Corporate sustainability reporting and its impact on the work of boards

Abstract

Standardized and harmonized sustainability reporting by companies plays a crucial role in the European Union’s sustainability strategy. The EU’s policy is clear, which has led to significant interest in knowing whether, and if so, what obligations will be placed on companies and their boards. This study examines the impact that the Corporate Sustainability Reporting Directive (CSRD) will have on the work of the boards of Icelandic companies that fall within its scope. Additionally, it explores whether the directive’s effects are already visible in the corporate governance guidelines of the Nordic countries. The findings show that the CSRD only contains direct instructions for boards’ work, except that the board is responsible for preparing, submitting, and publishing the annual report, which includes sustainability information in the board’s report. The directive does not mandate companies or their boards to take actions regarding sustainability; they are only required to disclose what has been done. Despite this, increased sustainability reporting has the indirect effect of placing greater emphasis on the strategic and oversight roles of boards and, consequently, their responsibility. Ensuring the integrity of sustainability information and making informed decisions on whether and how to integrate sustainability into a company’s strategy and business model is essential. The directive’s influence and the broader EU sustainability legislation are beginning to be reflected in Nordic corporate governance guidelines. In Swedish and Danish guidelines, direct responsibilities are placed on boards regarding sustainability, not only in reporting but also in risk and opportunity analysis, strategy development, and ensuring effective risk management and internal control. The Norwegian guidelines show a partial increase in emphasis on sustainability. However, the Icelandic and Finnish guidelines need to catch up in providing boards with guidance on fulfilling their role in sustainability matters.