MIT Sloan Management Review Article on Doubling Down on Impact Reporting

New EU reporting mandates will affect businesses well beyond Europe’s borders and require them to report on material impacts far beyond their own walls.

U.S. companies that conduct significant business in Europe are in for the strategic and compliance challenge of a lifetime. Accustomed to doing their best to provide sustainability information to investors via voluntary reporting frameworks, they must now prepare to adopt a rigorous sustainability reporting regime and wrap their collective minds around a new concept: double materiality.

The aim of the European Green Deal is to accelerate the transition to a low-carbon, sustainable economy. By taking into account the current and future needs of a broader constituency of stakeholders, governments are expanding the concept of corporate accountability. Their goal is to compel companies to think beyond conventional calculations of profitability to factor in the impact they have on the world. Companies will find it harder to ignore previously unpriced externalities and must reckon with how much value they are creating or destroying, not only for themselves but for those affected by their activities.

About the Author

Brian Tomlinson is a managing director in the Financial Accounting Advisory Services practice at Ernst & Young LLP focused on environmental, social, and governance (ESG). Lucy Godshall is a principal in Ernst & Young LLP’s Climate Change and Sustainability Services practice focused on ESG.

The views reflected in this article are the views of the authors and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.

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