Easier said than done: Translating the materiality principle into sustainability reporting practices

This paper discusses the potential effects of the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) requirements on the implementation of materiality principle, drawing on dialogic accounting. We focus on companies listed in the Dow Jones Sustainability Europe Index and analyse their reporting practices on the materiality assessment process, in order to verify whether they share some commonalities and reflect a dialogic approach. Our results indicate that these practices are characterised by limited transparency, low stakeholder engagement, flawed identification of material topics, incomparability of information, and outdated reporting and engagement processes. This evidence casts doubt on the quality of sustainability reports and raises concerns about the effectiveness of CSRD and ESRS. Our study helps explain how the materiality principle is implemented in sustainability reporting pointing out the most critical issues related to the implementation of a dialogic approach. Further, it provides valuable insights into the ongoing debate around the regulation of sustainability reporting detailing possible disclosure gaps as well as best practices that could be useful to preparers, regulators and auditors.