CSRD Impact in Portugal: First-Year Evidence and Determinants of Application

Abstract

The growing importance of Environmental, Social and Governance (ESG) issues has transformed traditional corporate reporting, challenging the historical focus on financial disclosure alone. While financial reports long served as the main communication tool between companies and stakeholders, growing concerns regarding climate change, social inequalities, business ethics and corporate responsibility revealed the limitations of purely financial information in assessing long-term value creation. Consequently, non-financial disclosure emerged as a key element of corporate transparency, initially supported by voluntary frameworks such as the Global Reporting Initiative (GRI) and the International Integrated Reporting Framework. However, the lack of standardisation led to heterogeneous reporting practices, limiting comparability and reliability. To address these issues, the European Union (EU) shifted from a voluntary to a mandatory sustainability reporting framework. The Non-Financial Reporting Directive (NFRD) represented an important first step, although prior studies identified limitations regarding reporting quality and comparability (Anguiano-Santos et al., 2024; Radu et al., 2023). In response, the EU approved the Corporate Sustainability Reporting Directive (CSRD) in 2022, introducing substantial changes to corporate reporting. The CSRD expands the scope of companies subject to disclosure obligations, incorporates the double materiality principle, requires external assurance, and mandates compliance with the European Sustainability Reporting Standards (ESRS) developed by EFRAG. This study analyses the impact of the CSRD in Portugal during its first year of implementation. The research examines 46 companies listed on Euronext Lisbon, including 28 firms previously covered by the NFRD. Using quantitative content analysis, a compliance index based on 88 ESRS disclosure requirements was developed. The results reveal a relatively low overall compliance level (mean = 0.390), suggesting that Portuguese companies are still adapting to the new framework. Firms previously subject to the NFRD presented significantly higher compliance levels, indicating that prior experience facilitates adaptation. Governance disclosures achieved the highest compliance, whereas environmental disclosures showed the lowest. Regression results identify leverage as a negative determinant of compliance, while sustainability reporting practices, PSI index inclusion and prior NFRD experience positively influence compliance levels. The study contributes to the emerging literature on CSRD implementation and highlights implications for companies, auditors and policymakers regarding sustainability integration and reporting practices.