New research estimates suggest that between 30-40% of companies now exempt from the EU sustainability reporting directive could choose to implement the standards voluntarily.

Andreas Rasche, a professor of business in Denmark, says on LinkedIn that his contact with practitioners reveals upper and lower estimates of how many of the 41,700 companies now no longer caught by the Corporate Sustainability Reporting Directive (CSRD) will use it to make disclosures.

The main takeaway, he says in his post, is that “early voluntary reporting is likely to be driven by firms with prior experience (e.g., under NFRD [the Non-Financial Reporting Directive]).

“This dynamic may evolve over time as stakeholder expectations and market pressures shift.”

The CSRD went through a revision last year as part of the so-called “omnibus” process that eased the burden of applying the CSRD.

This was mostly aimed at changing the scope of the directive so that it applied to only those companies with 1,000 employers, or more, and €450m in turnover.

Originally, CSRD would have applied to around 50,000 companies across the EU, but the omnibus is estimated to have seen a reduction of 85-90%.

Rasche estimates that 41,700 companies have fallen out of the scope of the directive. If his estimate of voluntary action is correct, somewhere between 12,800 and 17,971 companies might still use the reporting rules without facing a legal mandate.

International repercussions

The EU is not the only jurisdiction in which sustainability and climate reporting is a major development.

In the UK, the Financial Conduct Authority has just closed a consultation on mandatory use of two sustainability reporting standards from the International Sustainability Standards Board.

The International Corporate Governance Network (ICGN) has lent its support to mandatory reporting this week.

A letter from ICGN chief executive Jen Sisson to the FCA says: “Investors value clear, consistent, financially material information about sustainability-related risks and opportunities. Improving the quality and comparability of disclosures supports market integrity and efficient capital allocation.”

This month, a survey from Morningstar Sustainalytics showed that almost half of investors, assets and other financial institutions worry they have gaps in their sustainability data about companies while 40% worry about inconsistent data between sustainability data vendors.

Morningstar Sustainalytics’ president, David Pagliaro, said: “Even with shifting political rhetoric in some markets, the underlying demand hasn’t changed: investors want high-quality, comparable data to understand risks, support meeting regulatory obligations and to help create long-term value.”