 2020; Baumüller and Sopp, 2022; Flandrino et al., 2022; Correa-Mejıa et al., 2024; Dragomir et al., 2024). From the perspective of double materiality, a sustainability topic is considered material if it is significant from either the impact (“inside-out”) perspective, the financial (“outside-in”) perspective, or both. The double materiality assessment is a complex process, depending on many factors and requiring active stakeholder engagement (Dyczkowska and Szalacha, 2026). Companies might focus in a different way on these two perspectives (Bartolacci et al., 2026), and the consequences of double materiality adoption related to organizational changes are still relatively unexplored (Panfilo et al., 2026).It should be noted that the recent changes in the sustainability reporting landscape in Europe are not without a global context. The International Financial Reporting Standards (IFRS) Foundation has also become a key global actor in sustainability reporting, pursuing a different, investor-oriented approach (financial materiality) than the ESRS (double materiality) or Global Reporting Initiative (GRI) Standards (impact materiality). Responding to pressure from investors and other stakeholders, the IFRS Foundation established the International Sustainability Standards Board (ISSB) in 2021, with a mandate to develop standards focused on information relevant to investors and capital market participants (IFRS Foundation, 2025). It is important to note that both convergence and divergence exist between the approaches of EFRAG and ISSB, and the standard-setting process is strongly shaped by the interplay of regional and global socio-political factors (Carungu et al., 2025). The ISSB issued two standards: IFRS S1, setting general sustainability disclosure requirements and IFRS S2, focusing specifically on climate-related risks and opportunities (Heyden, 2026).The significance of the regulatory developments discussed above is beyond question, as they mark a major turning point in the evolution of corporate reporting. Against this backdrop, the objective of this special issue is to examine the challenges and opportunities arising from the introduction of mandatory sustainability reporting in Europe. The issue brings together 13 papers that address this topic from diverse perspectives, offering new insights into the implications of these regulations and their global context. Each contribution sheds light on an important aspect of the transformation taking place, and together, they enrich our understanding of how this evolving regulatory framework influences all actors involved. The individual papers are discussed in greater detail in the following section.It is important to highlight that during the publication process of this special issue, the CSRD's evolutionary path has been marked by considerable uncertainty, particularly regarding the publication of the so-called Omnibus package at the end of February 2025 (EC, 2025; Nicolò et al., 2025; Mahmood et al., 2026). Following an initial wave of enthusiasm about the potential impact of the CSRD, many stakeholders highlighted criticisms related to its high complexity (Pizzi and Caputo, 2026). The proposal to postpone the application of the CSRD requirements by other than NFRD-reporters (“stop the clock”) has already been adopted and is to be transposed into the member states' national legislation by 31 December 2025 (Council of the EU, 2025). Another proposal includes shifting the focus of reporting obligations to the largest companies. On 13 November 2025, the European Parliament adopted its negotiating position on imposing sustainability reporting requirements only to businesses employing on average over 1,750 employees and with a net annual turnover of over €450 million (European Parliament, 2025). The reform also seeks to simplify ESRS (already undergone a public consultation period), ensure that sustainability reporting requirements for large companies do not impose excessive burdens on SMEs within their value chains, and possibly eliminate the obligation to transition from limited to reasonable assurance (Di Tullio et al., 2026).As evidenced above, regulatory changes in the sustainability reporting domain are occurring rapidly and, as evidenced by the Omnibus proposal, in often unexpected directions. This creates significant challenges for companies operating

• openalex https://doi.org/10.1108/md-07-2026-529first seen 2026-07-18 06:20:19