There is still room for improvement in the sustainability reports of Austrian companies, according to a recent Deloitte study titled "NFI Reporting Analysis."

Incomplete and unclear information, as well as unrealistic descriptions, not only provide ample opportunity for greenwashing accusations, but also carry the risk of high financial penalties and competitive disadvantages in the future.

Since the 2024 fiscal year, large companies across the EU have been required to report on sustainability aspects in accordance with the Corporate Sustainability Reporting Directive. While the implementation of the CSRD is still pending in Austria, the majority of affected companies are already implementing the requirements voluntarily. While this is generally welcome, a closer look at the reports reveals considerable potential for optimization. This is shown by a recent analysis by Deloitte Austria of a total of 46 sustainability statements from Austrian companies. For example, many of the environmental and social impacts described in the reports as positive do not reflect reality.

"In fact, only 40% of the positive impacts cited actually lead to real improvements. Far too often, they are merely reactions to previously caused negative effects. By misrepresenting their own work in this way, companies risk serious accusations of greenwashing. A clearer distinction is urgently needed between genuine positive impacts and measures to mitigate negative effects," emphasizes Alfred Ripka, partner and ESG expert at Deloitte Austria.

Poor quality due to poor implementation

There is also potential for improvement in the overall quality of reporting: Around half of the reports contain deficiencies in their disclosures on administrative, management, and supervisory bodies. The most common deficiencies are incomplete information (36), unclear information (26), and content that is difficult to find (13) – even though these do not concern complex, topic-specific sustainability issues, but rather purely descriptive elements of corporate governance.

"It can be assumed that the existing deficiencies are not the result of missing or difficult-to-provide information, but rather of poor implementation of the disclosure requirements. The good news: The standard-setter is currently making further improvements here. It is to be hoped that this will make the requirements easier to understand and thus improve the overall quality of the reports," says Alfred Ripka.

Missing contexts make understanding difficult

Also striking is the complicated structure of the reports. This makes it extremely difficult to capture the connections between significant impacts, opportunities, and risks (IROs), management concepts, measures, and objectives. This negatively impacts the readability and overall clarity of the reports. Furthermore, it is evident that the reports of Austrian companies have a significantly higher page count than the European average. "For better readability, sustainability connections need to be further developed and presented more clearly. For example, it is recommended to place IROs and the relevant concepts, measures, and objectives in a separate place in the report for each aspect," says the expert.

Even though the existing reporting deadlines and obligations have been postponed by the omnibus packages published by the European Commission, the basic requirements remain. Timely optimization of sustainability reporting therefore remains essential. "Companies not only secure competitive advantages in this way, but also avoid sanctions. After all, the mandatory penalties for violations of the CSRD will amount to up to five percent of annual revenue in the future," says Alfred Ripka.