Global ESG Reporting Is Converging in Form but Fracturing in Substance, Review Finds

Environmental, social, and governance reporting has moved from the margins of corporate communication to the center of global financial regulation, yet a new systematic review suggests that the world’s sustainability disclosure systems are far less unified than they appear. The study, published in Discover Global Society, analyzed 48 peer-reviewed papers published between 2020 and 2025 and concluded that ESG reporting worldwide is best described not as harmonized and not as hopelessly fragmented, but as something in between: a condition the authors call partial interoperability. Reporting frameworks increasingly share the same architecture, vocabulary, and structural expectations, while remaining deeply divided over the fundamental question of what sustainability disclosure is actually for.

The review, conducted by Sunitha Prabhuram and Thamburaj Anthuvan of Manipal Academy of Higher Education in Dubai, followed the PRISMA 2020 protocol for systematic literature reviews. The researchers searched Scopus, supplemented by Google Scholar cross-searching, using Boolean strings that combined terms such as ESG materiality, sustainability materiality, financial materiality, impact materiality, and double materiality with disclosure and reporting terms. After identification, deduplication, title and abstract screening, and full-text eligibility assessment, 48 studies remained. Of the 38 studies excluded at the full-text stage, 18 lacked substantive engagement with materiality despite discussing ESG reporting broadly, nine had insufficient linkage to materiality-related frameworks, and 11 offered limited analytical contribution. A second reviewer independently audited a 25 percent subsample of the corpus to check coding consistency, with discrepancies resolved through discussion.

At the heart of the analysis lies a conceptual fault line that most casual observers of the ESG boom never see. Materiality, in traditional financial reporting, refers to information significant enough to influence the economic decisions of investors and other capital providers. Financial materiality carries this logic into the sustainability domain: an environmental or social issue matters only insofar as it affects expected cash flows, asset values, or the cost of capital. Climate transition risks, regulatory exposure, litigation threats, and supply chain disruptions all qualify under this lens because they translate into financial consequences for the firm. This investor-centered logic underpins the standards of the International Sustainability Standards Board, which anchors disclosure to enterprise value.

Impact materiality takes the opposite starting point. Rooted in stakeholder theory and sustainability governance, it requires companies to account for their effects on the world regardless of whether those effects ever touch the bottom line. Pollution, biodiversity loss, poor working conditions, and community displacement can impose enormous social and environmental costs even when profitability remains untouched. The Global Reporting Initiative is the most prominent framework built on this foundation. Double materiality, meanwhile, merges the two perspectives: a sustainability issue is reportable if it either affects enterprise value or represents a significant corporate impact on society and the environment. The European Union’s Corporate Sustainability Reporting Directive and its European Sustainability Reporting Standards, developed by the European Financial Reporting Advisory Group, institutionalize this hybrid approach, requiring firms to assess material issues across their entire value chain from both angles.

The review’s central finding is that these competing logics have not merged despite a striking convergence in reporting form. Frameworks now share standardized terminology, structured disclosure categories, and common expectations around governance, strategy, risk management, and metrics. The ISSB’s global baseline and the European standards have pushed standard-setters toward cross-framework mapping and interoperability efforts. Yet beneath this architectural alignment, the underlying assumptions about accountability remain irreconcilable. The ISSB regime serves capital providers and frames sustainability as an extension of financial reporting; the European regime serves a broader constituency of employees, regulators, civil society, and affected communities, and frames disclosure as an instrument of public accountability. Structural convergence, the authors argue, can coexist with endemic fragmentation.

The fragmentation extends into measurement practice. The reviewed literature reveals no standardized method for operationalizing materiality in empirical research or corporate reporting. Researchers rely on materiality matrices, formal double materiality assessments, disclosure indices, content analysis of sustainability reports, and narrative classification of ESG topics, each with different thresholds, coding conventions, units of analysis, and topic taxonomies. An issue deemed material in one study may be treated entirely differently in another, restricting cross-study comparability and hindering cumulative knowledge building. In corporate practice, firms operating across multiple regimes may use identical terminology while applying different assessment processes, stakeholder engagement procedures, and significance thresholds, meaning that materiality tests can be situation-specific rather than comparable across firms, industries, or jurisdictions.

The practical consequences ripple outward. For multinational companies, complying simultaneously with ISSB-style and European-style requirements means running parallel materiality assessments, documenting judgments under different logics, and preparing for assurance under divergent expectations. The review notes that newer European regimes have made materiality assessments more transparent, but most operational approaches still depend on individual firm interpretation, complicating assurance readiness and disclosure comparability. Investors and assurance providers, the authors suggest, need to consider the underlying materiality orientation of any sustainability report before comparing it across companies or jurisdictions, because two documents that look structurally similar may rest on fundamentally different judgments about whose interests the disclosure serves.

Why do these competing logics persist? The review points to deep institutional path dependence. Anglo-American reporting traditions have long emphasized investor protection and decision usefulness, while European systems have historically prioritized public accountability, a divergence now embodied in the contrast between the ISSB and the CSRD. Double materiality attempts to reconcile the two views, but the tension remains, and the literature is divided on whether financial and double materiality are complementary extensions of one another or genuinely competing disclosure philosophies. The authors also note that dynamic materiality, the idea that sustainability impacts may become financially material over time as externalities are internalized through regulation, litigation, or reputational pressure, appeared only indirectly in the reviewed studies, suggesting a promising theoretical frontier linking impact significance to financial significance.

Looking ahead, the review argues that a single global materiality standard is improbable. Instead, the authors predict a plural but synchronized future: growing structural coherence alongside persistent divergence in disclosure purpose. They reframe materiality itself, moving it from a technical reporting threshold to a multi-level disclosure-governance mechanism that connects institutional standard-setting, organizational reporting practice, and accountability orientation. The policy challenge, they contend, is not to force harmonization but to build interoperability, giving standard-setters, regulators, and firms clearer guidance on translating materiality considerations across the ISSB, ESRS, and GRI frameworks. Stronger internal governance for stakeholder engagement, assessment, documentation, and review would help companies navigate multi-regime compliance, while improved interoperability mechanisms could reduce compliance complexity and enhance the comparability and decision usefulness of disclosures worldwide.

The review also identifies a conspicuous blind spot: emerging economies. The corpus was dominated by empirical work shaped by European regulatory developments, and direct evidence on how firms in developing and transitional economies cope with conflicting disclosure obligations, limited institutional capacity, and assurance readiness remains scarce. The authors flag this absence as a priority for future research, alongside empirical studies of how firms implement simultaneous financial and impact assessments, the evolving role of assurance services across different materiality criteria, and the potential of interoperability models and double materiality approaches to function as translation systems between disclosure regimes. Until those gaps close, the global ESG reporting landscape will likely remain what this review says it already is: a two-track architecture in which the paperwork increasingly looks the same while the reasons for producing it continue to diverge.

Subject of Research: Competing ESG materiality regimes and their effects on global sustainability reporting harmonization

Article Title: Harmonization and fragmentation in competing ESG materiality regimes and their implications for sustainability reporting

Article References: Prabhuram, S., & Anthuvan, T. (2026). Harmonization and fragmentation in competing ESG materiality regimes and their implications for sustainability reporting. Discover Global Society, 4(1), Article 246. https://doi.org/10.1007/s44282-026-00512-5

Image Credits: AI Generated

DOI: 10.1007/s44282-026-00512-5

Keywords: ESG reporting, materiality, double materiality, financial materiality, sustainability disclosure, ISSB, CSRD, ESRS, GRI, regulatory fragmentation, interoperability, systematic review