Integrating Sustainable Development Goals in Environmental, Social and Governance Criteria and the Sustainability Transformation of the EU Business Sector

Koundouri, Phoebe and Landis, Conrad Felix Michel and Dellis, Konstantinos and Plataniotis, Angelos (2025): Integrating Sustainable Development Goals in Environmental, Social and Governance Criteria and the Sustainability Transformation of the EU Business Sector. Forthcoming in: : pp. 1-27.

Abstract

The paper reviews environmental, social, and governance (ESG) Criteria and Sustainable Development Goals (SDG) within the EU policy framework. It evaluates the integration of the SDGs into existing sustainability reporting frameworks, advocating for more comprehensive and interdisciplinary approaches to embed long-term SDGs in corporate sustainability reporting. This is considered essential to accelerate the EU business sector's sustainability transformation. Moreover, this paper evaluates the effectiveness of current frameworks in influencing firm behavior, particularly in reducing pollution levels, promoting green innovation, and complying with enhanced disclosure requirements. Finally, it concludes by suggesting that, while progress has been made, there is a need for further alignment and refinement of these frameworks to ensure that they drive meaningful corporate action and policy development towards achieving the transformation to sustainability.

• Item Type: MPRA Paper
• Language: English
• Keywords: ESG, Sustainable Development Goals, SDG, CSRD, Sustainability Reporting, European Green Deal
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M14 - Corporate Culture ; Diversity ; Social Responsibility; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q0 - General > Q01 - Sustainable Development; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy

References

Anderson, B. J., Convery, F., & Di Maria, C. 2010. Technological Change and the EU ETS: The Case of Ireland [SSRN Scholarly Paper]. https://doi.org/10.2139/ssrn.1687944

Andreou, P. C., & Kellard, N. M. 2021. Corporate Environmental Proactivity: Evidence from the European Union’s Emissions Trading System. British Journal of Management, 32(3), 630–647. https://doi.org/10.1111/1467-8551.12356

Anyfantaki, S., Migiakis, P. M., & Paisiou, K. 2022. Green finance in Europe: actors and challenges. Bank of Greece Economic Bulletin, (55), 83-106

Arif, M., Sajjad, A., Farooq, S., Abrar, M., & Joyo, A. S. 2021. The impact of audit committee attributes on the quality and quantity of environmental, social and governance (ESG) disclosures.

Corporate Governance: The International Journal of Business in Society, 21(3), 497-514

Avramov, D., Cheng, S., Lioui, A., & Tarelli, A. 2022. Sustainable investing with uncertainty in ESG rating. Journal of Financial Economics, 145(2), 642-664

Bauer, R. and Hann, D. 2010. Corporate environmental management and credit risk. ECCE Working Paper. University Maastricht, The European Centre for Corporate Engagement. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1660470

Bekaert, G., Rothenberg, R., V., and Noguer, M. 2020. Sustainable Investment - Exploring the Linkage between Alpha, ESG, and SDG's. Econometric modelling. https://api.semanticscholar.org/CorpusID:225799329

Berg, F., Koelbel, J. F., & Rigobon, R. 2022. Aggregate confusion: The divergence of ESG ratings. Review of Finance, 26(6), 1315-1344

Betti, G., Consolandi, C., and Eccles, R., G. 2018. The Relationship between Investor Materiality and Sustainable Development Goals. A Methodological Framework. Sustainability. https://api.semanticscholar.org/CorpusID:169131310

Boffo, R. and R. Patalano. 2020. ESG Investing: Practices, Progress and Challenges. OECD Paris, www.oecd.org/finance/ESG-Investing-Practices-Progress-and-Challenges.pdf

Busch, D. 2021. Sustainability disclosure in the EU financial sector. Sustainable Finance in Europe: Corporate Governance, Financial Stability, and Financial Markets. 397-443

Canan, A. 2024. Measuring and Reporting Sustainability in Change and Innovation Management. In Reference Module in Social Sciences. https://doi.org/10.1016/b978-0-443-13701-3.00307-8

Carbon Disclosure Project. 2023. About Us. Retrieved from https://www.cdp.net/en/info/about-us

Chen, F., Wang, M., & Pu, Z. 2022. The impact of technological innovation on air pollution: Firm-level evidence from China. Technological Forecasting and Social Change, 177, 121521. https://doi.org/10.1016/j.techfore.2022.121521

Christensen, H. B., Hail, L. & Leuz, C. 2021. Mandatory CSR and sustainability reporting: Economic analysis and review of the literature. Review of Accounting Studies, 26(3), 1176–1248. https://doi.org/10.1007/s11142-021-09609-5

Cohen, G. 2023. ESG risks and corporate survival. Environment Systems and Decisions, 43(1), 16-21

Cohen, L., Gurun, U.G. & Nguyen, Q. H. 2020. The ESG-innovation disconnect: Evidence from green patenting (No. w27990). National Bureau of Economic Research

Corporate sustainability reporting. 2023. Finance. https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en

Cuomo, F., Gaia, S., Girardone, C., & Piserà, S. 2022. The effects of the EU non-financial reporting directive on corporate social responsibility. The European Journal of Finance, 0(0), 1–27. https://doi.org/10.1080/1351847X.2022.2113812

Czerny, A., & Letmathe, P. 2017. Eco-efficiency: The reduction related to environmental and economic performance. The case of companies participating in the EU Emissions Trading Scheme. Business Strategy and the Environment, 26(6), 791–806. https://doi.org/10.1002/bse.1951

D'amato, D., Droste, N., Chan, S. & Hofer, A. 2017. The Green Economy Pragmatism or revolution? Perceptions of young researchers on social and ecological transformation. Environmental Values, 26(4), 413-435

Darshi, Gunawardana, & Weerakoon Banda. 2023. A Systematic Review of Sustainable Reporting Accuracy: CURRENT PRACTICES AND ISSUES FOR THE FUTURE. Journal of Accountancy & Finance, 9(3). https://doi.org/10.57075/jaf922sp03

DIANEOSIS. 2023. Υιοθέτηση κριτηρίων ESG στη λήψη επενδυτικών αποφάσεων: Τάσεις και προοπτικές. - Adoption of ESG criteria for investment decisions: Trends and projections

Djalolitdinovna, M. A., & Xakimovna, N. F. 2024. DEVELOPMENT OF SUSTAINABILITY REPORTING TOWARDS COMMON STANDARDS. European Journal of Higher Education and Academic Advancement, 1(3), 84–91. https://doi.org/10.61796/ejheaa.v1i3.443

Dong, Y., Zhang, Y., & Liu, S. 2024. The impacts and instruments of energy transition regulations on environmental pollution. Environmental Impact Assessment Review, 105, 107448. https://doi.org/10.1016/j.eiar.2024.107448

Earnst & Young. 2023. Sustainable Finance Disclosure Regulation: Prepared for a ‘level II’ application. Retrieved from https://www.ey.com/en_lu/sustainability-financial-services/sustainable-finance-disclosure-regulation--getting-ready-for--le

EU Technical Expert Group (TEG) on Sustainable Finance. 2019. Report on the EU Green Bond Standard. https://finance.ec.europa.eu/system/files/2019-06/190618-sustainable-finance-teg-report-green-bond-standard_en.pdf

European Commission. 2019. Guidelines for reporting climate-related information. https://ec.europa.eu/finance/docs/policy/190618-climate-related-information-reporting-guidelines_en.pdf

European Commission. 2020. A European Green Deal: The aim is to be the first climate-neutral continent. https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal/actions-being-taken_en

European Commission. 2021. Communication on the 2030 climate target plan. https://ec.europa.eu/clima/sites/clima/files/deforestation/docs/2030_en.pdf

European Commission. 2022. EU Taxonomy: Accelerating sustainable investments. Retrieved from https://finance.ec.europa.eu/system/files/2022-02/sustainable-finance-taxonomy-complementary-climate-delegated-act-factsheet_en.pdf

Finch, N. 2005. The Motivations for Adopting Sustainability Disclosure. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.798724

Global Reporting Initiative (GRI). 2021. Sustainability reporting standards. Retrieved from https://www.globalreporting.org/standards/gri-standards-download-center/

Global Reporting Initiative. 2023. About GRI. Retrieved from https://www.globalreporting.org/about-gri/

Gregory, A., Tharyan, R., & Whittaker, J. 2014. Corporate Social Responsibility and Firm Value: Disaggregating the Effects on Cash Flow, Risk and Growth. Journal of Business Ethics, 124(4), 633–657. https://doi.org/10.1007/s10551-013-1898-5

Gutterman, A. 2021. Sustainability Reporting Frameworks. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3809288

Halkos, G., & Nomikos, S. 2021. Corporate Social Responsibility: Trends in global reporting initiative standards. Economic Analysis and Policy, 69, 106-117

Henriksson, R., Livnat, J., Pfeifer, P., & Stumpp, M. 2019. Integrating ESG in portfolio construction. The Journal of Portfolio Management, 45(4), 67-81

International Integrated Reporting Council. 2023. The International <IR> Framework. Retrieved from https://integratedreporting.org/resource/international-ir-framework/

Huang, M., & Li, X. 2023. Exploring the impact of ambient air quality standards on firm innovation: evidence from listed industrial companies in China. International Journal of Emerging Markets. https://doi.org/10.1108/ijoem-12-2021-1899

Jiao, Y. 2010. Stakeholder welfare and firm value. Journal of Banking and Finance, 34, 2549-2561

Joltreau, E., & Sommerfeld, K. 2018. Why does emissions trading under the EU Emissions Trading System (ETS) not affect firm competitiveness? Empirical findings from the literature. Climate Policy, 19(4). https://doi.org/10.1080/14693062.2018.1502145

IFRS Foundation. (2022, January 31).IFRS Foundation completes consolidation of CDSB from CDP. https://www.ifrs.org/news-and-events/news/2022/01/ifrs-foundation-completes-consolidation-of-cdsb-from-cdp/

Kapellas, K. & Siougle, G. 2017. Financial reporting practices and investment decisions: A review of the literature. Industrial Engineering & Management, 6(04), 1-9

Khan, M. A. 2022. ESG disclosure and firm performance: A bibliometric and meta-analysis. Research in International Business and Finance, 61, 101668

Khan, M., Serafeim, G., & Yoon, A. 2016. Corporate sustainability: First evidence on materiality. The accounting review, 91(6), 1697-1724

Koundouri, P. and Landis, C. 2023. ESG and SDG momentum in international stock returns, AE4RIA, UN SDSN Global Climate Hub, Athens University of Economics and Business, Working Paper. https://econpapers.repec.org/paper/auewpaper/2318.htm

Koundouri, P., Christantoni, M., Landis, C., Loloni, M., Oikonomidis, S., & Plataniotis, A. 2023. Towards Sustainability of the Greek Port Sector–The Case Study of Lavrio (No. 2317). Athens University of Economics and Business. https://wpa.deos.aueb.gr/docs/2023.ICSD2023.Sustainability.Lavrio.Port.pdf Working paper

Koundouri, P., Devves, S. & Plataniotis, A. 2021. Alignment of the European Green Deal, the Sustainable Development Goals and the European Semester Process: Method and application. Theoretical Economics Letters, 11(4), 743-770

Krasodomska, J., Zarzycka, E., & Zieniuk, P. 2023. Voluntary sustainability reporting assurance in the European Union before the advent of the corporate sustainability reporting directive: The country and firm‐level impact of Sustainable Development Goals. Sustainable Development, 32(3), 1652–1664. https://doi.org/10.1002/sd.2744

Lafortune, G., Cortés Puch, M., Mosnier, A., Fuller, G., Diaz, M., Riccaboni, A., Kloke-Lesch, A., Zachariadis, T., Carli, E. Oger, A. 2021. Europe Sustainable Development Report 2021: Transforming the European Union to achieve the Sustainable Development Goals. SDSN, SDSN Europe and IEEP. France: Paris

Lafortune, G., Zoeteman, K., Fuller, G., Mulder, R., Dagevos, J. and Schmidt-Traub, G. 2019. The 2019 SDG Index and Dashboards Report for European Cities (prototype version). Sustainable Development Solutions Network (SDSN) and the Brabant Centre for Sustainable Development (Telos)

Migliorelli, M. 2021. What do we mean by sustainable finance? Assess existing frameworks and policy risks. Sustainability, 13(2), 975

Mittelbach-Hörmanseder, S., Hummel, K., & Rammerstorfer, M. 2021. The Information Content of Corporate Social Responsibility Disclosure in Europe: An institutional perspective. European Accounting Review, 30(2), 309–348. https://doi.org/10.1080/09638180.2020.1763818

Myshko, D. 2012. R&D: Regulatory. PharmaVoice. https://www.pharmavoice.com/news/pharmaceutical-regulations/613678/

Nagy, Z., Kassam, A. and Lee, L. E. 2015. Can ESG add Alpha?, The Journal of Investing, 25(2), 113-12410.3905/joi.2016.25.2.113

Pacces, A.M. 2021. Will the EU taxonomy regulation foster sustainable corporate governance? Sustainability, 13(21), 12316

Pasko, O., Chen, F., Kuts, T., Sharko, I. and Ryzhikova, N., 2022. Sustainability reporting nexus to corporate governance in scholarly literature. Environmental Economics, 13(1), p.61.

Pasko, O. Zhong, F., Tetyana, C., Kuts., Inna, Sharko, N., N., Ryzhikova. 2022. Sustainability reporting nexus to corporate governance in the scholarly literature. Environmental Economics. doi: 10.21511/ee.13(1).2022.06

Plastun, A., Makarenko, I., Khomutenko, L., Osetrova, O., and Shcherbakov, P. 2020. SDGs and ESG disclosure regulation: is there an impact? Evidence from the Top 50 World Economy. Problems and perspectives in management. https://api.semanticscholar.org/CorpusID:225662523

Pogurecka, K. 2023. Corporate governance and sustainability reporting in Latvia. Indivīds. Sabiedrība. Valsts. doi: 10.17770/iss2022.7023

Popp, D., Newell, R. G., & Jaffe, A. B. 2010. Chapter 21—Energy, the Environment, and Technological Change. In B. H. Hall & N. Rosenberg (Eds.), Handbook of the Economics of Innovation (Vol. 2, pp. 873–937). North-Holland. https://doi.org/10.1016/S0169-7218(10)02005-8

Porter, M. E. 1991. Towards a dynamic theory of strategy. Strategic Management Journal, 12(S2), 95–117. https://doi.org/10.1002/smj.4250121008

Porter, M. E., & van der Linde, C. 1995. Toward a New Conception of the Environment Competitiveness Relationship. Journal of Economic Perspectives, 9(4), 97–118. https://doi.org/10.1257/jep.9.4.97

Principles of Responsible Investment. 2023. About the PRI. Retrieved from https://www.unpri.org/pri/about-the-pri Retrieved from https://www.dianeosis.org/2023/12/ta-esg-kritiria-stin-ellada-kai-ston-kosmo/

Sachs J., Koundouri P. Becchetti L., Brunnhuber S., Chioatto E., Cordella M., Devves S., Halkos G., Hansmeyer C., Landis C. Morone P., Patel K., Plataniotis A., Romani I., Spani R., Stavridis C., Tessari F., Theodossiou N., Wetzel D., Zachariadis T. 2022. Financing the Transformations for the Joint Implementation of Agenda 2030 for Sustainable Development and the European Green Deal, SDSN Paper, https://resources.unsdsn.org/financing-the-joint-implementation-of-agenda-2030-and-the-european-green-deal

Sachs, JD, Schmidt-Traub, G., Mazzucato, M., Messner, D., Nakicenovic, N. & Rockström, J. 2019. Six transformations to achieve the goals of sustainable development. Nature sustainability, 2(9), 805-814

Sadiq, M., Ngo, T., Q., Pantamee, A., A., Khudoykulov, K., Ngan, T., T., and Phan Tan, L. 2022. The role of environmental social and governance in achieving sustainable development goals: evidence from ASEAN countries. Economic Research-Ekonomska Istra ivanja. https://api.semanticscholar.org/CorpusID:248898817

Scherer, B., Hasaj, M. Greenlabelling. 2023. How valuable is the SFDR Art 9 label? J Asset Manag 24, 541–546 https://doi.org/10.1057/s41260-023-00319-y Schneider, T. E. 2011. Is Environmental Performance a Determinant of Bond Pricing? Evidence from the U.S. Pulp, Paper and Chemical Industries. Contemporary Accounting Research, 28(5), 1537-1561

Scheyvens, R., Banks, G., & Hughes, E. (2016). The private sector and the SDGs: The need to move beyond ‘business as usual’. Sustainable Development, 24(6), 371-382

Sisodia, G., Joseph, A., & Dominic, J. 2022. Are corporate green bonds acting as armour during crises? Evidence from a natural experiment. International Journal of Managerial Finance, 18(4), 701–724. https://doi.org/10.1108/IJMF-10-2021-0501

Steuer, S., & Tröger, T. H. 2022. The Role of Disclosure in Green Finance. Journal of Financial Regulation, 8(1), 1–50 https://doi.org/10.1093/jfr/fjac001

Sustainability Accounting Standards Board. 2023. About SASB. Retrieved from https://www.sasb.org/about/

Sustainable Stock Exchanges. 2024. Sseinitiative.org. https://sseinitiative.org/

Tam, Duc, Dinh, Ann, Husmann., Gaia, Melloni. 2022. Corporate Sustainability Reporting in Europe: Scope Review. Accounting in Europe, doi:10.1080/17449480.2022.2149345

Task Force on Climate-Related Financial Disclosures. 2023. About the TCFD. Retrieved from https://www.fsb-tcfd.org/about/

Tsairi, Y., & Martens, K. 2024. Workplace responsibility for employee mobility? A review of sustainability reporting frameworks. Transport Reviews, 44(5), 1077–1102. https://doi.org/10.1080/01441647.2024.2356030

Ulrich, P., Metzger, J. 2022. Sustainability reporting: The way to standardise reporting according to the Corporate Sustainability Reporting Directive in Germany. doi: 10.22495/cgtapp14

Utz, S. and Wimmer, M. 2014. Are They Any Good at All? A Financial and Ethical Analysis of Socially Responsible Mutual Funds Journal of Asset Management, 15. 10.1057/jam.2014.8

Van Zanten, J.A. and Huij, J. 2022. ESG to SDG: Do Sustainable Investing Ratings Align with the Sustainability Preferences of Investors, Regulators, and Scientists? Available at SSRN: https://ssrn.com/abstract=4186680 or http://dx.doi.org/10.2139/ssrn.4186680

Veeravel, V., Sadharma, E. K. S., & Kamaiah, B. 2024. Do ESG disclosures lead to better firm performance? A method of moment panel quantile regression approach. Corporate Social Responsibility and Environmental Management. 31(1), 741-754

Whelan, T., Atz, U., Van Holt, T. and Clark, C. 2021. ESG and Financial Performance, NYU STERN, https://www.stern.nyu.edu/sites/default/files/assets/documents/ESG%20Paper%20Aug%202021.pdf. Assessed 20/6/2023

Xiong, L., Long, H., Zhang, X., Wen, Z., & Yu, C. 2023. Can environmental information disclosure reduce air pollution? Evidence from China. Frontiers in Environmental Science, 11. https://doi.org/10.3389/fenvs.2023.1126565