From Mandatory CSR Reporting to Environmental Impact: Assessing the Effectiveness of the EU NFRD in Reducing Corporate GHG Emissions

Since 2014, the European Union’s (EU’s) Non-Financial Reporting Directive (NFRD) has mandated large EU firms to disclose non-financial performance, aiming to promote corporate sustainable behaviour. This study empirically examines the impact of the NFRD on corporate environmental performance, with a focus on greenhouse gas (GHG) emissions. The analysis consists of two main components: (1) a descriptive, industry-level overview of both absolute GHG emissions (Scopes 1, 2, and 3) and emissions intensity among firms subject to the NFRD, and (2) a quantitative estimation of the Directive’s causal impact on GHG emissions, both in absolute terms and intensity, across ten different industry sectors. The results reveal significant variation across sectors. The highest absolute and intensity emitters are the Energy, Materials, and Utilities sectors. Across all industries, GHG emissions are largely driven by Scopes 2 and 3 sources. On average, the NFRD is associated with a 22.12% reduction in total GHG emissions. Nonetheless, this effect is highly uneven across sectors and primarily driven by reductions in low-emission industries. In contrast, high-emission sectors such as Energy, Materials, and Utilities show no statistically significant reductions. The results highlight the limited effectiveness of a horizontal approach to sustainability regulation, suggesting the need for sector-specific requirements in terms of non-financial publication and Climate Transition Plans.