EFRAG: Are Companies Struggling with Sustainability Reports?

European companies have produced sustainability reports averaging 115 pages in their first year under new EU disclosure rules according to analysis by the European Financial Reporting Advisory Group (EFRAG).

In the 656 statements reviewed, the longest reached 440 pages and the shortest just 25.

The CSRD applies to large companies and requires disclosure of ESG information according to European Sustainability Reporting Standards (ESRS).

Financial institutions are submitting the lengthiest reports, averaging 140 pages, compared with 110 pages for non-financial firms.

EFRAG attributes this in part to EU Taxonomy rules, which place additional reporting demands on financial institutions.

Only a quarter of companies filed statements under 70 pages, and EFRAG noted little connection between report length and either company size or the number of material topics disclosed.

Climate, workforce and conduct dominate disclosures

Across all sectors, three topics appear almost universally: climate change, workforce matters and business conduct.

According to EFRAG’s analysis, 98% of companies identify climate change as material to their operations, 99% include workforce issues and 93% address business conduct.

Only 10% reported all 10 topical ESRS standards as material, while a quarter reported four or fewer.

Six topics were identified as material by at least 60% of companies: climate change, own workforce, business conduct, consumers and end-users, circular economy and workers in the value chain.

Materiality assessments vary between sectors.

For example, circular economy concerns are material for 65% of non-financial companies but only 30% of financial institutions.

Likewise, workers in the value chain are material for 70% of non-financial firms compared with 35% of financial companies.

Some sub-topics are rarely considered material, with fewer than 5% of companies including issues such as microplastics, biodiversity-animal welfare and the rights of indigenous peoples in consumer contexts.

Climate targets and transition planning

More than half of the companies report having a transition plan for climate change mitigation, though EFRAG found that quality levels vary.

Northern and Western European firms lead adoption, with the Netherlands at 73%, Sweden at 69% and Denmark also at 69%.

Around 70% of reporting companies set near-term targets for Scope 1 and Scope 2 greenhouse gas emissions aligned with the 1.5°C limit, yet only 40% extend these targets to include Scope 3 emissions across their value chains.

One third still have no clear near-term Scope 1 and Scope 2 targets, and 16% have targets not in line with the 1.5°C trajectory.

Internal carbon pricing is relatively rare, adopted by just 20% of companies.

It is more prevalent in carbon-intensive industries: 60% in mining, about 50% in electricity and gas and 30% in transport and storage.

Biodiversity and human rights reporting

Biodiversity metrics appear in 30% of reports, with an average of four per company.

Disclosure rates vary by sector, with construction at 60%, electricity and gas at 62% and real estate at 64%.

France has the highest national rate at 49%, followed by Sweden and Austria at 44% each and the Netherlands at 39%.

Germany and Italy are lower, at 23% and 18% respectively.

Most biodiversity metrics are company-specific.

Non-financial firms measure impacts such as endangered species in operational areas and restoration activities.

Financial institutions assess investment exclusions based on biodiversity impacts and their engagement with portfolio companies.

On human rights, more than 90% of companies state compliance with minimum wage requirements for their own employees, but few distinguish between European Economic Area and non-EEA contexts.

In a subset of 50 firms, 81% reported discrimination incidents in their operations, though numbers vary widely.

Severe human rights incidents in own operations are disclosed by 78%, but only 5% report actual incidents occurring.

Stakeholder engagement patterns

Materiality assessments involve internal stakeholders in 97% of cases.

Customers feature in around 70% of assessments, suppliers in 65% and investors in 60%.

Engagement with broader societal stakeholders is lower: 36% involve authorities, 33% NGOs, 30% communities, 22% industry unions, 14% academia and 11% trade unions.

This shows companies tend to engage most with those holding direct business relationships, although some maintain balance between these groups and wider civil society.

Regional patterns in reporting are also visible in the report.

Southern EU countries such as Spain, France and Italy report more material topical standards than Nordic countries including Norway, Finland and Denmark.