Assurance Practices under the Corporate Sustainability Reporting Directive: The Role of Multidisciplinary Teams in Enhancing and Legitimizing Sustainability Reporting Assurance
The credibility and reliability of sustainability reporting has become increasingly important in recent years as global companies are increasingly in the interest of various stakeholder groups. To improve the credibility of sustainability reports, there is a growing need to verify this non-financial information. The European Union's Corporate Sustainability Reporting Directive (CSRD) requires companies to have their sustainability information validated by external audits. These audits, known as Sustainability Reporting Assurance, are of central importance to strengthen stakeholder trust. Nevertheless, the role of auditors in this process has not yet been clearly defined, and there are doubts as to whether auditors have the necessary expertise to adequately evaluate the complex, non-financial information in sustainability reports.
One approach to improving the quality and credibility of sustainability reporting assurance is to involve multidisciplinary teams in the assurance process. Such teams, which include experts from both auditing and specialised sustainability areas, can cover the complexity of sustainability issues in a complementary way, thus increasing the credibility and quality of the assurance. However, studies show that there has been little research to date on the use of multidisciplinary teams and their impact on audit quality. Consequently, there is a lack of clear best practice guidelines for their structure and implementation.
This research project investigates the factors influencing the introduction and effectiveness of multidisciplinary teams in sustainability auditing, as well as their potential to improve audit quality. A particular focus is on the situation in Europe and Germany, where the CSRD lays the foundation for the mandatory auditing of sustainability reports.
In the wake of the 2007-09 global financial crisis, there has been a notable surge in calls from stakeholders for enhanced sustainability measures within publicly-listed companies. This has been accompanied by a tightening of regulations governing sustainable business practices, such as laws pertaining to the mitigation of climate change. In response, corporates have escalated their commitment to Corporate Social Responsibility (CSR) initiatives, aiming to address the growing pressure from both stakeholders generally and regulatory bodies specifically. This in turn has heightened the focus on Corporate Governance as a catalyst for CSR efforts, consisting of the major subsets of ownership and board of directors.
Research on the board of directors is divided into composition and diversity. However, both terms are often broad, heterogeneously defined and interchangeably used. The former rather analyses the structure of the board, the latter focusses on differences between the board members themselves. Board diversity is rooted in the recognition of the invaluable contribution of various perspectives that board members from different backgrounds bring to the decision-making process. However, this diversity might also lead to challenges, as it can result in disagreements, decreased satisfaction, and reduced social cohesion.
The absence of a clear understanding of how board diversity influences CSR in Europe poses significant risks. Without this knowledge, companies may fail to effectively harness the potential of diverse perspectives in enhancing their CSR initiatives, potentially leading to suboptimal social and environmental outcomes. This gap in understanding also hampers the ability of policymakers and corporate leaders to make informed decisions that align new laws or corporate strategies with evolving societal and regulatory expectations. With that in mind, the corresponding research objectives are to analyse the state of the literature on the topic, to investigate how board diversity influences CSR performance, and to assess the role of diverse boards in CSR reporting and its alignment with actual performance in Europe.
The interdisciplinary climate research is heavily occupied with corporate climate-related sustainability reporting. Finance & management research hereby focuses on determinants, characteristics and consequences of climate-related sustainability reporting.
In order to limit the consequences of man-made climate change, governments and other institutions - as well as companies and individuals - are icreasing their efforts. Therefore, EU lawmakers have recently introduced extensive climate-related disclosure requirements for EU companies within the scope of corporate sustainability reporting. This research projects will investigate determinants, characteristics and consequences of corporate climate risk reporting within the context of the effects of regulatory transformation.
The importance of corporate sustainability reporting results from the information needs of investors and other stakeholders. This research project aims to deepen the knowledge of relevant interrelations. This may help practitioners to tailor their organisation towards investors' and other stakeholders' needs. Additionally, these research results may also be of use to discuss corporate greenwashing.
Heterogeneity in Family Firm Finance and Accounting: The Role of Family Influence for Financial Decisions in Family Firms
Family firms represent a significant share of economies worldwide. Simultaneously, family business research output exhibits consistent growth, as documented by several recent reviews. Historically, family business research has been largely dominated by comparative analyses between family and non-family firms, pointing towards the unique organizational characteristics of family firms.
In the recent years, the theme of family business heterogeneity which more strongly emphasizes the intra-group differences among family businesses is gaining momentum. This perspective shall guide the research project by asking how considerations of heterogeneity affect finance and accounting outcomes in family businesses. For instance, financing decisions in family business have been associated with various family-specific antecedents, e.g., aversion towards risks of losing of control. Likewise, accounting variables such as financial reporting quality or tax avoidance have amongst others been studied in the context of reputational concerns and socio-emotional (non-financial) considerations.
Overall, the research project shall explore dimensions of family business heterogeneity and their effect for family business finance and accounting outcomes. Based on quantitative methods the project shall further explore some of these dimensions in more detail.
In recent years, a series of data leaks and media reports on low tax rates of internationally active companies have created the impression that aggressive tax avoidance is a widespread corporate practice and causes significant harm to the public. In this context, taxes are increasingly coming into focus, not only from a public perspective, but also from a research and regulatory perspective, as a tool to achieve various economic and corporate sustainability goals.
In response, OECD countries have launched the Base Erosion and Profit Shifting (BEPS) initiative and have identified numerous tax avoidance practices to be eliminated in the future in order to achieve more sustainable economic activity. Furthermore, transparency with regard to the tax policy of companies is to be increased and thus the social pressure for sustainable tax policy is to be raised.
In the context of public reporting, in addition to the obligatory sustainability report of companies, there is also reporting within the framework of voluntary sustainability reporting, for example according to GRI 207 Tax, and within the framework of country-by-country reporting, which has so far only been available to the tax authorities, but which the EU Commission has proposed should also be publicly accessible from the year 2025.
The research project examines this triad of reporting in the context of tax avoidance or tax policy of companies and aims to elaborate concrete recommendations for action for research, practice, legislators and standard setters by examining in particular the quality of reporting and the qualitative differences between the various forms of reporting.
Monitoring of Internal Corporate Governance Systems by Audit Committees, Internal Auditors and External Auditors
A critical debate of corporate governance structures in society, science and business has been evident for several decades. Both the financial crisis in 2008/2009 and various accounting scandals and corporate collapses since the 1990s can be cited as some of the significant causes for this discourse. The Wirecard scandal in 2020 once again severely damaged public trust in the economy, corporate management and their control and monitoring structures, prompting research and practice to question existing corporate governance structures and discuss potential reform measures. In addition, the aspect of integrating sustainability into corporate governance systems is increasingly becoming the focus of the public and legislators, which is being pushed at European level in particular by the EU's Green Deal project and the associated sustainable finance regulation.
The following three corporate governance authorities: audit committee, internal auditors and external auditors are often in focus in this context, as these three parties play a crucial role in monitoring of internal corporate governance systems and their interaction is therefore indispensable when it comes to the preventing misconduct in companies and associated accounting scandals or ESG violations.
The research project aims to investigate this three-sided network of relationships in the context of cooperative monitoring of internal corporate governance systems and to develop concrete recommendations for action for research, practice, legislators and standard-setters.