From Compliance to Competitive (Dis)Advantage? The Transformation of Corporate Sustainability Reporting

ABSTRACT The tightening of EU sustainability reporting rules has raised a controversial debate between improving corporate transparency and the risk of stifling competitiveness, with ongoing EU‐wide discussions on potential deregulation. We contribute to this debate by examining changes in sustainability reporting practices over time. By using a hand‐collected dataset of German listed firms, we find that sustainability reporting has changed substantially over time. Sustainability reporting among sample firms increased from 7% in 2010 to 59% in 2022. Additionally, about 65% of these reports address climate‐related goals, and we find substantial differences in volume and scope between mandatory and voluntary disclosers. However, we do not find that the introduction of mandatory sustainability reporting is associated with a competitive disadvantage. These findings could help policymakers evaluate the tradeoff in sustainability reporting between high transparency and potential competitive disadvantages to balance regulatory ambition and economic feasibility.