Sustainability and the role of corporate reporting

December 18 2023

How can we encourage organizations to reduce their negative environmental and societal impacts? This question is central to the research of Ries Breijer, who obtained his PhD on December 18th. His research shows that regulatory changes on non-financial and financial reporting can play an important role.

While working on his master's thesis as part of the part-time accountancy degree program at Nyenrode, Breijer was approached to begin a full-time PhD program. "For me, that was a great opportunity to delve into sustainability reporting," Breijer says. "At the time, new legislation just came into effect, and we were uncertain about how it would unfold in practice. That made the topic particularly interesting."   

European Directive

Breijer's research focuses in part on the NFRD, i.e. the Non-Financial Reporting Directive. This is a European directive that requires large listed companies to be more transparent about their negative environmental and social impacts, often referred to as non-financial impacts. "In practice, we can divide organizations into two groups: those that have already started reporting non-financial information on a voluntary basis, and those that started doing so after it became mandatory. My research shows that the latter group focuses mainly on informing investors, with the information also being generic. Voluntary reporters, on the other hand, target a wide range of stakeholders and publish reports that are more informative than those of companies that are forced to do so. Typically, these companies excel in non-financial performance or face strong pressure from stakeholders and society, and therefore benefit from providing transparency." Breijer argues that the differences between the two groups' reporting practices makes it difficult to compare companies, thereby making it challenging to hold them accountable for their negative impact.


The underlying idea of mandatory non-financial reporting is that companies will make efforts to conduct their business in a manner that is both environmentally conscious and socially ethical. However, Breijer's research indicates that non-voluntary providers show no improvement in their social performance, unlike organizations that provide information on a voluntary basis. "The problem is that companies that provide only the mandated minimum information cannot be held accountable for their negative impact because of the lack of transparency," Breijer says. "As of the fiscal year 2024, tightened regulations are expected to enhance non-financial transparency to a level where companies can be held accountable for their negative impacts. But increasing transparency is only the first step. As a society, we should also penalize companies when mandatory reporting reveals wrongdoing. This accountability should encourage companies to address these issues. In short, there is still much uncertainty as to whether non-financial reporting is an effective means of motivating companies to reduce their negative impact."

In his study, Breijer further explores the accounting treatment of research and development (R&D) projects that are aimed at reducing a company’s negative environmental impact. Due to current regulations, green development costs are not spread over several years because they are unlikely to generate direct economic benefits. This is detrimental because, in the pursuit of short-term profits, sustainability may take a back seat. Previous research shows that the option for spreading costs leads to an increase in R&D investments. Therefore, Breijer advocates for a revised accounting treatment that allows for the (partial) spreading of green R&D costs when the R&D project generates long-term environmental and social advantages, even in the absence of direct economic benefits. This change in financial reporting has the potential to contribute to the sustainability of our economy, or better yet, cease impeding it.


In May of 2022, Breijer, along with colleague René Orij, published an article on the impact of the NFRD in the journal Accounting in Europe. This was not without merit, as their article earned him an award presented in May during the annual congress of the European Accounting Association in Helsinki. Conducting research and writing scientific articles is something Breijer intends to continue even after attaining his PhD. "The gap between financial and non-financial reporting is something that has increasingly fascinated me”, he stated. I am curious to see if the current initiatives in mandatory non-financial reporting, both in Europe and the United States, can bridge this gap. I see this as a promising avenue for my upcoming research projects." 

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