The Transition to an Impact-Based Approach in Sustainability and Financial Reporting

This paper analyzes the paradigm shift in sustainability and financial accounting on a sample of the first 100 companies reporting under the European Union’s Corporate Sustainability Reporting Directive (CSRD). Drawing on the shift from financial-focused reporting to impact-based disclosures, the study concentrates on the use of materiality and double materiality concepts developed by ESRS. Through a review of the world practices in these early adopters, the research also elicits patterns and challenges that firms face, as well as wider strategic implications involved with ESG considerations for corporate reporting. It emerged from the findings that there is considerable diversity in double materiality interpretation, indicating a lack of consistency and comparability despite regulatory guidance. The analysis also highlights the importance of harmonized standards to increase transparency, trust from stakeholders, and sustainable value creation. By harmonizing between classical financial and the impact-based sustainability reporting, this study delivers implications for researchers, regulators, as well as standard setters and professionals and practitioners interested in companies’ reporting in the age of CSRD ESRS. Ultimately, the study contributes to a deeper understanding of how early adoption of CSRD reporting shapes corporate accountability, decision-making processes, and the measurement of long-term ESG impacts.