The Impact of the CSRD on Management Control Systems: A qualitative case study on whether and how a large, multinational energy company´s MCS are affected by the CSRD

Abstract

With the European Green Deal, the European Union (EU) aims to make Europe the first climate-neutral continent in the world by achieving net-zero greenhouse gas emissions by 2050. As part of this, the EU has recently introduced the Corporate Sustainability Reporting Directive (CSRD), mandating all large and all listed companies in the EU to comply with new, expanded sustainability reporting requirements. While the main objective appears to be improving transparency towards stakeholders, it is also stated as a tool aimed to influence corporate sustainability behaviour. However, the main findings of existing literature appear to be mixed on whether mandatory reporting requirements have real causal impacts on companies’ sustainability-related activities and performance. On this basis, we aim to investigate whether mandatory reporting under the CSRD has influenced the management control systems (MCS) in large companies.

To answer our research question, we conduct a single case study on a large multinational energy company, collecting data through multi-purpose semi-structured interviews. Using Malmi and Brown’s MCS framework to structure our findings, we find that the MCS at Energy ASA have so far remained largely unaffected following the introduction of the CSRD. While it has led to changes to administrative controls, these are mainly limited to governance structure with the purpose of ensuring compliance. The regulation has not changed their long-term planning and strategy or short-term actions. While they state to have made improvements to the internal reporting processes, this has not led to changes in the main internal indicators. Neither has it influenced their reward and compensation systems. Thus, the intended purpose of the CSRD to influence company behaviour does not seem to have materialised in practice within the company under study.

Attempting to explain our findings, two key factors are identified. First, sustainability was already well-integrated in their MCS prior to the CSRD, having started their pathway towards becoming net-zero years back. Second, the company has been engaged in sustainability reporting for more than 20 years.