Disclosure of Sustainability Information Under the Corporate Social Responsibility Directive: The Degree of Compliance of Portuguese Stock Index Companies

Abstract

Europe has just published a new Directive on Corporate Sustainability Reporting disclosure and is elaborating new European Sustainability Reporting Standards. To analyze whether companies are complying with the new disclosure requirements before the Corporate Sustainability Reporting Directive (CRSD) on sustainability comes into force, a content analysis was carried out on the corporate reports of 12 companies in the Portuguese Stock Index of Euronext Lisbon for the year 2022, complemented by the score analysis technique. From the study of general disclosures (European Sustainability Reporting Standards—ESRS 2), we concluded that although some companies already comply with various requirements of this standard, they are not disclosing all the information required by ESRS 2 on sustainability. We also concluded, by analyzing the companies’ reports for 2022, that the requirements of the CSRD have different levels of disclosure.

1. Introduction

Over recent decades, accountability in companies has evolved from a traditional financial focus to a broader emphasis on sustainability and social responsibility. This shift is partly due to growing awareness of social and environmental issues, which has reshaped both public and private sector accountability practices (Brunelli, 2020). Initially, companies and investors were primarily focused on financial returns, but over time, investors have expanded their focus to include sustainability considerations, seeking corporate commitments to Environmental, Social, and Governance (ESG) principles (Abeysekera, 2013; Cicchiello et al., 2022; Migliavacca, 2024). The UNEP Finance Initiative and UN Global Compact established 10 principles in 2006 to guide responsible investment, helping institutional investors incorporate ESG risks into their strategies (Fleacă et al., 2023). ESG factors now serve as a foundation for companies to guide investments towards sustainability goals and assess sustainability performance (Li et al., 2023).

As societal expectations evolve, stakeholders increasingly demand transparency in corporate activities. Consequently, companies are re-evaluating their resource use and considering how best to communicate sustainability information (Abeysekera, 2013). This demand for sustainability information also raises the potential for liability claims from various stakeholders, including shareholders, consumers, and advocacy groups focused on environmental and human rights issues (Pantazi, 2024). Academics in accounting recognize the importance of issues related to ethics, governance, sustainability, and social responsibility in understanding corporate behavior and performance (Bebbington, 2019). However, there is ongoing debate about the materiality of sustainability information, which is critical to shaping the content of sustainability reports (Pizzi et al., 2022). Improved sustainability disclosure aims to build investor confidence in companies’ commitments to sustainable practices (Darbellay, 2024). Along with several other theories, such as agency or legitimacy, the stakeholders’ theory is crucial to explain disclosure practices in the context of corporate governance and organizational behavior. In fact, among the key theoretical perspectives discussed, stakeholder theory holds a central position. Another theory widely used in non-financial disclosure research is the legitimacy theory, which explains why companies adopt disclosure practices that go beyond regulatory requirements, especially in sensitive sectors or in response to public image crises (Rouf & Siddique, 2023).

To address these challenges, the European Parliament enacted Directive 2014/95/EU, setting out requirements for companies to disclose information on their social and environmental impacts, thus increasing transparency and accountability to stakeholders (M. Orth & Hobbs, 2022). This Directive introduced the concept of double materiality, which requires companies to consider both financial and non-financial impacts in their sustainability reporting (Baumüller & Sopp, 2022). However, due to limited effectiveness in achieving these objectives, the European Union (EU) updated its regulatory framework with Directive 2022/2464, also known as the Corporate Sustainability Reporting Directive (CSRD), to provide clearer guidance for companies and better meet stakeholders’ information needs (European Commission, 2022; Enander & Flygare, 2023). The CSRD mandates public interest entities with over 500 employees to disclose comprehensive sustainability information, addressing current enterprise trends and regulatory demands for increased transparency (CSRD, 2022, §3).

This regulatory shift opens a unique research opportunity to assess the effectiveness of the CSRD before it formally comes into force. Recent studies, such as L. Ottenstein et al. (2022), suggest examining whether companies are proactively aligning with CSRD requirements even before they are legally obligated to do so. Understanding such early compliance could shed light on the effectiveness of regulatory measures in fostering sustainability transparency (Fritsch et al., 2013; Sangiorgi et al., 2017). Hence, this study aims to address the question: Are companies complying with the new disclosure requirements before the CSRD is enforced? By employing content analysis and score analysis on corporate sustainability disclosure documents, this research seeks to identify whether companies are preemptively meeting the CSRD’s standards, which could inform policymakers about the efficacy of regulation in influencing corporate behavior.

Given the global relevance of social and environmental concerns, this study offers valuable insights into the comparability and transparency of corporate sustainability information. To the best of our knowledge, it is the first study to evaluate companies’ sustainability disclosures in the year preceding the CSRD’s enactment, providing original evidence on the impact of anticipated regulatory compliance on corporate behavior.

This introduction is followed by a review of the literature on corporate sustainability reporting, as well as an analysis of the drivers and implications of disclosure under the CSRD. The subsequent sections detail the research methodology, present the research results, and conclude with implications, limitations, and suggestions for future research.

2. Literature Review

2.1. Contextualization in Portugal

Portugal presents a unique and insightful context for studying sustainability reporting practices under European regulatory frameworks such as the CSRD. In recent years, Portuguese companies have been engaging with sustainability disclosures, yet studies suggest they may still face specific challenges compared to their European counterparts, highlighting the significance of examining this country specifically. While the CSRD applies across the EU, the extent of compliance, the quality of disclosures, and the challenges of implementation may vary across different national contexts. Portugal, with its emerging engagement in sustainability reporting, stands out for several reasons.

Historically, Portugal has shown significant progress in non-financial disclosure, but limitations remain, particularly regarding the comprehensiveness and depth of the information provided. Research has identified a lag between compliance levels and the quality of disclosures, with Portuguese companies frequently fulfilling only the minimum requirements without fully addressing issues such as human rights, corruption, and environmental sustainability (Gouveia, 2022; Agostini et al., 2022). Studies by Lourenço (2017) and Ribeiro (2019) highlight this partial compliance and an uneven focus across reporting topics, suggesting that while Portuguese companies disclose basic information, they often omit comprehensive analyses of broader societal impacts. These findings reflect a trend that, while sustainable reporting has become a priority, its quality and consistency need improvement to match the standards seen in countries like France and Germany.

Portugal’s regulatory adaptation to EU Directives on sustainability, especially Directive 2014/95/EU, has encouraged companies to disclose non-financial information, yet these disclosures are often limited by a lack of strategic depth. Lourenço (2017) note that financial information still outweighs non-financial information in many disclosures, and significant gaps persist in the coverage of social and environmental factors. Gouveia (2022) further notes that, while disclosure quantity increased after Directive 2014/95/EU, the quality and clarity of such information remain inconsistent. This context presents a compelling case for analyzing the potential impact of the CSRD on Portuguese companies, especially given that the CSRD aims to harmonize sustainability reporting across the EU, which may have profound implications for how Portuguese companies approach sustainability reporting.

Moreover, Portugal’s economic structure, characterized by a high proportion of small and medium enterprises (SMEs), may present additional challenges and insights into sustainability reporting. Unlike some larger economies in Europe, where corporate sustainability reporting is more ingrained, Portuguese firms may face a steeper learning curve in integrating the comprehensive CSRD standards. This scenario is relevant as it reflects the readiness and adaptability of companies in a mid-sized economy to adopt stricter sustainability frameworks, potentially serving as a model or counterpoint to the implementation experiences in other EU nations with similar economic structures.

Additionally, recent literature suggests that sustainability reporting in Portugal may be influenced by an evolving institutional environment and a shift toward international best practices. Institutional theory posits that organizations are shaped by their external environments, and in the case of Portuguese companies, this influence may manifest through regulatory pressure from the EU, the rising expectations of global investors, and increasing scrutiny from civil society. The CSRD could, therefore, serve as a catalyst, pushing Portuguese companies to enhance their disclosure practices not just in quantity but in quality, promoting transparency and accountability across all sectors.

In this context, the study of Portuguese companies under the CSRD provides valuable insights for understanding how an evolving regulatory environment impacts corporate behavior in sustainability reporting. Examining Portugal allows us to observe whether regulatory frameworks like the CSRD can act as an enabler of more meaningful disclosures in countries where sustainability reporting practices are still maturing, ultimately contributing to the broader debate on the role of regulation in driving sustainable corporate practices.

The analysis of sustainability reporting practices in Portugal under the CSRD highlights both progress and challenges. While Portuguese companies have increased their compliance with sustainability reporting, the quality of disclosures remains limited, often focusing only on basic requirements without addressing key areas like human rights or environmental impact (Gouveia, 2022; Agostini et al., 2022). This indicates that although there is growing awareness, the depth and comprehensiveness of reports still lag behind other European countries.

The presence of a high proportion of SMEs in Portugal presents additional challenges. These businesses may struggle with the resources and expertise needed to meet the CSRD’s comprehensive standards, making the one-size-fits-all approach problematic. Moreover, while external pressures from the EU and global investors are influencing corporate behavior, regulatory pressure alone may not be enough to drive significant change. For the CSRD to be effective in Portugal, it may need to be adapted to the specific needs of SMEs, ensuring that sustainability practices are not only compliant but truly transformative for businesses across the country.

2.2. Corporate Sustainability Reporting Directive

The European Commission (EC) introduced through Directive 2014/95/EU the obligation for companies to disclose information on how sustainability issues affect their performance, position, and development (CSRD Proposal). Directive 2014/95/EU aimed to increase the degree of harmonization of the disclosure of information on the sustainability of companies of public interest through a mandatory legal provision. However, this harmonization process faced difficulties because Member States had the possibility of transposing the Directive into national legislation with different provisions (Fiandrino & Tonelli, 2021).

Directive (EU) 2022/2464 presents the issuance of uniform European reporting standards and the introduction of mandatory external assurance in mandatory sustainability reporting for all large undertakings in the EU, as well as third-country undertakings active in the Union and new rules (Pantazi, 2024). The new Directive broadens the scope of entities required to report on sustainable development, such as SMEs. The aim is to make it easier for investors, in particular credit institutions, to manage sustainable development risk, i.e., the opportunities and impacts of their activities on people and the environment (Kamiński, 2023). Ortiz-Martínez and Marín-Hernández (2023) note in their study that, despite the obligations of Directive 2014/95/EU, sustainability information is intended for global stakeholders, not applying to sustainability reports (based on the Global Reporting Initiative—GRI) of SMEs and their close stakeholders and in local languages.

The 2030 Agenda for Development, adopted by all United Nations Member States in 2015, approved the Sustainable Development Goals (SDGs). Currently, the achievement of the SDGs is the basis for solving humanity’s global problems, and these goals require financial and informational support, as well as sustainability reporting practices (Makarenko & Makarenko, 2023). These objectives reflect the great challenges that the global community faces in trying to achieve sustainable development ambitions, as the only common understanding of the Triple Bottom Line (TBL) of sustainable development is economic, social, and environmental (Fleacă et al., 2023). Over the past few years, the European Parliament and the Council have supported the implementation of these objectives (CSRD, 2022, §6). In the Resolution of 15 June 2023, on the implementation and achievement of the SDGs, paragraph 73, the European Parliament states that:

The reporting and due diligence of companies in matters of sustainability, when subject to relevant audits, can provide an important framework to encourage greater accountability in the private sector regarding companies’ social and environmental impact and their contribution to achieving the SDGs.

The connections between sustainability performance and the progress toward SDGs led to a growing number and diversity of data and information developed and used to identify, analyze, measure, verify, and report a wide range of sustainability matters (Fleacă et al., 2023). The purpose of disclosing sustainability information is to contribute to achieving the SDGs, but the ability for companies to collaborate with government to achieve sustainability goals is critical because it requires hard work on the part of companies: aligning business models and strategies in accordance with the SDGs, defining measurable goals, controlling, and transparently describing the process (Izzo et al., 2020b). Fleacă et al. (2023) report that the SDG index is not advancing globally and that in 2021, the average score decreased slightly because the poorest and most vulnerable nations, with lower scores on the SDG Index, advanced more quickly than rich nations.

Directive 2014/95/EU on the disclosure of non-financial information was a historic step forward in increasing accountability and responsiveness to sustainable development. The introduction of this Directive marked a progressive movement from a voluntary disclosure regime decreed by a framework of international standards to a mandatory disclosure regime regulated by law (Fiandrino & Tonelli, 2021). The EC identified problems regarding the effectiveness of Directive 2014/95/EU, namely the fact that many companies did not disclose “material information on all important topics related to sustainability, namely climate-related information, including all gas emissions, the greenhouse effect, and factors that affect biodiversity” (CSRD, 2022, §13). Furthermore, the Commission recognized that the lack of comparability and reliability of information disclosed by companies are significant problems in the effectiveness of this Directive (CSRD, 2022, §13).

Thus, on 21 April 2021, the EC presented the Proposal for a Directive, with the aim of contributing to the transition to a fully sustainable and inclusive economic and financial system, in accordance with the European Green Deal and the SDG (CSRD, 2022; Enander & Flygare, 2023). On 16 November 2022, the EC approved the CSRD, which came into force 20 days after its publication in the Official Journal of the European Union. The CSRD aims to adjust the requirements of the ‘Non-Financial Information Disclosure Directive’ and contribute to sustainable development. According to §10 of the CSRD of the European Parliament and of the Council, one of the reasons why Directive 2013/34/EU was amended is related to the terminological change from “non-financial information” to “sustainability information”, as it is less depressive. It is stated in this paragraph that the changes to this Directive are expected to “increase data comparability and harmonize standards”.

The CSRD will be implemented gradually between 2024 and 2028, replacing the previous Non-Financial Reporting Directive (Poulle et al., 2024), and applies, among others, to the following companies: all companies, except for micro-enterprises, whose securities are admitted to trading on a regulated market in the Union and all companies that are parent companies of large groups (they must prepare group-level reporting) (CSRD, 2022, §17). It comes into force in Member States upon transposition into national law. Member States must comply with the established deadlines: public interest entities that are parent companies of a large group, which, at the balance sheet date, exceed, on a consolidated basis, the average number of 500 employees during the financial year, must disclose information on sustainability in financial years starting on or after 1 January 2024, in accordance with standards established by the EC.

The Commission adopted a first set of cross-cutting sustainability reporting standards through delegated acts on 14 June 2023 regarding the information that companies must disclose in relation to “all areas of information reporting and sustainability issues and that market participants are complying with the disclosure obligations set out in Regulation (EU) 2019/2088” (CSRD, 2022, §54). It is expected that the second set of standards will be presented by 30 June 2024. The second set of standards establishes proportional requirements for small and medium-sized companies, companies from third countries, and specific information for the sectors in which companies operate. On the other hand, to enable reported information to be tagged according to sustainability reporting standards, a digital taxonomy for the same is needed (CSRD, 2022, §55).

Given the limited timeframe for companies to prepare for the implementation of the Directive, it is essential that they start acting now to understand the impact of the Directive on their sustainability strategy, as well as the impact on their corporate reporting, internal controls, and other key business processes (C. Orth & Hobbs, 2022).

Aiming to ensure comparability and the quality of the disclosed data, the European Financial Reporting Advisory Group (EFRAG) is a non-profit association that serves the public interest by providing advice to the EC on sustainability reporting. EFRAG developed the European Sustainability Reporting Standards (ESRS), which establish the requirements that companies must meet to report sustainability information under the CSRD (Fleacă et al., 2023; Makarenko & Makarenko, 2023; Poulle et al., 2024).

Sustainability standards aim to “ensure the quality of the information communicated, requiring that they be understandable, relevant, verifiable, comparable, and presented faithfully” (Article 1—Amendment of Directive 2013/24/EU, point 8 of the CSRD or Chapter 6-A, Article 29-B, Directive 2013/24/EU). The standards distinguish between the information that companies must communicate when disclosing information at the individual level and the information that companies must communicate when disclosing information at the group level. In parallel, sustainability reporting standards should consider internationally recognized principles and frameworks on responsible business conduct, CSR, and sustainable development (CSRD, 2022, §45).

The European Union’s transition from Directive 2014/95/EU to the CSRD represents a significant leap forward in enhancing corporate accountability and aligning business practices with sustainability goals. However, despite the ambition to harmonize reporting standards across the EU, the flexibility allowed for national transposition has created inconsistencies, undermining the comparability and reliability of disclosed sustainability information (Fiandrino & Tonelli, 2021; P. Ottenstein et al., 2022; Brooks & Oikonomou, 2018). Furthermore, while the CSRD extends reporting requirements to SMEs and third-country companies, the implementation challenges for smaller businesses are notable. These companies may face difficulties in meeting the new reporting standards due to resource constraints, which could exacerbate disparities between larger corporations and SMEs in terms of sustainability disclosures (Kamiński, 2023).

Another significant concern is the continued difficulty in achieving global consistency in sustainability reporting, especially in relation to the SDGs. Despite EU efforts to align corporate reporting with the 2030 Agenda for Sustainable Development, global progress remains uneven, with poorer nations advancing faster than wealthier ones (Fleacă et al., 2023). This disparity highlights the need for a more globalized, collaborative approach to sustainability, as the effectiveness of EU Directives is inherently limited without broader international alignment. While the CSRD’s introduction of mandatory external assurance and digital taxonomy for reporting is a step in the right direction, its success hinges on the practical implementation of these systems and the capacity of companies, especially SMEs, to comply with them. Therefore, while the CSRD represents progress, its real-world impact will depend on how effectively it can balance rigor with flexibility and ensure that all companies, regardless of size, can contribute meaningfully to the EU’s sustainability objectives.

2.3. Theoretical Framework

Sustainability information has emerged as a critical component of corporate accountability, reflecting a confluence of societal awareness, regulatory imperatives, and the growing prioritization of stakeholder interests (Adhariani & de Villiers, 2019). According to the stakeholder theory, organizations must manage relationships with a variety of stakeholders, including investors, employees, customers, and the broader community, who are affected by the company’s operations and outcomes (Freeman, 1984). This transformation has been particularly driven by the EU’s proactive stance, exemplified by Directives such as the CSRD and Directive 2014/95/EU. These frameworks emphasize the integration of ESG metrics into corporate disclosures, fostering a sustainable economy that balances profitability with environmental stewardship and social equity (European Commission, 2022). As sustainability disclosures have gained prominence, their evolution in terminology and focus highlights their growing strategic importance in business contexts.

Over the years, sustainability disclosures have shifted from being labeled “non-financial information” to being recognized as financially material and integral to organizational goals. The CSRD represents a significant change in the way companies report sustainability information, with far-reaching impacts on stakeholders (Pirveli et al., 2024). The Directive emphasizes the importance of considering the interests of various stakeholders, including investors, customers, employees, and society in general, encouraging companies to disclose information that meets the needs of these groups, something which is in line with the stakeholder’s theory (Poulle et al., 2024). For example, according to Krasodomska et al. (2024), this new regulation leads to stakeholders’ favorable attitudes (such as accountants) regarding the CSRD requirements.

From a stakeholder perspective, this shift reflects the increasing recognition that sustainability factors are not only relevant for investors but also for a wide range of stakeholders whose interests must be considered to achieve long-term value creation (Harrison & Freeman, 1999). Erkens et al. (2015) describe non-financial information as encompassing dimensions beyond traditional financial assessments, including social, environmental, and intellectual capital performance. Ribeiro (2019) adds that non-financial information excludes data directly derived from accounting statements, emphasizing governance and environmental aspects prepared outside traditional accounting standards. These shifts underscore the evolving role of sustainability information in addressing both internal and external stakeholder needs. From another stance, the CSRD is the result of a negotiation process between the different stakeholders, which has influenced its content and scope by exploring the dynamics between companies, non-governmental organizations (NGOs), and EU legislators (Pirveli et al., 2024).

Li et al. (2023) further delineate the conceptual orientations of sustainability-related frameworks: ESG, Corporate Social Responsibility (CSR), and socially responsible investments (SRI) align with investor-driven contexts, while the Triple Bottom Line (TBL) emphasizes procedural integration across supply chains. Montecalvo et al. (2018) and Martínez-Ferrero et al. (2021) argue that “sustainability information” transcends compliance, focusing instead on proactive strategies to achieve long-term corporate goals.

The growing demand for sustainability disclosures reflects heightened awareness of global challenges, including environmental crises, human rights, and social equity issues. Fiandrino and Tonelli (2021) highlight the critical role of social responsibility in shaping corporate culture and market competitiveness. From a stakeholder perspective, responding to these issues can help organizations build stronger relationships with their stakeholders, enhancing trust and fostering long-term partnerships (Donaldson & Preston, 1995). Investors, as key stakeholders, have increasingly incorporated ESG factors into their strategic and decision-making processes, recognizing their value in mitigating risks and optimizing portfolio performance (Daugaard et al., 2024; Hristov & Searcy, 2024). Concurrently, studies such as Viet et al. (2023) reveal that robust sustainability disclosures enhance consumer trust and preference, further reinforcing the strategic value of transparency.

However, challenges in standardizing sustainability reporting persist, often resulting in inconsistencies and limited comparability (Ribeiro, 2019). The stakeholder theory suggests that these inconsistencies may hinder the ability of stakeholders to effectively evaluate corporate performance and hold companies accountable for their environmental and social impacts (Freeman, 1984). To address these issues, regulatory frameworks like Directive 2014/95/EU have mandated baseline disclosure requirements, encouraging harmonized practices across the EU. The CSRD builds on this foundation by requiring companies to integrate sustainability and financial data into cohesive management reports, improving accessibility and utility for stakeholders (European Commission, 2022).

According to Sweeney and Coughlan (2008), stakeholder theory plays a central role in CSR research, emphasizing that companies must integrate the interests of various stakeholders into their corporate strategy. This approach ensures that CSR initiatives are not only compliant with regulations but also genuinely responsive to the expectations of different groups, thus fostering long-term sustainability. Talpur et al. (2024) offer a systematic review of the decoupling phenomenon in CSR, highlighting how companies often engage in superficial CSR practices to meet external expectations while neglecting genuine internal implementation. This decoupling can undermine stakeholder trust, as stakeholders may perceive the discrepancy between disclosed commitments and actual practices, potentially leading to reputational risks and disengagement (Lange & Washburn, 2012). It emphasizes the critical need for aligning disclosed commitments with actual practices to foster trust and organizational sustainability. The authors call for future research to address gaps in the literature, particularly the role of corporate governance in reducing decoupling, and to develop conceptual models that integrate complex CSR regulations into actionable frameworks. The article also examines the societal and environmental consequences of CSR decoupling, noting its contribution to persistent global challenges and its potential to mislead stakeholders, creating market inefficiencies and information asymmetries. These findings underscore the urgency of enhancing accountability and transparency in CSR practices.

The changes introduced by the CSRD offer valuable insights in the face of growing demands for transparency and accountability in sustainability reporting (Krasodomska et al., 2024). Hence, it is also an opportunity for companies to improve their sustainability and transparency practices (Kosi & Relard, 2024). In fact, and in line with the legitimacy theory, companies seek to legitimize their operations in the eyes of society by aligning their practices and disclosures with social and regulatory expectations (Poulle et al., 2024). The legitimacy theory is grounded on the concept of community agreement, where organizations are required to meet with the social morals of the society where they function (Dowling & Pfeffer, 1975). Voluntary disclosure is interpreted as a ‘signal’ sent by companies to stakeholders to demonstrate their quality, performance, and commitment to certain values (Rouf & Siddique, 2023). The CSRD reinforces this quest for legitimacy by demanding transparency on sustainability issues (Poulle et al., 2024; Kosi & Relard, 2024). Along with stakeholder theory, legitimacy theory helps to explain why companies should align their practices with regulatory and social pressures. This theory is also useful in explaining how companies can use regulatory compliance to strengthen their market position (Hristov & Searcy, 2024; Kosi & Relard, 2024). Integrating sustainability into corporate governance is seen as a way of strengthening organizational legitimacy by demonstrating alignment with social expectations (Hristov & Searcy, 2024).

Also, Celli et al. (2024) examine the impacts of the CSRD on Italian SMEs, exploring future scenarios for its implementation. The study highlights challenges such as limited technical capacity, resource constraints, and the need to adapt to European Sustainability Reporting Standards (ESRS). While acknowledging the CSRD’s potential to enhance transparency and sustainability, the authors emphasize the need for tailored approaches, including technical and regulatory support, to address SMEs’ unique needs. The article concludes by proposing strategies such as financial incentives and training programs to facilitate compliance and strengthen sustainability within the Italian business sector. Similarly, Pizzi and Coronella (2024) analyzed how listed Italian SMEs are preparing to meet the new sustainability reporting requirements.

Recent studies offer a comprehensive exploration of the CSRD and its implications across various contexts. Alharbi and Mahgoub (2024) analyze the contextual and traditional factors influencing CSRD adoption in Saudi Arabia, highlighting the interplay between local regulations, corporate culture, stakeholder expectations, and economic infrastructure, particularly in light of Saudi Vision 2030. This analysis aligns with the stakeholder theory, which stresses that companies must consider both global and local stakeholder interests to successfully implement sustainability initiatives and ensure alignment with broader societal goals. They emphasize the need for a balanced approach to align global requirements with regional specificities. Similarly, Matuszak-Flejszman et al. (2024) examine Polish commercial banks’ efforts to meet CSRD demands, focusing on challenges such as materiality assessment, data collection, and ESG integration, while noting the need for regulatory support and capacity building to enhance compliance. Based on CSR/sustainability reports and other documents, Glaveli et al. (2023) analyzed the maturity of business model disclosures and sustainable strategies of listed companies pertaining to six sectors of the Greek economy, considering the CSRD.

Furthermore, Ed-Dafali et al. (2024) analyze existing research on environmental, social, and governance (ESG) practices and their impact on corporate sustainability and financial results through a systematic literature review. They concluded that strong governance mechanisms are the main drivers of improved ESG performance and corporate profitability. However, they consider that more research is needed to better understand how different governance structures and ESG practices interact and to offer clearer guidance to policymakers and company managers in promoting sustainable business practices.

On the other hand, Van Dijk et al. (2024) provide a broader overview of the evolution of global corporate sustainability reporting, tracing the rapid development of frameworks such as the CSRD and ESRS and international initiatives like the ISSB and SEC Proposals. They highlight the strategic and organizational impacts of these standards and their contribution to global harmonization. Fornasari and Traversi (2024) delve into how the CSRD and ESRS drive greater transparency and comparability in ESG reporting, despite challenges related to compliance costs and technical complexity. They underscore the frameworks’ role in fostering trust and promoting sustainable business practices.

Finally, Velte (2024) focuses on non-carbon environmental objectives, such as biodiversity protection and the circular economy, within the EU Taxonomy Regulation and ESRS framework. Emphasizing the centrality of ESRS 2 in defining general principles for ESG reporting, Velte identifies its potential to ensure consistent and comprehensive disclosures while acknowledging challenges in practical adoption. Together, these studies underscore the transformative role of the CSRD and related frameworks in advancing sustainability reporting and corporate responsibility globally.

In addition to regulatory measures, voluntary standards such as the GRI (2024), the International Integrated Reporting Framework (IFRS, 2021), and ISO 26000 (ISO, 2010) (have emerged as pivotal tools. These frameworks promote transparency, comparability, and a holistic approach to sustainability reporting. For instance, the GRI’s double materiality principle emphasizes addressing both financial impacts and broader societal implications of sustainability factors (Fleacă et al., 2023). Such initiatives align corporate practices with international sustainability benchmarks, including the United Nations Global Compact and SDGs (Ribeiro, 2019).

The advent of digital technologies has further transformed sustainability reporting. By requiring reports to be publicly accessible online, the CSRD fosters greater stakeholder engagement and accountability (CSRD, 2022, §55). Digital platforms enhance the usability of disclosures, enabling broader reach and alignment with modern transparency expectations.

Integrated reporting (IR) represents a paradigm shift in corporate disclosures, combining financial and non-financial information to illustrate how companies create, preserve, or diminish value over time. Baumüller and Sopp (2022) argue that IR addresses the evolving expectations of investors and stakeholders, offering a holistic view of the interplay between financial performance and sustainability outcomes. Izzo et al. (2020a) further highlight IR’s role in strategic alignment, helping organizations balance short-term profitability with long-term goals.

As IR and other advanced reporting frameworks gain traction, sustainability reporting has become central to corporate strategy. This evolution reflects a broader recognition that long-term success is defined not only by financial outcomes but also by the organization’s capacity to contribute to environmental and social well-being.

3. Methodology

With the aim of analyzing whether companies are already in compliance with the new disclosure requirements before CSRD comes into force, this study is based on the following question: Are companies already in compliance with the new disclosure requirements before the CSRD comes into force?

Considering the applicability of the CSRD (2022, §17), and as companies with listed values are considered to be of public interest and more accessible in obtaining information, it was decided to analyze the disclosure of information on sustainability based on a sample of Portuguese companies with listed values in the Portuguese Stock Index of Euronext Lisbon on 1 January 2023. To select the sample, a search was carried out on the Euronext Lisbon website (https://www.bolsadelisboa.com.pt/. Assessed 1 January 2020) and the list of companies consisting of 16 companies, as shown in

Table 1. Companies listed in the PSI on Euronext Lisbon on 1 January 2023.

List of Companies
Altri SGPS, S.A.
B. Com. Português
Corticeira Amorim, SGPS, S.A.
CTT—Correios de Portugal, S.A.
EDP—Energias de Portugal, S.A.
EDP Renováveis, S.A.
Galp Energia, SGPS, S.A.
Greenvolt—Energias Renováveis, S.A.
Ibersol, SGPS, S.A.
Jerónimo Martins, SGPS, S.A.
Mota-Engil, S.A.
NOS, SGPS, S.A.
REN—Redes Energéticas Nacionais, SGPS, S.A.
SEMAPA
SONAE—SGPS, S.A.
The Navigator Company

Source: Euronext Live Markets (Euronext Lisbon|live), © 2023 Euronext.

.

Of the companies that belong to the PSI on 1 January 2023, the following were excluded:

Companies that do not disclose the audited financial reporting document in accordance with the European Single Electronic Format (ESEF) and/or sustainability report on the institutional website;

Companies that have not been audited in accordance with Portuguese legislation;

Credit institutions have different criteria for disclosing sustainability information.

Thus, the final sample consists of 12 companies belonging to different sectors of activity (

Table 2. List of Companies listed in the PSI on Euronext Lisbon, by sector/industry on 1 January 2023.

Listed Companies	Sector/Industry
Altri SGPS, S.A.	2000, Industrials
Corticeira Amorim, SGPS, S.A.	3000, ConsumerGoods
CTT—Correios de Portugal, S.A.	2000, Industrials
EDP—Energias de Portugal, S.A.	7000, Utilities
Galp Energia, SGPS, S.A.	0001, Oil and Gas
Ibersol, SGPS, S.A.	5000, Consumer Services
Jerónimo Martins, SGPS, S.A.	5000, Consumer Services
Mota-Engil, S.A.	2000, Industrials
NOS, SGPS, S.A.	5000, Consumer Services
REN—Redes Energéticas Nacionais, SGPS, S.A.	7000, Utilities
SONAE—SGPS, S.A.	5000, Consumer Services
The Navigator Company	1000, Basic Materials

Source: Adapted from Lourenço (2017).

).

Companies can be grouped into activity sectors according to the Industry Classification Benchmark (ICB), adopted by Euronext Lisbon (Lourenço, 2017). The sectors “0001, Oil and Gas”, “1000, Basic Materials”, and “3000, Consumer Goods” are represented by only one company, respectively. The predominant sector of activity in the final sample is the “5000, Consumer Services” sector.

The information was collected on the companies’ institutional websites, from the reports where companies publish information on sustainability, namely, the Report and Accounts, Integrated Report, Sustainability Report, and Government and Society Report. A total of 15 documents relating to the 2022 financial year were collected, analyzed, and presented in

Table 3. Reports from the companies analyzed for the 2022 financial year.

Listed Companies	Report Type
Altri SGPS, S.A.	Integrated Report and Corporate Governance Report
Corticeira Amorim, SGPS, S.A.	Integrated Report
CTT—Correios de Portugal, S.A.	Integrated Report
EDP—Energias de Portugal, S.A.	Integrated Report
Galp Energia, SGPS, S.A.	Integrated Report
Ibersol, SGPS, S.A.	Integrated Report
Jerónimo Martins, SGPS, S.A.	Report and Accounts
Mota-Engil, S.A.	Report and Accounts and Sustainability Report
NOS, SGPS, S.A.	Integrated Report
REN—Redes Energéticas Nacionais, SGPS, S.A.	Integrated Report
SONAE—SGPS, S.A.	Integrated Report
The Navigator Company	Report and Accounts and Sustainability Report

.

We can see in Table 3 that 8 companies disclose information about sustainability in the Integrated Report (approximately 66.67% of the companies in the sample), 2 companies disclose it in the Report and Accounts and in the Sustainability Report, and one company discloses it in the Integrated Report and the Report of Corporate Governance.

Since the objective of this study is the analysis of documents adopted by companies to disclose information about sustainability, it was decided to use the content analysis technique complemented by the score analysis technique. This analysis is thus the most common method for evaluating disclosure. According to Lourenço (2017), the most common option for identifying the presence or absence of certain information is the use of a binary code (“1”—when the information in question is disclosed and “0”—otherwise) combined with the elaboration of a disclosure index, which contains the totality of information to be disclosed, thus allowing the current percentage of disclosure to be measured compared to the total that should be disclosed, with the higher the percentage obtained, the greater the amount of information disclosed. It is, however, a technique that has limitations, as it does not allow identifying whether a given company is disclosing the entirety of an indicator under analysis. In this way, not disclosing is different from not disclosing in full or in different percentages, which means that the analysis is distorted, and a more precise, broader, and higher-quality analysis is necessary to analyze such differences.

In the first instance, the disclosure requirements of the CSRD were analyzed to identify the items that underpin this study. During the analysis it was found that there are requirements of the CSRD that cannot be considered because this investigation aims to study companies based in Portugal. In addition, companies could only disclose information after the approval of the first set of standards, and these are complex requirements. A table was then created in Excel format with the items submitted for analysis, and the reports that companies use to disseminate the information were collected.

To fill these gaps, the score analysis method was developed (Lourenço, 2017), which served as inspiration for this investigation. According to the author, this methodology allows the use of a broader scoring system instead of binary code. Score analysis allows you to evaluate the extent of the item partially disclosed; that is, each item is assigned a score according to the number of elements identified. Through this analysis, it is possible to understand whether the company “Discloses”, “Does not disclose”, or “Partially discloses” the information required by the CSRD. As the information was partially analyzed, it was possible to evaluate the quality of the information on sustainability that the companies in the sample disclose. There are limitations in the application of this method due to its subjectivity, as it is largely subject to the sensitivity, integrity, and knowledge of the researcher. Furthermore, companies’ lack of objectivity in disclosing information about sustainability makes analysis difficult and influences the conclusions obtained.

The first set of information that must be communicated by companies in accordance with the ESRS was released by the EC on 31 July 2023. This first set discloses the intersectoral requirements; that is, they apply to all companies covered by the scope of the ESRS. application of the CSRD. The first set of ESRS is divided into the following two parts:

• Cross-cutting standards: ESRS 1 General requirements and ESRS 2 General disclosures.
• Environmental, social, and governance standards: ESRS E1 Climate Change, ESRS E2 Pollution, ESRS E3 Water and marine resources, ESRS E4 Biodiversity and ecosystems, ESRS E5 Resource use and circular economy, ESRS S1 Own workforce, ESRS S2 Workers in the value chain, ESRS S3 Affected communities, ESRS S4 Consumers and end users, and ESRS G1 Business conduct.

To answer the research question, transversal standards were analyzed, more precisely, general disclosures (ESRS 2). Subsequently, these indicators were disaggregated into sub-indicators in accordance with the provisions presented by EFRAG, which aim to ensure the correct application of the standards. The sub-indicators in which the definition could raise doubts were disaggregated and reformulated, without changing the meaning. But as previously mentioned, there are requirements that were not considered in the analysis because this investigation aims to study companies based in Portugal; in addition, companies could only disclose information after the approval of the first set of standards, and these are complex requirements.

According to the study carried out by Lourenço (2017, p. 32), the “objective was to assign a certain score to the analyzed sub-indicator in order to conclude whether it was disclosed or not, in this case in the presence of a binary code, in which “0” corresponds to non-disclosure and “1” to disclosure. However, as the sub-indicators are complex and the extent of the analysis is greater, the application of the “binary code” became inappropriate, and it was decided to add the scoring unit.

Fourteen indicators were defined, which are broken down into 110 sub-indicators subject to analysis. These sub-indicators were assigned a minimum score that corresponds to “0” and a maximum score that corresponds to the highest value on the right in the “Score” column. Subsequently, the documents were analyzed, and all indicators for each company were analyzed sequentially. If the company disclosed all items of a sub-indicator, the maximum score would be assigned, but if there was no evidence of information, a score of “0” would be assigned.

In certain situations of random analysis of one of the sub-indicators for which there was a need to add a greater number of analysis units to the “binary code”. Therefore, if there are disclosures about sustainability in a given item, a maximum score of, for example, four points could be assigned if the company obtained complete disclosure with the disclosure of the four items simultaneously, but if the company disclosed three items, it would be given a score of “3”; if it disclosed two items, it would be given a score of “2”; if there was only a reference to one item, it would be given a score of “1”; and if the company did not disclose the information, it would be given a score of “0”.

If companies do not disclose information because they do not apply certain items, a “Not applicable” score was assigned to the respective sub-indicators. For example, in the sub-indicator “1. Describes the main characteristics of the pension plan”, some companies do not have pension plans, and in these cases the classification “Not applicable” was assigned. In the sub-indicator “2. If the unit of measurement of a metric is currency, the company uses the same currency that served as the basis for presenting its financial statements”, we can see that most companies do not disclose metrics whose unit of measurement is currency, and in these cases, it was considered “Not applicable”.

The maximum total score to be achieved was calculated individually for each company to take into account items not applicable to companies.

4. Results

Considering the objective under study, it was found that there are sub-indicators that have a propositional logic; that is, companies will only have to disclose information if they consider this requirement in the company’s strategy. For example, the company will not disclose information about the consideration given to the interests of the main stakeholders in defining the policy if it does not define its policies considering the interests of the main stakeholders (sub-indicator 5 of the MDR-P Policies indicator—Policies adopted to manage material sustainability issues). Companies may not disclose information because they do not apply a certain requirement in the company. Consequently, the percentage values must be analyzed, taking this fact into account to avoid biased conclusions.

Overall, for the 12 companies that make up the sample, the average level of disclosure of information on sustainability is 49.58%. This result can be justified by the lack of precision of the requirements and a high number of private standards and frameworks that made it difficult for companies to obtain exact knowledge of the information they should disclose (Proposal for a Directive on Sustainability Reporting: Amendment of Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC, and Regulation (EU) no 537/2014, 2021), and companies may not put certain requirements into practice in their business strategy.

Table 4. Level of disclosure of the companies that make up the sample.

Listed Company	Sector/Industry	Level of Disclosure in %
Altri SGPS, S.A.	2000, Industrials	57.14%
Corticeira Amorim, SGPS, S.A.	3000, ConsumerGoods	44.98%
CTT—Correios de Portugal, S.A.	2000, Industrials	37.32%
EDP—Energias de Portugal, S.A.	7000, Utilities	70.33%
Galp Energia, SGPS, S.A.	0001, Oil and Gas	46.19%
Ibersol, SGPS, S.A.	5000, Consumer Services	25.49%
Jerónimo Martins, SGPS, S.A.	5000, Consumer Services	59.24%
Mota-Engil, S.A.	2000, Industrials	59.33%
NOS, SGPS, S.A.	5000, Consumer Services	48.33%
REN—Redes Energéticas Nacionais, SGPS, S.A.	7000, Utilities	44.55%
SONAE—SGPS, S.A.	5000, Consumer Services	43.54%
The Navigator Company	1000, Basic Materials	58.57%

shows the level of disclosure of the companies that make up the sample.

As we can see, EDP—Energias de Portugal, S.A. is the company with the highest level of disclosure with 70.33%. In addition to this, there is a group of four more companies that have a higher-than-average level of disclosure and seven companies with a lower-than-average level of disclosure. The company with the lowest level of disclosure is Ibersol, SGPS, S.A., with 25.49%. Next, a detailed analysis of the disclosure requirements for information on the sustainability of the companies that were selected for this investigation was carried out.

Table 5. Average disclosure level per indicator.

Indicator	Average Disclosure Level in %
1. Basis for Preparation:
BP1—General basis for preparing of sustainability statements	4.41%
2. Governance:
GOV1—The role of the administrative, management, and supervisory bodies	43.56%
GOV2—Information provided to and sustainability matters addressed by the undertaking’s administrative, management, and supervisory bodies	31.25%
GOV 3—Integration of sustainability-related performance in incentive schemes (for members of the administrative, management, and supervisory bodies)	61.67%
GOV4—Statement on due diligence	46.00%
GOV5—Risk management and internal controls over sustainability reporting	70.24%
3. Strategy:
SBM1—Strategy, business model, and value chain	65.22%
SBM2—Interests and views stakeholders	61.31%
SBM3—Material impacts, risks and opportunities and their interaction with strategy and business model	44.35%
4. Impact, risk and opportunity management
IRO1—Description of the processes to identify and assess material impacts, risks and opportunities	43.21%
Policies MDR-P—Policies adopted to manage material sustainability matters	45.51%
Actions MDR-A—Actions and resources in relacion to material sustainability matters	55.25%
5. Metrics and targets
Metrics MDR-M—Metrics in relation to material sustainability matters	38.39%
Targets MDR-T—Tracking effectiveness of policies and actions through targets	65.15%

shows the average disclosure per indicator.

By analyzing Table 5, the indicator that presents the highest average level of disclosure (70.24%) is the requirement “GOV–5—Risk management and internal controls over sustainability reporting”. Among other reasons, this result is justified by the fact that all companies representing the sample disclose the sub-indicator “2. Identifies the risk assessment approach that is followed, including the methodology for defining risk priorities”, and most companies disclose the sub-indicator “3. It mentions the main risks identified, as well as the respective mitigation strategies (including related controls)”. These sub-indicators are extremely important for reporting on company sustainability. We can also see in Table 5 that the indicator that presents the lowest average level of disclosure (4.41%) is the requirement “BP-1—General basis for preparation sustainability statements”.

Companies do not disclose that they omit a specific element of information corresponding to intellectual property, know-how, or innovation results (sub-indicator 2.4), only two companies disclose a sub-indicator referring to sources of estimates and uncertainty of results; only two companies disclose information on sub-indicator 4, regarding changes in the preparation and presentation of information on sustainability; and no company discloses sub-indicator 5 on the material errors in the previous period that were identified. In

Table 6. Indicators in descending order of position according to the level of average disclosure.

Indicator	Average Disclosure Level in %
GOV5— Risk management and internal controls over sustainability reporting	70.24%
SBM1—Strategy, business model and value chain	65.22%
Targets MDR-T—Tracking effectiveness of policies and actions through targets	65.15%
GOV3—Integration of sustainability-related performance in incentive schemes (for members of administrative, management, and supervisory bodies related to sustainability issues)	61.67%
SBM2—Interests and views of stakeholders	61.31%
Actions MDR-A—Actions and resources in relation to material sustainability matters	55.25%
GOV4—Statement on due diligence	46.00%
Policies MDR-P—Policies adopted to manage material sustainability matters	45.51%
SBM3—Material impacts, risks and opportunities and their interaction with strategy and business model	44.35%
GOV1—The role of the administrative, management, and supervisory bodies	43.56%
IRO1—Description of the processes to identify and assess material impacts, risks and opportunities	43.21%
Metrics MDR-M—Metrics in relation to material sustainability matters	38.39%
GOV2—Information provided and sustainability matters addressed by the undertaking’s management, executive, and supervisory bodies	31.25%
BP1—General basis for preparation of sustainability statements	4.41%

we can observe the indicators in descending order according to the level of average disclosure.

Regarding the indicator “SBM1—Strategy, business model and value chain” with the second highest level of disclosure (65.22%), we can see that the majority of companies describe the significant groups of products offered and/or of services provided and changes in the reporting period (sub-indicator 1.1) and describe the significant markets and/or customer groups served by the company and changes in the reporting period (sub-indicator 1.2). But companies do not disclose information on the number of salaried workers by geographic area (sub-indicator 1.3), and they also do not disclose information on products and services that are subject to bans in certain markets (if applicable and if material). Although this requirement presents positive results in relation to the average level of disclosure, it is worth noting that companies should approach this requirement with more dedication because the information required is not visible in company reports. The company that presents a lower level of disclosure on this indicator is SONAE—SGPS, S.A., and the company that presents a higher level of disclosure is NOS, SGPS, S.A. From a stakeholder perspective, such omissions could weaken stakeholder trust, as key groups such as employees and regulators rely on transparent and detailed disclosures to evaluate the company’s social and economic footprint.

Regarding the indicator “MDR-T Goals—Tracking effectiveness of policies and actions through targets”, which occupies third position with a disclosure level of 65.15%, we can see that it is the indicator with the highest number of sub-indicators (21 sub-indicators). Despite this, if companies already disclose the information required in these sub-indicators, the information is easily identified in company reports.

Most companies already disclose “the measurable and time-bound result-oriented targets that the company has set to meet policy objectives defined in terms of expected outcomes for people, the environment, or the company with respect to impacts, risks, and material opportunities” (sub-indicator 2) and “global progress towards achieving the goals adopted over time” (sub-indicator 3). But companies do not disclose whether stakeholders participate in defining goals for material sustainability issues (sub-indicator 5). Furthermore, while some companies disclose the base year for measuring progress, the reference value is often unclear. The lack of stakeholder engagement in goal setting, as required by sub-indicator 5, indicates missed opportunities for aligning corporate objectives with stakeholder expectations, as emphasized by Freeman’s stakeholder theory. By actively involving stakeholders, companies could ensure that their goals better address stakeholder concerns and enhance legitimacy.

The indicator “GOV 3—Integration of sustainability-related performance in incentive schemes” has an average disclosure level of 61.67%. It was concluded that half of the companies do not have a pension plan, and in these cases, the classification “Not applicable” was assigned to the sub-indicator “1. Companies disclose that administrative, management, and supervisory bodies are evaluated based on sustainability objectives and/or impacts (sub-indicator 2), but they do not specify these objectives and/or impacts. This lack of specificity can undermine stakeholder confidence, particularly among investors and employees, who value clear alignment between executive incentives and sustainability outcomes. According to stakeholder theory, transparent disclosures on incentive schemes could motivate stakeholder support by demonstrating a company’s commitment to aligning executive actions with broader societal and environmental goals.

Regarding the indicator “SBM2—Interests and view of stakeholders”, with an average level of disclosure of 61.31%, we highlight that all companies disclose their main stakeholders (sub-indicator 1.1.), and, in relation to the sub-indicator “1.2. If there is involvement with them and for which categories of stakeholders”, it is worth noting that only one company does not fully disclose this sub-indicator. The information required in sub-indicator “3.1. The way in which the company has changed or expects to change its strategy and/or business model to respond to the interests and points of view of its stakeholders” is not apparent in the reports. Through the analysis of this indicator, it was observed that all companies want to develop a relationship with their stakeholders with the aim of improving the performance of the activity and understanding how they can create a positive impact for them. EDP—Energias de Portugal, S.A., Jerónimo Martins, SGPS, S.A., and The Navigator Company were the companies that presented the highest level of disclosure with a result of 92.86%. On the other hand, Altri SGPS, S.A. presented the lowest level of disclosure with 28.57%. This is a significant gap, as stakeholder engagement is a cornerstone of corporate responsibility. Freeman’s theory highlights that understanding and addressing stakeholder concerns are vital for long-term success. Companies that fail to disclose this information risk alienating stakeholders and losing valuable insights that could inform strategic improvements.

The indicator “Actions MDR-A—Actions and resources in relation to material sustainability matters” presents a disclosure level of 55.25%. From the analysis of the reports, it can be seen that most companies clearly define the measures taken in the reporting year and which are planned for the future, and the way in which their execution contributes to the achievement of political objectives and goals (sub-indicator 1.1). All companies analyzed carry out their activity incorporating measures that contribute to the United Nations SDGs, contributing more actively to objectives that are more interconnected with the activity. The time horizons for actions established by companies are also aligned to contribute to the 2030 Agenda, which means that companies are committed to sustainability. The CSRD requires companies to disclose significant operating costs (Opex) and/or capital expenditure (Capex) relating to action plans, but companies representing the sample for this research are not disclosing this information. This omission weakens stakeholders’ ability to assess the company’s financial commitment to sustainability, potentially affecting investor confidence and decision-making. Detailed financial disclosures could strengthen stakeholder trust by demonstrating accountability and resource allocation toward sustainability objectives.

Regarding the indicator “GOV4—Statement on due diligence”, it was found that companies are very succinct in explaining how and where they are applying the process inherent to due diligence in their sustainability reporting. It is notable that there is still a long way to go before the disclosure of this requirement is complete. Companies disclose that they apply the process inherent to the duty of diligence in human rights matters but do not mention the application in environmental and governance issues. This highlights a gap in addressing stakeholder expectations comprehensively, as stakeholders are increasingly demanding transparency not only in social matters but also in environmental and governance practices, which are fundamental to assessing long-term value creation.

In the eighth position is the indicator “Policies MDR-P—Policies adopted to manage material sustainability matters,” with an average level of disclosure of 45.51%. This result must be analyzed, taking into account the existence of sub-indicators that require the disclosure of items that companies may not put into practice in their strategy, as is the case with information from sub-indicators 4, 5, and 6. The only company that obtained the maximum score (100%) was EDP—Energias de Portugal, S.A., because it disclosed all the required items. According to the results obtained in this indicator, we can say that companies are not giving due importance to the disclosure of this information. Such negligence may lead to stakeholder dissatisfaction, as comprehensive policies signal a company’s commitment to addressing material sustainability issues, fostering trust among stakeholders.

The indicator “SBM3—Material impacts, risks and opportunities and their interaction with strategy and business model” has an average disclosure level of 44.35%. A maximum score of 3 points was assigned for the sub-indicator 1. Brief description of the elements on which material impacts, risks, and opportunities are concentrated in your business model, in your own operations, and in your upstream and downstream value chain, resulting from your materiality assessment” because it was found that the companies can disclose impacts and risks, but they have difficulty disclosing opportunities. The same reasoning was followed to assign the scores for sub-indicators 2, 3, and 9. Stakeholders value transparency about opportunities as much as risks, as this information allows them to understand how a company plans to generate shared value while mitigating potential downsides. Failure to disclose such opportunities could hinder stakeholder engagement and strategic alignment.

To check whether companies disclose the information required by the indicator “GOV1—The role of administrative, management and supervisory bodies”, it was necessary to analyze the companies’ Corporate Governance Reports. All companies disclose the number of executive and non-executive members; ten companies disclose the percentage by gender, and five companies disclose the percentage of independent members of the board of directors. Disclosing the number of men and women on the board of directors is different from disclosing the percentage by gender, just as disclosing the number of independent members of the board of directors is different from disclosing the percentage of independent members of the board of directors. The companies in the sample are not disclosing representation of salaried workers and representation of other workers. Companies are not disclosing “the specialized knowledge in sustainability matters that the bodies, as a whole, directly possess or can increase” (sub-indicator 3) and “the way these specialized skills and knowledge relate to the impacts, material risks, and opportunities of the company (sub-indicator 3.2). Ensuring diversity and independence in governance bodies resonates with stakeholder expectations for balanced decision-making processes and equitable representation. Disclosing such information transparently reinforces stakeholders’ trust in governance practices.

The indicator “IRO1—Description of the processes to identify and assess material impacts, risks and opportunities” has an average disclosure level of 43.21%. It was found that 10 companies in the sample describe in their reports the methodologies and assumptions applied in the processes of identifying and evaluating material impacts, risks, and opportunities (sub-indicator 1), which means that the majority are already complying with this requirement. Only one company disclosed “how the company took into account the links between its impacts and dependencies and the risks and opportunities that may arise from these impacts and dependencies” (sub-indicator 3). From a stakeholder perspective, the lack of disclosure on interconnected risks and dependencies may compromise stakeholders’ ability to evaluate a company’s resilience and adaptability to systemic challenges, such as climate change and global supply chain risks. Regarding sub-indicator 6, it was necessary to scrutinize the information disclosed in the reports to reach a conclusion. We can see two facts: companies still do not apply the process of identifying, evaluating, and managing opportunities in the company’s overall risk management process or do not disclose this information in their reports.

Regarding the indicator “Metrics MDR-M—Metrics in relation to material sustainability matters”, it was concluded that the majority of companies that disclose metrics in reports do not disclose the information required for each metric, in accordance with ESRS 2 requirements. Only two companies disclosed metrics whose unit of measurement is currency, and, in these cases, they used the same currency that served as the basis for presenting their financial statements (sub-indicator 2). Stakeholders rely on clear and consistent metrics to assess a company’s sustainability performance and its alignment with broader ESG goals. Failure to meet these expectations may diminish stakeholders’ ability to compare and evaluate performance across the industry effectively. For the remaining companies that did not disclose metrics whose unit of measurement is currency, the classification “Not attributable” was assigned for this sub-indicator.

The indicator “GOV2—Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies” presents an average disclosure level of 31.25%. It was observed that some companies even disclose who informs and how often they inform administration, management, and supervisory bodies, including their relevant committees, about impacts, risks, and opportunities, but do not disclose the implementation of due diligence and the results and effectiveness of adopted policies, actions, metrics, and targets (sub-indicator 1 and sub-indicator 2). This lack of transparency regarding governance processes limits stakeholders’ confidence in the company’s capacity to integrate sustainability into its strategic oversight and decision-making. Most companies do not disclose how administrative, management, and supervisory bodies take impacts, risks, and opportunities into account when overseeing the company’s strategy, its decisions on major transactions, and its management processes. risks (sub-indicator 3). Given the central role of governance in addressing stakeholder concerns, the absence of detailed disclosures undermines the perceived credibility and accountability of these bodies. If companies are disclosing the information required in this indicator, but it was not possible to identify why they are not disclosing it clearly and objectively, a score of “0” was assigned.

In short, it is concluded that companies are not disclosing all the information required by ESRS 2, but there are companies, such as EDP—Energias de Portugal, S.A., that already comply with several requirements of this standard. Companies must improve the communication of information about sustainability, complying with all established requirements. Overall, for the 12 companies that make up the sample, the average level of disclosure of information on sustainability is 49.58%. This situation is corroborated by Velte (2024), who emphasizes that ESRS 2 is fundamental to ensuring that sustainability disclosures are consistent, comparable, and comprehensive, serving as a foundation for the application of other specific ESRS. Moreover, consistent adherence to ESRS 2 aligns with stakeholder theory, as it provides stakeholders with the necessary information to assess the company’s sustainability performance, identify shared value opportunities, and engage constructively with the company. The ESRS 2 provides a clear framework to enhance the transparency and relevance of reports. The authors conclude that ESRS 2 is essential for strengthening stakeholder trust and promoting more sustainable business practices, as also mentioned by Fornasari and Traversi (2024). By aligning their disclosures with ESRS 2, companies demonstrate a commitment to addressing stakeholder concerns comprehensively, contributing to the broader goal of sustainable development.

5. Concluding Remarks

This investigation analyzes the level of compliance with the new disclosure requirements of the CSRD prior to its full implementation. Based on a sample of 12 public interest entities listed on Euronext Lisbon, the study focuses on sustainability disclosures in their reports for the 2022 financial year. To assess the extent of compliance, the ESRS 2 presented by the EFRAG were broken down into indicators and sub-indicators.

The analysis revealed that eight of the twelve companies (approximately 66.67%) disclose sustainability information through their Integrated Reports, while two companies use a combination of the Annual Report and the Sustainability Report, and one company merges the Integrated Report with the Corporate Governance Report. By addressing the research question, “Are companies already in compliance with the new disclosure requirements before the CSRD comes into force?”, the findings indicate that several aspects of the CSRD requirements are already being met. The CSRD is clearly an attempt to institutionalize sustainability practices, promoting greater alignment between companies, society, and regulators (Rouf & Siddique, 2023). As suggested by Pirveli et al. (2024), the CSRD is the result of a negotiation process between the different stakeholders. This is in line with the stakeholders’ theory, as the Directive emphasizes the importance of considering the interests of various interest groups (Poulle et al., 2024).

However, the lack of clarity in presenting information makes it challenging to directly correlate disclosures with specific CSRD mandates, suggesting that companies may be fulfilling some requirements not explicitly identified in this study.

This study further observed that certain CSRD requirements depend on propositional logic, as companies are only required to disclose information relevant to their business strategy. Consequently, the average level of sustainability disclosure, calculated at 49.58%, reflects this contextual variability. While the indicator related to risk management and internal controls for sustainability communication (GOV-5) showed the highest average disclosure level at 70.24%, the general basis for preparing sustainability statements (BP-1) recorded the lowest at 4.41%, particularly due to omissions concerning intellectual property and previous material errors.

These findings suggest progress toward compliance with CSRD requirements, yet significant room for improvement remains, particularly in areas such as intellectual property and managing uncertainty in sustainability reporting. This underscores the need for companies to enhance both the quantity and quality of their sustainability disclosures to align with the evolving regulatory landscape. This means that regulatory compliance may explain why Portuguese companies show low levels of voluntary disclosure (see Kosi & Relard, 2024). According to the legitimacy theory, it is expected that these companies’ practices will align with the regulatory and social pressures (Hristov & Searcy, 2024). Hence, the legitimacy theory seems to be the one that best relates to EU Directive 2022/2464, considering the objectives and requirements of this legislation. This Directive requires companies to present detailed reports on sustainability, including environmental, social, and governance impact, in line with international standards such as the ESRS standard (see Rouf & Siddique, 2023). In this context, legitimacy theory provides a robust framework for understanding how and why companies seek to conform to these norms, not only to comply with the law but to ensure their long-term social standing and acceptance (see Rouf & Siddique, 2023).

The implications of this study for policymakers and regulators are significant. It highlights the necessity of developing standardized ESG disclosure frameworks that ensure comparability while accommodating sector-specific nuances. Clear and consistent guidelines are essential to achieving a balance between uniformity and diversity in ESG disclosures, which can, in turn, promote transparency and comparability. Additionally, this study emphasizes the critical role of financial markets in advancing sustainable investment by integrating ESG criteria into investment decisions, thereby incentivizing companies to prioritize sustainability in their strategies.

At a global level, the harmonization of ESG standards is crucial for fostering cross-border cooperation and reducing regulatory fragmentation. Aligning ESG standards across jurisdictions would ensure a more cohesive approach to addressing common challenges and opportunities in sustainability reporting. This study highlights the interconnectedness between management practices and policy initiatives in ESG, laying a foundation for future research as the importance of sustainability reporting continues to grow for both companies and regulators.

These conclusions also provide practical insights into how companies in Portugal are adapting their ESG practices to meet CSRD requirements. Portuguese firms are shown to be integrating sustainability disclosures into their reporting practices, albeit with varying degrees of clarity and compliance. This reflects the dynamic interaction between regulatory Directives and corporate governance, contributing to a deeper understanding of how companies respond to external pressures.

By concentrating on the Portuguese context, this study refines theories of institutional adaptation and regulatory compliance, revealing how firms prioritize certain disclosures, such as risk management, while underreporting in areas like intellectual property. These findings are placed within a comparative framework, highlighting similarities with other developed markets, where regulatory maturity supports higher ESG integration, and contrasting with emerging markets, where less developed regulatory infrastructures can hinder compliance.

This study’s emphasis on the role of financial markets in driving sustainable practices, coupled with a call for global harmonization of ESG standards, enriches theories of sustainability governance. At the same time, the variability in compliance levels observed underscores the need for standardized, flexible guidelines to address sector-specific challenges while ensuring meaningful alignment with CSRD objectives.

Finally, this research opens avenues for future exploration, including sectoral differences, longitudinal trends, and the interplay between disclosure volume and quality. These directions address this study’s limitations and contribute to refining the theoretical frameworks, advancing our understanding of the evolving relationship between corporate practices and regulatory frameworks in sustainability reporting.

Despite the valuable insights provided by this study, it is not without its limitations. One of the key limitations is the subjectivity inherent in the analysis of company reports. The reports were analyzed by a single researcher, which introduces potential bias in the interpretation of the data. A multi-researcher approach could improve the objectivity and reliability of the findings.

Another limitation is that this study focused only on the 2022 financial year, meaning that it does not provide a longitudinal perspective on the evolution of companies’ sustainability disclosure practices. Future studies could expand the time frame to track changes in disclosure levels over multiple years, allowing for a more comprehensive understanding of how companies adapt to the CSRD’s requirements.

In addition, the selection of companies for this study was limited to a sample of 12 companies, which does not allow us to analyze and compare sectors of activity and their respective reporting practices.

Given these limitations, future research could, on the one hand, explore a broader scope, i.e., extend this study to include companies listed on several EU stock exchanges to provide a more comprehensive understanding of how companies from different countries and different stock exchanges are complying with the CSRD. It would also be possible to investigate whether certain sectors are more proactive than others in complying with CSRD requirements and whether sector-specific challenges have an impact on the level of compliance.

On the other hand, a longitudinal analysis could be carried out, i.e., investigating whether the level of sustainability disclosure increases or decreases over time, particularly in the period leading up to the full implementation of the CSRD.

An analysis could also be carried out on the relationship between the quantity of disclosures and their quality. This would be particularly relevant after the entry into force of the CSRD, since companies can increase the volume of disclosure without necessarily improving the substance of their reports. To address the limitations, future studies could provide a more holistic understanding of the effectiveness of CSRD and its long-term impact on sustainability reporting practices.