The Regulatory Architecture of Sustainable Development: Corporate Accountability, Legal Compliance, and the Governance of ESG Integration
DOI:
https://doi.org/10.51137/wrp.ijarbm.751Keywords:
Sustainable Development Governance, Corporate Sustainability Reporting, ESG Regulation, Due Diligence Law, Regulatory Compliance, Corporate AccountabilityAbstract
The governance of sustainable development has undergone a profound legal transformation as regulatory frameworks increasingly mandate corporate accountability for environmental, social, and governance performance. This article examines the evolving legal architecture governing sustainable development management, with particular focus on the European Union's Corporate Sustainability Reporting Directive, Corporate Sustainability Due Diligence Directive, and their extraterritorial implications for global business governance. Drawing upon regulatory theory, corporate governance scholarship, and comparative legal analysis, the article argues that the convergence of sustainability management with legal compliance obligations represents a paradigmatic shift in how corporations internalise sustainable development objectives. The analysis reveals that while regulatory frameworks have created unprecedented transparency and accountability mechanisms, significant challenges persist regarding enforcement consistency, jurisdictional fragmentation, and the balance between regulatory ambition and business competitiveness. The article proposes a governance model grounded in regulatory coherence, proportionate liability, and transnational regulatory convergence to harmonise sustainable development imperatives with corporate operational realities. The findings carry implications for corporate managers, compliance officers, policymakers, and scholars seeking to navigate the intersection of law and sustainable development governance.
References
Journal articles
Annesi, N., Battaglia, M., Ceglia, I., & Mercuri, F. (2025). Navigating paradoxes: Building a sustainable strategy for an integrated ESG corporate governance. Management Decision, 63(2), 531–559. https://doi.org/10.1108/MD-03-2024-0589
Aureli, S., Del Baldo, M., Lombardi, R., & Nappo, F. (2020). Nonfinancial reporting regulation and challenges in sustainability disclosure and corporate governance practices. Business Strategy and the Environment, 29(6), 2392–2403. https://doi.org/10.1002/bse.2504
Boiral, O., & Heras-Saizarbitoria, I. (2020). Sustainability reporting assurance: Creating stakeholder accountability through hyperreality? Journal of Cleaner Production, 243, 118596. https://doi.org/10.1016/j.jclepro.2019.118596
Brożek, J., Kożuch, A., Wieruszewski, M., Jaszczak, R., & Adamowicz, K. (2024). Taxonomy Regulation as a new instrument for the sustainable management of the forest environment in Europe. Sustainability, 16(20), 8799. https://doi.org/10.3390/su16208799
Caputo, F., Pizzi, S., Ligorio, L., & Leopizzi, R. (2021). Enhancing environmental information transparency through corporate social responsibility reporting regulation. Business Strategy and the Environment, 30(8), 3470–3484. https://doi.org/10.1002/bse.2814
Carmo, C., & Ribeiro, C. (2022). Mandatory non-financial information disclosure under European Directive 95/2014/EU: Evidence from Portuguese listed companies. Sustainability, 14(8), 4860. https://doi.org/10.3390/su14084860
Channuntapipat, C., Samsonova-Taddei, A., & Turley, S. (2020). Variation in sustainability assurance practice: An analysis of accounting versus non-accounting providers. The British Accounting Review, 52(2), 100843. https://doi.org/10.1016/j.bar.2019.100843
Christensen, H., Hail, L., & Leuz, C. (2021). Mandatory CSR and sustainability reporting: Economic analysis and literature review. Review of Accounting Studies, 26, 1176–1248. https://doi.org/10.1007/s11142-021-09609-5
Davey, K., Entwistle, G., & Faye, C. (2025). Sustainability reporting in the banking industry. Journal of Applied Economics and Policy Perspectives, 26(1), 27. https://doi.org/10.60154/jaepp.2025.v26n1p27
Dacin, M. T., Harrison, J. S., Hess, D., Killian, S., & Roloff, J. (2022). Business versus ethics? Thoughts on the future of business ethics. Journal of Business Ethics, 180(3), 863–877. https://doi.org/10.1007/s10551-022-05241-8
Doni, F., Bianchi Martini, S., Corvino, A., & Mazzoni, M. (2020). Voluntary versus mandatory non-financial disclosure: EU Directive 95/2014 and sustainability reporting practices based on empirical evidence from Italy. Meditari Accountancy Research, 28(5), 781–802. https://doi.org/10.1108/MEDAR-12-2018-0423
Farooq, M. B., & De Villiers, C. (2020). How sustainability assurance engagement scopes are determined, and its impact on capture and credibility enhancement. Accounting, Auditing and Accountability Journal, 33(2), 417–445. https://doi.org/10.1108/AAAJ-11-2018-3727
Farooq, M. B., Azantouti, A. S. A., & Zaman, R. (2024). Non-financial information assurance: A review of the literature and directions for future research. Sustainability Accounting, Management and Policy Journal, 15(1), 48–84. https://doi.org/10.1108/SAMPJ-03-2023-0166
Fiandrino, S., Gromis di Trana, M., Tonelli, A., & Lucchese, A. (2022). The multi-faceted dimensions for the disclosure quality of non-financial information in revising directive 2014/95/EU. Journal of Applied Accounting Research, 23(1), 274–300. https://doi.org/10.1108/JAAR-04-2021-0118
Fornasari, T., & Traversi, M. (2024). The impact of the CSRD and the ESRS on non-financial disclosure. Symphonya: Emerging Issues in Management, 1(1), 117–133. https://doi.org/10.4468/2024.1.07fornasari.traversi
Garcia-Benau, M. A., Bollas-Araya, H. M., & Sierra-Garcia, L. (2022). Non-financial reporting in Spain: The effects of the adoption of the 2014 EU Directive. Revista de Contabilidad: Spanish Accounting Review, 25(1), 3–15. https://doi.org/10.6018/RCSAR.392631
Gebhardt, M., Schneider, A., Siedler, F., Ottenstein, P., & Zilch, H. (2024). Climate reporting in the fast lane? The impact of corporate governance on the disclosure of climate-related risks and opportunities. Business Strategy and the Environment, 33(7), 7253–7272. https://doi.org/10.1002/bse.3852
Harrison, J. S., Phillips, R. A., & Freeman, R. E. (2020). On the 2019 Business Roundtable "Statement on the Purpose of a Corporation." Journal of Management, 46(7), 1223–1237. https://doi.org/10.1177/0149206319892669
Hazaea, S. A., Zhu, J., Khatib, S. F., Bazhair, A. H., & Elamer, A. A. (2022). Sustainability assurance practices: A systematic review and future research agenda. Environmental Science and Pollution Research, 29(4), 4843–4864. https://doi.org/10.1007/s11356-021-17359-9
Jokinen, L., Harju, N., Kinnunen, K., & Hänninen, S. (2025). Implications of Corporate Sustainability Reporting Directive (CSRD) to company network collaboration. Journal of Sustainable Research, 7(1), e250018. https://doi.org/10.20900/jsr20250018
Kim, J., Wang, C., & Wu, F. (2023). The real effects of risk disclosures: Evidence from climate change reporting in 10-Ks. Review of Accounting Studies, 28, 2271–2318. https://doi.org/10.1007/s11142-023-09700-5
Kong, F., Gao, Z., & Oprean-Stan, C. (2023). Green bond in China: An effective hedge against global supply chain pressure? Energy Economics, 128, 107167. https://doi.org/10.1016/j.eneco.2023.107167
Krasodomska, J., Zarzycka, E., & Zieniuk, P. (2024). Exploring multi-level drivers of accountants' opinions on the changes introduced by the Corporate Sustainability Reporting Directive. Accounting in Europe. https://doi.org/10.1080/17449480.2024.2382205
Larcker, D. F., Tayan, B., & Watts, E. M. (2022). Seven myths of ESG. European Financial Management, 28(4), 869–882. https://doi.org/10.1111/eufm.12378
Lee, M. T., & Raschke, R. L. (2023). Stakeholder legitimacy in firm greening and financial performance: What about greenwashing temptations? Journal of Business Research, 155, 113393. https://doi.org/10.1016/j.jbusres.2022.113393
Li, Q., Shan, H., Tang, Y., & Yao, V. (2024). Corporate climate risk: Measurements and responses. Review of Financial Studies, 37, 1778–1830. https://doi.org/10.1093/rfs/hhad089
Lund, D. S., & Pollman, E. (2021). The corporate governance machine. Columbia Law Review, 121, 2563–2634. https://doi.org/10.2139/ssrn.3877401
Maroun, W. (2020). A conceptual model for understanding corporate social responsibility assurance practice. Journal of Business Ethics, 161(1), 187–209. https://doi.org/10.1007/s10551-018-3909-z
Martinčević, I., Primorac, D., & Dorić, B. (2025). Corporate Sustainability Reporting Directive (CSRD): Obligations, challenges and requirements for companies. ENTRENOVA - ENTerprise REsearch InNOVAtion Journal, 10(1), 317–327. https://doi.org/10.54820/entrenova-2024-0026
Mezzanotte, F. E. (2023). Corporate sustainability reporting: Double materiality, impacts, and legal risk. Journal of Corporate Law Studies, 23(2), 633–663. https://doi.org/10.1080/14735970.2023.2187890
Monteiro, A., Cepeda, C., & Silva, A. (2022). EU non-financial reporting research. International Journal of Financial, Accounting, and Management, 4(3), 335–348. https://doi.org/10.35912/ijfam.v4i3.1179
Monteiro, S., Roque, V., & Faria, M. (2024). Does sustainability reporting impact financial performance? Evidence from the largest Portuguese companies. Sustainability, 16(15), 6448. https://doi.org/10.3390/su16156448
Novicka, J., & Volkova, T. (2024). Regulation of sustainability reporting requirements: Digitalisation path. Sustainability, 17(1), 138. https://doi.org/10.3390/su17010138
Pizzi, S., & Coronella, L. (2024). Are listed SMEs ready for the corporate sustainability reporting directive? Evidence from Italy. Business Ethics, the Environment and Responsibility. https://doi.org/10.1111/beer.12736
Pizzi, S., Principale, S., Fasiello, R., & Imperiale, F. (2023). The institutionalisation of social and environmental accounting practices in Europe. Journal of Applied Accounting Research, 24(5), 816–838. https://doi.org/10.1108/JAAR-07-2022-0190
Radu, O. M., Dragomir, V. D., & Hao, N. (2023). Company-level factors of non-financial reporting quality under a mandatory regime: A systematic review of empirical evidence in the European Union. Sustainability, 15(23), 16265. https://doi.org/10.3390/su152316265
Tettamanzi, P., Tedeschi, R. G., & Murgolo, M. (2024). The European Union (EU) green taxonomy: Codifying sustainability to provide certainty to the markets. Environment, Development and Sustainability, 26(11), 27111–27136. https://doi.org/10.1007/s10668-023-03798-6
Todaro, D. L., & Torelli, R. (2024). From greenwashing to ESG-washing: A focus on the circular economy field. Corporate Social Responsibility and Environmental Management, 31(5), 4034–4046. https://doi.org/10.1002/csr.2786
Venter, E., & Krasodomska, J. (2024). Research on extended external reporting assurance: An update on recent developments. Journal of International Financial Management & Accounting, 35(2), 390–428. https://doi.org/10.1111/jifm.12200
Villiers, C. (2022). New directions in the European Union's regulatory framework for corporate reporting, due diligence and accountability: The challenge of complexity. European Journal of Risk Regulation, 13, 548–566. https://doi.org/10.1017/err.2022.30
Wang, X., Sun, X., Oprean-Stan, C., & Chang, T. (2023). What role does global value chain participation play in emissions embodied in trade? New evidence from value-added trade. Economic Analysis and Policy, 80, 1205–1223. https://doi.org/10.1016/j.eap.2023.10.018
Legislation and Official Documents
European Parliament and Council of the European Union. (2022). Directive (EU) 2022/2464 on corporate sustainability reporting (Corporate Sustainability Reporting Directive). Official Journal of the European Union.
European Parliament and Council of the European Union. (2024). Directive (EU) 2024/1760 on corporate sustainability due diligence (Corporate Sustainability Due Diligence Directive). Official Journal of the European Union.
European Parliament and Council of the European Union. (2026). Directive (EU) 2026/470 amending Directives (EU) 2022/2464 and (EU) 2024/1760 as regards sustainability reporting and due diligence (Omnibus I). Official Journal of the European Union.
United Nations. (2023). The Sustainable Development Goals Report 2023. United Nations Department of Economic and Social Affairs. https://unstats.un.org/sdgs/report/2023/The-Sustainable-Development-Goals-Report-2023.pdf
Bebic, D., et al. (2024). Exploring the barriers and drivers of ESG in the German Mittelstand: A qualitative analysis of mechanical and plant engineering companies. Journal of Business Economics, forthcoming.
Bux, C., et al. (2020). Promoting sustainability through corporate social responsibility implementation in the manufacturing industry: An empirical analysis of barriers using the ISM-MICMAC approach. Journal of Cleaner Production, 258, 120755. https://doi.org/10.1016/j.jclepro.2020.120755
Filho, W.L., et al. (2022). Barriers to institutional social sustainability. Sustainability, 14(9), 5360. https://doi.org/10.3390/su14095360
Ikram, M., et al. (2020). The social dimensions of corporate sustainability: An integrative framework including COVID-19 insights. Journal of Cleaner Production, 277, 123838. https://doi.org/10.1016/j.jclepro.2020.123838
Wijayanto, A., et al. (2025). Analysis of the challenges of sustainable organizational development in a changing business environment. Advances in Management & Financial Reporting, 3(3), 697–713. https://doi.org/10.60079/amfr.v3i3.587
Case law
Município De Mariana v BHP Group (UK) Limited & BHP Group Limited [2025] EWHC 3001.
Conference papers Monographs
Dinga, E., Oprean-Stan, C., Tănăsescu, C. R., Brătian, V., & Ionescu, G. M. (2022). Financial market analysis and behaviour: The adaptive preference hypothesis. Taylor & Francis.
Gartenberg, C., Prat, A., & Serafeim, G. (2019). Corporate purpose and financial performance. Organization Science, 30(1), 1–18. https://doi.org/10.1287/orsc.2018.1230
Karpoff, J., Litan, C., Schrand, C., & Weil, R. (2022). What ESG-related disclosures should the SEC mandate? Financial Analysts Journal, 78, 9–18. https://doi.org/10.1002/csr.3018
Contributions to Collective Works (Books)
Dinga, E., Oprean-Stan, C., Tănăsescu, C. R., Brătian, V., & Ionescu, G. M. (2023). Binomial co-evolution in the financial market—Mechanisms. In Co-Evolution of Symbolic Species in the Financial Market: A Framework for Economic and Political Decision-Making (pp. 119–171). Cham: Springer Nature Switzerland.
Electronic material
Clifford Chance. (2025, November 18). Fundão claim: BHP found liable by the English High Court. Clifford Chance Insights. https://www.cliffordchance.com/insights/resources/blogs/group-litigation-and-class-actions/2025/11/fundao-claim-bhp-found-liable-by-the-english-high-court.html
DLA Piper. (2026, March 31). EU Council approves Omnibus I Directive. DLA Piper Knowledge. https://knowledge.dlapiper.com/dlapiperknowledge/globalemploymentlatestdevelopments/2026/eu-council-approves-omnibus-i-directive
Gibson Dunn. (2026, March 4). Omnibus simplification of EU's sustainability rules (CSRD and CSDDD) enacted. Gibson Dunn Client Alert. https://www.gibsondunn.com/omnibus-simplification-of-eu-sustainability-rules-csrd-and-csddd-enacted/
ISS Corporate Solutions. (2026, January 23). EU sustainability rules reset: What the 2026 changes mean. ISS Corporate Solutions Blog. https://www.iss-corporate.com/resources/blog/eu-sustainability-rules-reset-what-the-2026-changes-mean/
Mayer Brown. (2025, September 30). Regulatory climate shift: Updates on the SEC climate-related disclosure rules. Mayer Brown Insights. https://www.mayerbrown.com/en/insights/publications/2025/09/regulatory-climate-shift-updates-on-the-sec-climate-related-disclosure-rules
PwC. (2025). Insights from the first 100 CSRD reports. PwC Global. https://www.pwc.com/gx/en/issues/esg/sustainability-compliance-to-reinvention/corporate-sustainability-reporting-directive/initial-csrd-insights.html
PwC. (2026, April). CSRD reporting benchmark study on Finnish companies. PwC Finland.
Responsible Contracting Project. (2024, November 5). What the EU Corporate Sustainability Due Diligence Directive says about contracts. RCP Policy Brief. https://www.responsiblecontracting.org/csddd-rcp-brief
Ruhm & Associates. (2025, May 22). The boardroom goes global: Legal duties, ESG accountability and transnational corporate governance for directors of international companies. Ruhm & Associates. https://www.ruhmandassociates.com/board-room-goes-global-legal-duties-esg-accountability-and-transnational-corporate-governance-in-2025
Sidley Austin LLP. (2025, December 10). English High Court finds BHP liable in landmark £36 billion Fundão dam litigation. Sidley Austin Insights. https://www.sidley.com/en/insights/newsupdates/2025/12/english-high-court-finds-bhp-liable-in-landmark
Toms, S., Jackson-McGill, K., & Lau, J. (2026, January 24). 2025 ESG wrap-up and 2026 outlook. Harvard Law School Forum on Corporate Governance. https://corpgov.law.harvard.edu/2026/01/24/2025-esg-wrap-up-and-2026-outlook/
Downloads
Published
Issue
Section
License
Copyright (c) 2026 Mlondolozi Mvikweni, Paul S. Masumbe (Author)
This work is licensed under a Creative Commons Attribution 4.0 International License.
