Sustainability 2
6314M0419Y
Table of Contents
Week 1 ..................................................................................................................................................... 3
Lecture 1: Measuring and Reporting Sustainability ............................................................................ 3
Sustainability reporting regulation .................................................................................................. 3
Measuring sustainability.................................................................................................................. 4
Tutorial 1: Measuring sustainability .................................................................................................... 6
Cai et al. (2024): Diversity targets ................................................................................................... 6
Articles ................................................................................................................................................. 8
Cai, W., Chen, Y., Rajgopal, S., & Azinovic-Yang, L. (2024). Diversity targets. Review of Accounting
Studies, 29(3), 2157–2208. https://doi.org/10.1007/s11142-024-09831-x .................................... 8
Week 2 ..................................................................................................................................................... 9
Lecture 2: Ethical decision-making in sustainability reporting ............................................................ 9
Competing stakeholder interests..................................................................................................... 9
Ethical decision framework ............................................................................................................. 9
Reporting biases ............................................................................................................................ 10
Tutorial 2: Ethical decision-making in sustainability reporting.......................................................... 12
McManus, J. (2018). Hubris and Unethical Decision Making: The Tragedy of the Uncommon .... 12
Cardinaels, E., Kuang, Y. F., & Zhang, J. (2025). CEO charity involvement and corporate
performance in promoting stakeholders ....................................................................................... 14
Articles ............................................................................................................................................... 15
Cardinaels, E., Kuang, Y. F., & Zhang, J. (2025). CEO charity involvement and corporate
performance in promoting stakeholders ’. Accounting and Business Research,0(0), 1–38.
https://doi.org/10.1080/00014788.2025.2450619 ...................................................................... 15
McManus, J. (2018). Hubris and Unethical Decision Making: The Tragedy of the Uncommon.
Journal of Business Ethics, 149(1), 169–185. https://doi.org/10.1007/s10551-016-3087-9 ........ 16
Week 3 ................................................................................................................................................... 17
Lecture 3: Ethical accounting for sustainability ................................................................................. 17
Ethical dilemmas............................................................................................................................ 17
Connecting accounting and sustainability ..................................................................................... 17
Sustainability risk management .................................................................................................... 18
Tutorial 3: Ethical accounting for sustainability ................................................................................. 19
Raghunandan, A., & Rajgopal, S. (2024). Do Socially Responsible Firms Walk the Talk? .............. 19
Articles ............................................................................................................................................... 21
Page 1 of 44
, Raghunandan, A., & Rajgopal, S. (2024). Do Socially Responsible Firms Walk the Talk? The Journal
of Law and Economics, 67(4), 767–810. https://doi.org/10.1086/728855 ................................... 21
Week 4 ................................................................................................................................................... 22
Lecture 4: Strategic sustainability accounting and reporting ............................................................ 22
Sustainable strategy decisions ....................................................................................................... 22
Sustainable accounting systems .................................................................................................... 22
Sustainable supply chains .............................................................................................................. 24
Tutorial 4: Strategic sustainability accounting and reporting ............................................................ 25
Case study: Tony’s Chocolonely ..................................................................................................... 25
Week 5 ................................................................................................................................................... 26
Lecture 5: Sustainability reporting processes and governance ......................................................... 26
Sustainability Governance ............................................................................................................. 26
The reporting process .................................................................................................................... 28
Tutorial 5: Sustainability reporting processes and governance ........................................................ 31
Amiraslani, H., Deller, C., Ittner, C. D., & Keusch, T. (2024). Board Risk Oversight and
Environmental and Social Performance. ....................................................................................... 31
Articles ............................................................................................................................................... 32
Amiraslani, H., Deller, C., Ittner, C. D., & Keusch, T. (2024). Board Risk Oversight and
Environmental and Social Performance. Journal of Accounting and Economics, 101754.
https://doi.org/10.1016/j.jacceco.2024.101754 ........................................................................... 32
Week 6 ................................................................................................................................................... 34
Lecture 6: Assurance of sustainability information ........................................................................... 34
Purpose of sustainability assurance .............................................................................................. 34
Sustainability assurance vs. financial statement auditing ............................................................. 35
Assurance process ......................................................................................................................... 36
Tutorial 6: Assurance of sustainability reporting ............................................................................... 40
Ballou, B., Chen, P.-C., Grenier, J. H. & Heitger, D. L. (2018). Corporate social responsibility
assurance and reporting quality: Evidence from restatements .................................................... 40
Simic, S., Luo, L. & Datt, R. (2024). Compensation and carbon assurance: Evidence from the
United Kingdom ............................................................................................................................. 41
Articles ............................................................................................................................................... 42
Ballou, B., Chen, P. C., Grenier, J. H., & Heitger, D. L. (2018). Corporate social responsibility
assurance and reporting quality: Evidence from restatements. Journal of Accounting and Public
Policy, 37(2), 167–188. https://doi.org/10.1016/j.jaccpubpol.2018.02.001 ................................ 42
Simic, S., Luo, L., & Datt, R. (2024). Compensation and carbon assurance: Evidence from the
United Kingdom. International Journal of Auditing, 28(2), 307–327.
https://doi.org/10.1111/ijau.12332 .............................................................................................. 44
Page 2 of 44
, Week 1
Lecture 1: Measuring and Reporting Sustainability
Sustainability reporting regulation
The Global Risk Perception Survey of the World Economic Forum pointed out that in the long-term environmental risk
are estimated to be most impactful/severe, while in the short-term misinformation seems to be more pressing.
Sustainability topics, such as climate change, can have a huge economic impact and as such are becoming more and
more important for businesses → e.g. impact of LA wildfires.
Sustainable development is how we must live today if we want a better tomorrow, by meeting present needs without
compromising the chances of future generations to meet their needs.
Firms have already been reporting on environmental and social topics since 2000. Over time, however, there has been a
shift from a voluntary reporting environment to a mandatory reporting environment in the EU. The EU sustainability
reporting framework began with the Non-Financial Reporting Directive (NFRD) passed in 2014, requiring certain large
public-interest entities to disclose non-financial information. In 2023, companies were required to report on taxonomy
eligibility, which entails identifying which activities are covered by the EU Taxonomy. From 2024, they must report on
taxonomy alignment, assessing which eligible activities are actually sustainable. The Corporate Sustainability
Reporting Directive (CSRD) came into force in January 2023, expanding the scope and rigor of reporting requirements.
From 2025 to 2029, different categories of companies (including large listed firms, SMEs, and non-EU entities) must
progressively comply with CSRD. The assurance level for sustainability reporting will also increase, moving from limited
assurance in 2026 to reasonable assurance by 2028.
• The Non-Financial Reporting Directive (NFRD, 2014/95/EU) focuses on „Public interest entities“, i.e., large
listed firms with more than 500 employees or banks & insurance firms. This entailed that from FY 2017
onwards, ca. 11,000 firms had to comply with the NFRD. The resulting environmental, social, and governance
(ESG) information is reported in the annual report or a CSR report → no standardization.
• The Corporate Sustainability Reporting Directive (CSRD, 2022/2464/EU) focuses on large companies with
€40m net turnover and €20m on the balance sheet, with more than 250 employees. From FY 2024 onwards,
ca. 50.000 firms are in affected by this regulation. The CSRD requires limited assurance in the initial years of
reporting, but this will be expanded to reasonable assurance in later years. Furthermore, the European
Sustainability Reporting Standards (ESRS) have been created for standardized disclosure → lot of required
disclosure → puts a lot of strain on firms. The impact of the ESRS has been great, as it increase
transparency in all ESG areas. However, the downside of this is the resulting reports became much larger,
increasing stakeholder processing cost.
The aforementioned strain was also noted by the legislators and the EU's Omnibus Simplification Package was
introduced in February 2025. The omnibus is a legislative proposal aimed at easing the regulatory burden of
sustainability reporting on businesses. The main things the omnibus targets are:
Topic CSRD Omnibus
Timing Scope of CSRD and the timing of compliance ‘Stop the clock’ → Postpone ‘wave 2’ and ‘wave
depends on entity size: 3’ reporting by two years
• Wave 1: large listed in 2025
• Wave 2: small listed in 2026
Page 3 of 44
, • Wave 3: SME in 2027
Scope Depends on entity size (number of employees) Scope reduction: mandatory reporting for firms
with more than 1,000 employees
Assurance Limited assurance in the initial years of reporting, Removes switch to reasonable assurance
moving to reasonable assurance
Standards Up to 40 sector standards Remove the requirement for sector standards
ESRS adopted and in effect for wave 1 firms Update ESRS to reduce the reporting burden:
• ‘Substantial’ reduction of mandatory
datapoints
• Prioritize quantitative datapoints over
qualitative text
• Improve consistency with other EU
legislation
Measuring sustainability
Measuring sustainability comes down to
key performance indicators (see figure).
These KPIs often also link back to firm
performance, e.g. energy use: oil costs
increase significantly over the years. In
this class we will focus on ‘carbon
emissions’ and ‘own workforce’. During
the tutorial we will discuss ‘diversity
(DEI)’.
GHG emissions
Greenhouse gas (GHG) emissions are classified into three scopes under the widely used GHG Protocol. Scope 1
includes direct emissions from sources owned or controlled by the company, such as emissions from its own facilities
or vehicles, and that are included in the Kyoto-Protocol (greenhouse gases). Scope 2 covers indirect emissions from
the generation of purchased electricity, steam, heating, or cooling that the company consumes. Scope 3 refers to all
other indirect emissions that occur across a company’s value chain, such as emissions from suppliers, business travel,
or product use → full value chain included. The measurement of indirect emissions is often tricky, since it involves a
lot of estimations.
In order to report on GHG emissions we need to have reporting boundaries: only if you have operational control then you
need to include it in your emissions. A company has operational control (over an entity, site, operation or asset) when
Page 4 of 44
6314M0419Y
Table of Contents
Week 1 ..................................................................................................................................................... 3
Lecture 1: Measuring and Reporting Sustainability ............................................................................ 3
Sustainability reporting regulation .................................................................................................. 3
Measuring sustainability.................................................................................................................. 4
Tutorial 1: Measuring sustainability .................................................................................................... 6
Cai et al. (2024): Diversity targets ................................................................................................... 6
Articles ................................................................................................................................................. 8
Cai, W., Chen, Y., Rajgopal, S., & Azinovic-Yang, L. (2024). Diversity targets. Review of Accounting
Studies, 29(3), 2157–2208. https://doi.org/10.1007/s11142-024-09831-x .................................... 8
Week 2 ..................................................................................................................................................... 9
Lecture 2: Ethical decision-making in sustainability reporting ............................................................ 9
Competing stakeholder interests..................................................................................................... 9
Ethical decision framework ............................................................................................................. 9
Reporting biases ............................................................................................................................ 10
Tutorial 2: Ethical decision-making in sustainability reporting.......................................................... 12
McManus, J. (2018). Hubris and Unethical Decision Making: The Tragedy of the Uncommon .... 12
Cardinaels, E., Kuang, Y. F., & Zhang, J. (2025). CEO charity involvement and corporate
performance in promoting stakeholders ....................................................................................... 14
Articles ............................................................................................................................................... 15
Cardinaels, E., Kuang, Y. F., & Zhang, J. (2025). CEO charity involvement and corporate
performance in promoting stakeholders ’. Accounting and Business Research,0(0), 1–38.
https://doi.org/10.1080/00014788.2025.2450619 ...................................................................... 15
McManus, J. (2018). Hubris and Unethical Decision Making: The Tragedy of the Uncommon.
Journal of Business Ethics, 149(1), 169–185. https://doi.org/10.1007/s10551-016-3087-9 ........ 16
Week 3 ................................................................................................................................................... 17
Lecture 3: Ethical accounting for sustainability ................................................................................. 17
Ethical dilemmas............................................................................................................................ 17
Connecting accounting and sustainability ..................................................................................... 17
Sustainability risk management .................................................................................................... 18
Tutorial 3: Ethical accounting for sustainability ................................................................................. 19
Raghunandan, A., & Rajgopal, S. (2024). Do Socially Responsible Firms Walk the Talk? .............. 19
Articles ............................................................................................................................................... 21
Page 1 of 44
, Raghunandan, A., & Rajgopal, S. (2024). Do Socially Responsible Firms Walk the Talk? The Journal
of Law and Economics, 67(4), 767–810. https://doi.org/10.1086/728855 ................................... 21
Week 4 ................................................................................................................................................... 22
Lecture 4: Strategic sustainability accounting and reporting ............................................................ 22
Sustainable strategy decisions ....................................................................................................... 22
Sustainable accounting systems .................................................................................................... 22
Sustainable supply chains .............................................................................................................. 24
Tutorial 4: Strategic sustainability accounting and reporting ............................................................ 25
Case study: Tony’s Chocolonely ..................................................................................................... 25
Week 5 ................................................................................................................................................... 26
Lecture 5: Sustainability reporting processes and governance ......................................................... 26
Sustainability Governance ............................................................................................................. 26
The reporting process .................................................................................................................... 28
Tutorial 5: Sustainability reporting processes and governance ........................................................ 31
Amiraslani, H., Deller, C., Ittner, C. D., & Keusch, T. (2024). Board Risk Oversight and
Environmental and Social Performance. ....................................................................................... 31
Articles ............................................................................................................................................... 32
Amiraslani, H., Deller, C., Ittner, C. D., & Keusch, T. (2024). Board Risk Oversight and
Environmental and Social Performance. Journal of Accounting and Economics, 101754.
https://doi.org/10.1016/j.jacceco.2024.101754 ........................................................................... 32
Week 6 ................................................................................................................................................... 34
Lecture 6: Assurance of sustainability information ........................................................................... 34
Purpose of sustainability assurance .............................................................................................. 34
Sustainability assurance vs. financial statement auditing ............................................................. 35
Assurance process ......................................................................................................................... 36
Tutorial 6: Assurance of sustainability reporting ............................................................................... 40
Ballou, B., Chen, P.-C., Grenier, J. H. & Heitger, D. L. (2018). Corporate social responsibility
assurance and reporting quality: Evidence from restatements .................................................... 40
Simic, S., Luo, L. & Datt, R. (2024). Compensation and carbon assurance: Evidence from the
United Kingdom ............................................................................................................................. 41
Articles ............................................................................................................................................... 42
Ballou, B., Chen, P. C., Grenier, J. H., & Heitger, D. L. (2018). Corporate social responsibility
assurance and reporting quality: Evidence from restatements. Journal of Accounting and Public
Policy, 37(2), 167–188. https://doi.org/10.1016/j.jaccpubpol.2018.02.001 ................................ 42
Simic, S., Luo, L., & Datt, R. (2024). Compensation and carbon assurance: Evidence from the
United Kingdom. International Journal of Auditing, 28(2), 307–327.
https://doi.org/10.1111/ijau.12332 .............................................................................................. 44
Page 2 of 44
, Week 1
Lecture 1: Measuring and Reporting Sustainability
Sustainability reporting regulation
The Global Risk Perception Survey of the World Economic Forum pointed out that in the long-term environmental risk
are estimated to be most impactful/severe, while in the short-term misinformation seems to be more pressing.
Sustainability topics, such as climate change, can have a huge economic impact and as such are becoming more and
more important for businesses → e.g. impact of LA wildfires.
Sustainable development is how we must live today if we want a better tomorrow, by meeting present needs without
compromising the chances of future generations to meet their needs.
Firms have already been reporting on environmental and social topics since 2000. Over time, however, there has been a
shift from a voluntary reporting environment to a mandatory reporting environment in the EU. The EU sustainability
reporting framework began with the Non-Financial Reporting Directive (NFRD) passed in 2014, requiring certain large
public-interest entities to disclose non-financial information. In 2023, companies were required to report on taxonomy
eligibility, which entails identifying which activities are covered by the EU Taxonomy. From 2024, they must report on
taxonomy alignment, assessing which eligible activities are actually sustainable. The Corporate Sustainability
Reporting Directive (CSRD) came into force in January 2023, expanding the scope and rigor of reporting requirements.
From 2025 to 2029, different categories of companies (including large listed firms, SMEs, and non-EU entities) must
progressively comply with CSRD. The assurance level for sustainability reporting will also increase, moving from limited
assurance in 2026 to reasonable assurance by 2028.
• The Non-Financial Reporting Directive (NFRD, 2014/95/EU) focuses on „Public interest entities“, i.e., large
listed firms with more than 500 employees or banks & insurance firms. This entailed that from FY 2017
onwards, ca. 11,000 firms had to comply with the NFRD. The resulting environmental, social, and governance
(ESG) information is reported in the annual report or a CSR report → no standardization.
• The Corporate Sustainability Reporting Directive (CSRD, 2022/2464/EU) focuses on large companies with
€40m net turnover and €20m on the balance sheet, with more than 250 employees. From FY 2024 onwards,
ca. 50.000 firms are in affected by this regulation. The CSRD requires limited assurance in the initial years of
reporting, but this will be expanded to reasonable assurance in later years. Furthermore, the European
Sustainability Reporting Standards (ESRS) have been created for standardized disclosure → lot of required
disclosure → puts a lot of strain on firms. The impact of the ESRS has been great, as it increase
transparency in all ESG areas. However, the downside of this is the resulting reports became much larger,
increasing stakeholder processing cost.
The aforementioned strain was also noted by the legislators and the EU's Omnibus Simplification Package was
introduced in February 2025. The omnibus is a legislative proposal aimed at easing the regulatory burden of
sustainability reporting on businesses. The main things the omnibus targets are:
Topic CSRD Omnibus
Timing Scope of CSRD and the timing of compliance ‘Stop the clock’ → Postpone ‘wave 2’ and ‘wave
depends on entity size: 3’ reporting by two years
• Wave 1: large listed in 2025
• Wave 2: small listed in 2026
Page 3 of 44
, • Wave 3: SME in 2027
Scope Depends on entity size (number of employees) Scope reduction: mandatory reporting for firms
with more than 1,000 employees
Assurance Limited assurance in the initial years of reporting, Removes switch to reasonable assurance
moving to reasonable assurance
Standards Up to 40 sector standards Remove the requirement for sector standards
ESRS adopted and in effect for wave 1 firms Update ESRS to reduce the reporting burden:
• ‘Substantial’ reduction of mandatory
datapoints
• Prioritize quantitative datapoints over
qualitative text
• Improve consistency with other EU
legislation
Measuring sustainability
Measuring sustainability comes down to
key performance indicators (see figure).
These KPIs often also link back to firm
performance, e.g. energy use: oil costs
increase significantly over the years. In
this class we will focus on ‘carbon
emissions’ and ‘own workforce’. During
the tutorial we will discuss ‘diversity
(DEI)’.
GHG emissions
Greenhouse gas (GHG) emissions are classified into three scopes under the widely used GHG Protocol. Scope 1
includes direct emissions from sources owned or controlled by the company, such as emissions from its own facilities
or vehicles, and that are included in the Kyoto-Protocol (greenhouse gases). Scope 2 covers indirect emissions from
the generation of purchased electricity, steam, heating, or cooling that the company consumes. Scope 3 refers to all
other indirect emissions that occur across a company’s value chain, such as emissions from suppliers, business travel,
or product use → full value chain included. The measurement of indirect emissions is often tricky, since it involves a
lot of estimations.
In order to report on GHG emissions we need to have reporting boundaries: only if you have operational control then you
need to include it in your emissions. A company has operational control (over an entity, site, operation or asset) when
Page 4 of 44
