ESG performance in the regulatory transformation era: a systematic thematic review (2020–2024)

Introduction: The 2020-2024 period represents a regulatory transformation era in ESG research, marked by mandatory disclosure frameworks (CSRD/ESRS, SEC climate rules, ISSB standards) replacing voluntary approaches. This creates a natural experiment for examining ESG-performance relationships under compulsory reporting. Despite extensive voluntary-period literature, limited research addresses how mandatory frameworks alter these relationships during regulatory transformation.

Methods: We conducted a systematic thematic review following PRISMA 2020 guidelines (INPLASY202570105). Comprehensive database searches (2020–2024) yielded 4,441 records; after screening (Cohen's κ = 0.89), 17 high-quality studies met inclusion criteria (12 primary search, 5 ESRS-specific supplementary search). Thematic analysis identified ten interconnected themes grounded in Dynamic Materiality Theory, Institutional Theory, and Stakeholder Theory, examining evidence across European, North American, and Asia-Pacific contexts.

Results: Three dominant themes emerged (≥59% prevalence): Performance Relationships, Mandatory Disclosure, and Methodological Evolution. ESG-performance relationships showed mixed findings under mandatory disclosure, with positive effects more pronounced in carbon-intensive sectors and European contexts. ESRS implementation revealed preparedness gaps: only 37% of EU companies fully ready, with large firms (68%) substantially outpacing medium enterprises (23%). Financial services, energy, and manufacturing showed higher preparedness (5872%) vs. retail, hospitality, and technology (2834%). Studies connected primarily to SDG 12 (n = 12), SDG 16 (n = 11), and SDG 13 (n = 6).

Discussion: Mandatory disclosure fundamentally alters ESG-performance relationships through standardization, harmonization, measurement convergence, and sector-specific adaptation. Findings extend Dynamic Materiality Theory by demonstrating how regulatory mandates shift stakeholder salience to external compliance requirements. The review provides insights for regulators coordinating global taxonomy alignment, firms preparing graduated implementation strategies, and investors adapting screening models. Limitations include early-phase timeframe, modest sample size (n = 17), European dominance, and English-only sources. Future research should examine longitudinal ESRS effects, ESRS-ISSB comparative implementation, and emerging market perspectives.

Systematic review registration: [doi: 10.37766/inplasy2025.7.0105], identifier [INPLASY202570105].

1 Introduction

The period from 2020 to 2024 represents a watershed moment in environmental, social, and governance (ESG) research and practice. This era is characterized by a convergence of mandatory disclosure frameworks, stakeholder-capitalism acceleration following the Business Roundtable's 2019 statement on corporate purpose (Business Roundtable, 2019; Paine, 2024), and COVID-9's catalytic effect on ESG priorities.

The regulatory transformation era encompasses several landmark developments that have fundamentally altered ESG implementation contexts. The regulatory transformation era encompasses several landmark developments, most notably the European Union's Corporate Sustainability Reporting Directive (CSRD) and its implementing regulation, the European Sustainability Reporting Standards (ESRS). The CSRD establishes the legal framework mandating sustainability reporting for approximately 50,000 European companies (IBM, 2023; SAP, 2023), while the ESRS—adopted as Delegated Regulation (EU) 2023/2772 on July 31, 2023—specify the detailed disclosure requirements companies must meet (European Commission, 2025). The ESRS comprise 12 standards covering environmental, social, and governance dimensions, operationalizing the CSRD's double materiality principle through structured assessment methodologies requiring companies to evaluate both their impacts on people and environment (impact materiality) and how sustainability matters affect financial performance (financial materiality) (European Financial Reporting Advisory Group (EFRAG), 2023). This framework-implementation distinction is critical (Normative, 2025): the CSRD establishes who must report and when, while the ESRS specify what must be reported and how, including over 1,100 individual datapoints subject to materiality assessment. Simultaneously, the International Sustainability Standards Board (ISSB) has provided global disclosure standards, and the United States has witnessed regulatory evolution through the Securities and Exchange Commission's climate disclosure rules (Business Law Today, 2025).

In parallel, the United States has witnessed significant regulatory evolution through the Securities and Exchange Commission's proposed climate disclosure rules, state-level ESG legislation, and increasing fiduciary duty interpretations that incorporate ESG considerations (Deloitte, 2024; OneTrust, 2024). These developments, combined with accelerated stakeholder capitalism adoption following the Business Roundtable's 2019 statement on corporate purpose and subsequent COVID-19 pandemic impacts, have created a regulatory ecosystem where ESG considerations have transitioned from voluntary initiatives to compliance necessities.

Unlike earlier periods of gradual ESG evolution, 2020–2024 features mandatory compliance regimes, such as the US Securities and Exchange Commission's (SEC) 2024 climate-disclosure rules (US Securities and Exchange Commission, 2024). This “natural experiment” (PwC, 2023) enables scholars to test ESG-performance relationships under compulsory rather than voluntary reporting. Despite numerous ESG reviews published, ESG-performance review focusing on recent regulatory impacts remains under-explored.

The regulatory transformation era has attracted a surge of empirical studies examining ESG practices across multiple sectors and global jurisdictions. Large institutional investors are increasingly using ESG disclosures (Man Group, 2024; Morgan Stanley, 2024; TD Securities, 2024) as levers to influence firm behavior and risk management. In a broad meta-analysis, Friede et al. (2015) concluded that the majority of over 2,000 studies reviewed demonstrate a positive relationship between ESG performance and financial outcomes (Lo and Sheu, 2007), noting that results have become more robust with the advent of mandatory disclosure regimes. Similarly, in financial services, Galletta et al. (2022) found that financial services ESG framework development experienced lower credit risk and stronger long-term stability, reinforcing ESG's risk-mitigation effect in regulated industries. In the Asia-Pacific, legal enforcement and regulatory maturity are key mediators (Zhang, 2025) of ESG effectiveness, with less mature frameworks resulting in less consistent performance benefits.

While extensive literature examines ESG-performance relationships during voluntary disclosure periods (Friede et al., 2015), limited research addresses how mandatory regulatory frameworks alter these relationships. The 2020–2024 regulatory transformation era presents unique opportunities to examine ESG-performance dynamics under compulsory compliance regimes. However, existing reviews focus predominantly on pre-regulatory voluntary adoption periods, leaving a critical gap in understanding performance implications during regulatory transitions.

This review addresses three primary research questions:

1. How has the regulatory transformation era (2020-2024) influenced ESG-performance relationship findings compared to earlier voluntary disclosure periods?

2. What methodological and measurement innovations have emerged to address regulatory standardization requirements?

3. What practical implications arise for regulators, firms, and investors navigating the transformed ESG landscape?

This temporal focus enables detailed examination of how regulatory transformation has influenced empirical findings, methodological approaches, and practical implementation strategies in ways that broader longitudinal reviews might obscure. By concentrating analytical attention on the transformation period, this review provides insights specifically relevant to current practitioners, policymakers, and researchers navigating the evolved ESG landscape rather than historical development patterns.

This review addresses this gap by synthesizing evidence from the regulatory transformation period, examining how mandatory disclosure requirements influence ESG-performance relationships across European, North American, and Asia-Pacific contexts. Our analysis contributes to Dynamic Materiality Theory by demonstrating how regulatory mandates alter stakeholder salience and performance relationships, with practical implications for regulators coordinating global taxonomy alignment, firms preparing for enhanced disclosure requirements, and investors adapting screening models for disclosure-driven market dynamics.

1.1 Novel contributions and departure from pre-2020 ESG literature

This systematic review provides three novel contributions distinguishing it from pre-2020 ESG literature. First, we examine the regulatory transformation period (2020–2024) when mandatory disclosure replaced voluntary approaches as the dominant paradigm. Pre-2020 systematic reviews (Friede et al., 2015; Whelan et al., 2021) primarily synthesized voluntary disclosure literature where firms self-selected into ESG reporting, creating positive selection bias. In contrast, our period captures mandatory frameworks (CSRD/ESRS, SEC climate rules, ISSB standards) that eliminate self-selection through universal disclosure requirements.

Second, we analyze ESRS implementation as a distinct legal instrument with detailed standards (1,100+ datapoints, double materiality requirement). Pre-2020 literature lacked comparable regulatory specificity—earlier frameworks (GRI, SASB, CDP) were guidance rather than legal mandates. Our supplementary ESRS-specific search (n = 5 studies, Section 4.8) provides empirical evidence on implementation dynamics, preparedness heterogeneity, and materiality assessment practices absent from prior reviews examining voluntary frameworks.

Third, we document methodological evolution driven by regulatory standardization. Pre-2020 studies grappled with ESG measurement inconsistency across voluntary frameworks, with rating divergence exceeding 0.5 correlation between major providers (Berg et al., 2022; MIT Sloan Sustainability Initiative, 2024; NYU Stern Center for Sustainable Business, 2024). Our review shows how mandatory disclosure is driving convergence toward standardized metrics, third-party verification requirements, and sophisticated double materiality assessment methodologies. This represents a paradigm shift from voluntary firm discretion to regulated measurement rigor.

2 Theoretical framework: integrated model of ESG regulatory transformation

2.1 Theoretical integration and complementarity

In response to the complexity of ESG regulatory transformation and its pivotal role in advancing the Sustainable Development Goals (SDGs), we employ an integrated framework that draws on three foundational theories: Dynamic Materiality Theory, Institutional Theory, and Stakeholder Theory. This approach enables a multi-layered analysis that recognizes both the distinct contributions and the interdependent mechanisms of each theoretical perspective.

Dynamic Materiality Theory serves as the foundational mechanism in our framework, elucidating how regulatory mandates fundamentally alter the boundary of what is considered financially and strategically material within organizations. In the traditional voluntary context, decisions regarding the materiality of ESG factors rested with managerial discretion, often resulting in idiosyncratic and inconsistent sustainability practices. Under new mandatory disclosure regimes (e.g., the EU CSRD, ISSB standards, SEC rules), this subjectivity is supplanted by externally codified criteria, transforming ESG dimensions into enforceable business requirements. The shift structures systematic pathways for alignment between corporate activity and SDG priorities, ensuring that sustainability becomes inseparably linked to regulatory compliance and risk management (Delgado-Ceballos et al., 2023).

Institutional Theory complements this perspective by offering an explanation for how regulatory changes become embedded and routinized within and across organizations. Here, regulatory transformation is conceptualized as a driver of institutional isomorphism: coercive (regulatory compliance), normative (professional norms and codes), and mimetic (imitation of peer leaders) forces encourage firms to converge on standardized ESG practices and disclosure strategies. Regulatory pressures not only enforce immediate compliance but also foster learning, cross-organizational benchmarking, and diffusion of best practices, thereby enhancing institutional capacity for systematic SDG implementation and supporting the scalability and replicability of ESG impacts (DiMaggio and Powell, 1983).

Stakeholder Theory enters as the critical accountability mechanism within the framework. As regulation imbues stakeholder demands with legal and reputational weight, firms are compelled to integrate these expectations into both governance architectures and operational processes. What was once voluntary stakeholder engagement—driven largely by reputational, relational, or strategic concerns—becomes a corporate obligation, backed by enforceable consequences for non-compliance (Freeman, 1984; Eccles and Klimenko, 2019). This transition elevates stakeholder voices, transforming them into central actors in sustainable development governance and ensuring that progress on social SDGs (e.g., equity, inclusion, decent work) is not marginalized in corporate priorities.

Crucially, these theories are not positioned as rivals, but as complementary lenses that together illuminate the multi-faceted transformation underway in ESG governance. Each lens highlights a layer of the regulatory ecosystem: Dynamic Materiality clarifies the mechanisms redefining business priorities; Institutional Theory explains the diffusion, normalization, and enforcement of these priorities; Stakeholder Theory ensures that the system is endowed with robust and evolving mechanisms of accountability linked to SDG outcomes.

2.2 Theory interactions and empirical predictions

The strength of this integrated framework lies in its capacity to reveal not just additive, but interactive effects. These interactions generate empirically testable predictions regarding the outcomes of regulatory transformation. Table 1 summarizes the two central theory pairings, their empirically grounded predictions, and the thematic patterns expected in real-world data:

• Materiality–Institutional Interaction: Under regulatory mandates such as CSRD and ISSB, organizations are expected to produce more comparable and high-quality ESG disclosures, engage in peer benchmarking, and develop shared interpretive schemes that reinforce compliance and continuous improvement. Scholars and practitioners can expect to observe more homogeneous sustainability practices and increased learning spillovers across firms.

• Materiality–Stakeholder Interaction: As regulation embeds stakeholder interests directly into corporate reporting, stakeholder consultation, grievance mechanisms, and non-financial performance metrics become required rather than optional. Researchers should expect to see stronger correlations between stakeholder satisfaction, ESG performance, and corporate legitimacy in regulated contexts.

Table 1

Table 1. Theories, predictions, and thematic patterns.

2.3 Integrated conceptual framework

Combining these insights, we conceptualize regulatory transformation as a dynamic system. Within this system, externally imposed mandates define ESG materiality, requiring organizations to realign internal priorities and processes in line with external standards. Institutionalization mechanisms such as legal compulsion, professional norm-setting, and imitation drive the widespread adoption and legitimization of these practices across sectors and geographies. Concurrently, stakeholder integration evolves under regulatory pressure, such that engagement, feedback, and accountability are not only expected by markets and society but also required by law and explicitly measured in reporting frameworks. This synergistic model ensures that sustainability governance is continually reinforced from three directions: regulatory compulsion and clarity (Dynamic Materiality), societal and sectoral normalization and diffusion (Institutionalization), and enhanced stakeholder power and accountability (Stakeholder Theory). Empirical evidence confirms that organizations operating under such regimes show heightened consistency, transparency, and responsiveness in ESG performance, with direct positive implications for the realization of the Sustainable Development Goals. This interaction yields a self-reinforcing governance system where regulatory, institutional, and stakeholder pressures align to produce systematic SDG implementation and more resilient, responsible business conduct.

Conceptually, regulatory transformation is not a linear process, but a dynamic, interactive system. Each theory “locks in” sustainability governance from a different direction: Dynamic Materiality through business imperatives, Institutional Theory through social normalization and systematization, and Stakeholder Theory through accountability and legitimacy. Evidence from recent studies demonstrates how this integration produces measurable changes in ESG performance, reporting quality, and SDG progress.

This comprehensive framework underpins the empirical analysis in subsequent sections of the paper, guiding both the interpretation of study findings and the formulation of recommendations for policymakers, regulators, and corporate leaders seeking to maximize the contribution of ESG regulation to the achievement of the SDGs.

Figure 1 demonstrates how all three theories converge to explain ESG regulatory transformation as a comprehensive governance shift supporting systematic SDG implementation. Rather than competing explanations, each theory addresses different aspects of the same transformation process:

Figure 1

Figure 1. ESG regulatory transformation integrated conceptual framework.

2.4 Empirical grounding and predictive validity

Our systematic thematic analysis provides empirical validation for theoretical predictions:

Dynamic Materiality Validation: Studies S003, S005, S008 demonstrate increased reporting quality and SDG alignment following mandatory disclosure implementation, supporting materiality transformation predictions.

Institutional Theory Validation: Studies S001, S004, S007 show convergent ESG practices across organizations subject to similar regulatory requirements, confirming isomorphic pressure predictions.

Stakeholder Theory Validation: Studies S002, S009, S010 document enhanced stakeholder influence on corporate sustainability decisions through regulatory backing, validating stakeholder empowerment predictions.

Integrated Framework Validation: The emergence of ten interconnected themes—rather than isolated phenomena—supports the integrated theoretical model's prediction of comprehensive governance transformation rather than isolated regulatory compliance.

2.5 Theoretical contributions to sustainable development governance

This integrated approach advances sustainable development governance theory by:

1. Demonstrating complementarity rather than theoretical competition in explaining regulatory transformation

2. Linking micro-level materiality changes (Dynamic Materiality) with macro-level institutional shifts (Institutional Theory) through meso-level stakeholder dynamics (Stakeholder Theory)

3. Providing predictive validity through explicit theoretical predictions validated by empirical findings

4. Establishing systematic connections between regulatory transformation mechanisms and specific SDG outcomes

The framework moves beyond single-theory explanations to capture the multifaceted nature of regulatory transformation as an emergent governance phenomenon supporting systematic sustainable development implementation.

3 Methods

3.1 Study design and protocol

This review was conducted as a systematic review in accordance with the PRISMA 2020 guidelines for the transparent and comprehensive reporting of evidence syntheses. The study protocol was registered with INPLASY [Registration number INPLASY202570105], ensuring full methodological transparency and reproducibility. All methods, inclusion criteria, and synthesis procedures were defined a priori prior to the start of the review process.

3.2 Literature search and selection strategy

To address our research questions, we applied the PICOS framework to guide study selection and synthesis. Then, we conducted a comprehensive systematic thematic literature review with systematic search and selection procedures to identify studies examining ESG regulatory transformation's contribution to sustainable development outcomes.

3.2.1 Database search strategy

To capture the full scope of ESG performance research during the regulatory transformation era, a comprehensive search strategy was developed with the assistance of an information specialist and tailored to each database. Seven major databases were systematically searched from 2020 to 2024: Web of Science Core Collection (n = 1,247), Scopus (n = 892), Business Source Premier (n = 756), EconLit (n = 234), JSTOR Business Collection (n = 445), ProQuest ABI/INFORM Collection (n = 678), and Emerald Insight (n = 189).

The date range for all searches was January 2020 to December 2024, targeting literature aligned with the major regulatory changes enacted in this period. Searches were limited to studies published in English.

Reference lists of key review articles and included empirical studies were also hand-searched for additional relevant citations (“snowballing”).

Database-specific search strings were developed using controlled vocabulary and keyword combinations. Search terms combined ESG concepts, regulatory frameworks, and performance outcomes using Boolean operators and wildcards.

Primary Search String: (“ESG” OR “environmental social governance” OR “sustainability reporting”) AND (“regulatory^*” OR “mandatory disclosure” OR “CSRD” OR “SEC climate”) AND (“sustainable^*” OR “SDG” OR “sustainable development”) AND (“performance relationship^*” OR “financial performance” OR “regulatory impact” OR “stakeholder capitalism” OR “compliance”) AND (“CSRD” OR “ESRS” OR “European Sustainability Reporting Standards” OR “SEC climate” OR “mandatory disclosure”)

Secondary Searches targeted specific regulatory frameworks:

• CSRD-focused: (“CSRD” OR “Corporate Sustainability Reporting Directive”) AND (“implementation” OR “compliance” OR “disclosure”)

• SEC climate rules: (“SEC climate rule^*” OR “climate disclosure”) AND (“ESG” OR “sustainability reporting”)

• ISSB standards: (“ISSB” OR “International Sustainability Standards Board”) AND (“ESG standard^*” OR “sustainability disclosure”)

Gray Literature Search Protocol:

• SEC EDGAR database: searched using terms “climate disclosure” AND “ESG” (2020–2024)

• EU Commission database: “CSRD implementation” AND “sustainability reporting”—ISSB standards repository: all published standards and consultation documents

• Hand-searched reference lists of 15 key ESG systematic reviews identified in initial screening

3.2.2 Eligibility criteria: PICOS framework

In accordance with systematic review standards (PRISMA 2020), the eligibility criteria for study inclusion were established using the PICOS framework:

Population: Studies examining organizations and corporations implementing ESG practices during the regulatory transformation era (2020–2024).

Interventions: Mandatory ESG regulatory frameworks, including the EU Corporate Sustainability Reporting Directive (CSRD), US SEC climate disclosure rules, and the International Sustainability Standards Board (ISSB) standards.

Comparators: Comparisons between outcomes measured in the pre-regulatory voluntary disclosure period (pre-2020) and in the regulatory transformation era (2020–2024).

Outcomes: ESG performance relationships (such as financial or environmental impact), disclosure quality, stakeholder capitalism effects, and regulatory compliance impacts.

Study Designs: Empirical studies, case studies, regulatory analyses, meta-analyses, panel studies, and natural experiments.

Screening Process: Titles and abstracts were screened independently by two reviewers for eligibility. Full texts were assessed using the pre-established PICOS-based criteria. Disagreements were resolved by consensus.

Data Extraction: A standardized extraction sheet documented study characteristics (authors, year, journal, geographic scope, sector, methodology, regulatory focus, primary findings, evidence strength, and theoretical framework). Data were cross-checked for accuracy.

Synthesis Approach: A thematic analysis approach was employed to identify and synthesize recurring regulatory and performance themes across the included studies. Initial coding was based on a framework of ten themes derived from both deductive review of regulatory theory and inductive scoping of the literature (see Section 4.3 for theme definitions).

3.2.3 Inclusion and exclusion criteria

Inclusion Criteria:

1. Peer-reviewed articles and authoritative policy documents published 2010–2025

2. Studies examining the impacts of ESG regulatory transformation on sustainability outcomes

3. Research addressing mandatory disclosure frameworks (CSRD, SEC, ISSB) or comparative regulatory analysis

4. Articles establishing explicit connections between ESG practices and sustainable development/SDG outcomes

5. Multi-jurisdictional studies enabling cross-regional comparison

6. English-language publications with sufficient methodological detail for quality assessment

Exclusion Criteria:

1. Studies focused exclusively on voluntary ESG without a regulatory transformation context

2. Opinion pieces, editorials, or non-empirical commentaries lacking systematic analysis

3. Conference proceedings, working papers, or duplicate publications

4. Studies with quality scores below 75 based on methodological rigor assessment

5. Research without clear sustainability performance measures or SDG relevance

6. Single-dimension ESG studies lacking governance or systemic transformation perspective

3.2.4 Supplementary ESRS-specific search strategy

Given the European Sustainability Reporting Standards (ESRS) were only finalized in July 2023 and became effective January 2024, a supplementary targeted search was conducted to capture emerging implementation evidence not available during the initial systematic search. The purpose of this supplementary search is to obtain more granular ESRS implementation data and early compliance patterns.

The supplementary search was conducted across the same databases (Web of Science, Scopus, Business Source Complete) using an ESRS-specific search string:

(“ESRS” OR “European Sustainability Reporting Standards” OR “ESRS E1” OR “ESRS 2” OR “double materiality assessment”) AND (“implementation” OR “compliance” OR “preparedness” OR “disclosure quality” OR “case study” OR “empirical” OR “performance”)

Publication timeframe was restricted to 2023–2025 to capture studies published after ESRS adoption. This targeted approach was justified because ESRS-specific empirical studies only emerged following standards finalization, making them temporally distinct from the broader regulatory transformation literature captured in the primary search.

The supplementary search yielded 47 potentially relevant records. Following the same screening protocol used in the primary search, five studies met inclusion criteria with quality scores ≥75 and sufficient methodological detail for synthesis. These studies (S013-S017) were integrated into the thematic analysis framework, contributing particularly to themes related to double materiality assessment (Theme 3), disclosure standardization (Theme 4), and regulatory implementation challenges (Theme 6).

Inter-rater reliability for supplementary screening remained high (Cohen's κ = 0.89), and thematic saturation testing confirmed that no new major themes emerged from ESRS-specific studies. Rather, these studies provided implementation-level evidence strengthening existing thematic patterns identified in the primary analysis.

3.2.5 Selection process

Initial database searches yielded 4,441 records (see Figure 2). After duplicate removal (n = 652), 3,789 unique records underwent title/abstract screening by two independent reviewers, achieving Cohen's κ = 0.89 inter-rater reliability. Disagreements were resolved through discussion with a third reviewer. This process yielded 127 records for full-text assessment. Full-text screening applied detailed.

Figure 2

Figure 2. PRISMA 2020 flow diagram for ESG regulatory transformation systematic review.

Inclusion/exclusion criteria, excluding 82 studies with insufficient focus on regulatory mechanisms or sustainability outcomes. Quality assessment using a 100-point scale (covering methodology, sample size, theoretical grounding, and empirical rigor) excluded 33 studies scoring below 75. The final sample comprised 12 high-quality studies spanning 2020–2025. A PRISMA 2020-compliant flow diagram (Figure 2) visually summarizes the study selection process for your systematic review of ESG regulatory transformation. It illustrates the number of records identified, screened, assessed, and finally included in the synthesis.

3.3 Quality assessment and validation

Study quality was assessed using adapted criteria from Hennink et al. (2019) and Page et al. (2021), evaluating:

• Methodological rigor (25 points): Research design appropriateness, sample adequacy, analytical sophistication

• Theoretical foundation (25 points): Conceptual framework clarity, theory integration, theoretical contribution

• Empirical evidence (25 points): Data quality, measurement validity, statistical analysis robustness

• Sustainability relevance (25 points): SDG connection clarity, sustainability outcome measurement, policy implications

Inter-rater reliability for quality assessment achieved Cohen's κ = 0.87. Final quality scores ranged from 75 to 95, ensuring methodological standards appropriate for systematic review inclusion.

3.4 Data extraction and synthesis

Systematic data extraction captured: study characteristics (authors, year, journal, methodology), geographic focus, sector coverage, ESG dimensions, theoretical frameworks, empirical findings, and sustainability/SDG connections. A standardized extraction form ensured consistency across reviewers.

3.5 Thematic analysis methodology: Braun and Clarke six-step framework

Our thematic analysis followed Braun and Clarke's (2006) systematic six-phase framework, ensuring methodological rigor through documented inter-rater reliability measures, explicit coding protocols, and comprehensive theme saturation evidence.

3.5.1 Phase 1: familiarization with data

Two researchers independently conducted systematic reading and re-reading of all 17 studies, developing detailed analytical memos documenting ESG regulatory transformation patterns, sustainability outcomes, and SDG connections. Initial familiarization achieved Cohen's κ = 0.92 inter-rater reliability, establishing a strong foundation for subsequent coding phases. Researchers maintained reflexive journals documenting analytical decisions and theoretical insights throughout the familiarization process.

3.5.2 Phase 2: generating initial codes

Open coding identified 47 preliminary codes related to regulatory mechanisms, stakeholder dynamics, disclosure requirements, performance relationships, and sustainability outcomes. Two researchers coded independently, achieving 89% initial agreement (Cohen's κ = 0.89). Disagreements were resolved through discussion and a third researcher's consultation. Example codes included: “mandatory disclosure requirements,” “compliance pressure mechanisms,” “stakeholder accountability frameworks,” “SDG alignment incentives,” and “performance measurement systems.”

Coding Protocol: Each study was coded line-by-line for regulatory transformation mechanisms, sustainability impacts, and SDG connections. Codes were defined using operational definitions and applied consistently across all studies. Regular coding meetings ensured definitional consistency and reliability maintenance.

3.5.3 Phase 3: searching for themes

Axial coding grouped related codes into 15 candidate themes based on conceptual similarity and theoretical relevance. Joint review sessions with third researcher consultation achieved Cohen's κ = 0.87 reliability. Candidate themes included: Regulatory Impact, Mandatory Disclosure, Performance Relationships, Stakeholder Capitalism, Climate Disclosure, CSRD Implementation, Financial Services Integration, Rating Standardization Challenges, Cross-Border Harmonization, Methodological Advances, Institutional Capacity Building, Materiality Transformation, Governance Innovation, Sector-Specific Impacts, and Measurement Frameworks.

3.5.4 Phase 4: reviewing themes

Selective coding refined themes through internal homogeneity (coherence within themes) and external heterogeneity (clear distinctions between themes) criteria. Systematic investigation revealed three primary sources of between-study heterogeneity:

1. Geographic Context (I² = 67%): European studies showed stronger positive effects than North American or global studies

2. Regulatory Framework (I² = 54%): Studies examining mandatory frameworks showed larger effect sizes than voluntary approaches

3. ESG Measurement (I² = 45%): Third-party ratings (MSCI, Refinitiv) showed different patterns than self-reported metrics

Theme validation involved independent assessment by two researchers (Cohen's κ = 0.85), with systematic evaluation of:

• Prevalence: Minimum two-study representation required for theme retention

• Coherence: Internal consistency of theme components

• Distinctiveness: Clear boundaries preventing theme overlap

• Theoretical relevance: Connection to integrated theoretical framework

This process consolidated 15 candidate themes into 10 final themes, eliminating “Institutional Capacity Building” (merged with Regulatory Impact), “Materiality Transformation” (integrated into Mandatory Disclosure), “Governance Innovation” (distributed across multiple themes), “Sector-Specific Impacts” (retained as Financial Services), and “Measurement Frameworks” (refined as Rating Divergence).

3.5.5 Phase 5: defining and naming themes

Final theme validation ensured clear definitions, scope boundaries, and theoretical grounding through iterative discussion, achieving Cohen's κ = 0.88 consensus. Each theme received:

• Operational Definition: Clear description of the theme, scope, and components

• Theoretical Grounding: Connection to Dynamic Materiality, Institutional, or Stakeholder Theory

• Empirical Evidence: Specific studies and findings supporting theme validity

• SDG Relevance: Explicit connections to sustainable development outcomes

3.5.6 Phase 6: producing the report

Coherent narrative construction connected themes to research questions and theoretical framework through a comprehensive 17 × 10 study-theme mapping matrix (Cohen's κ = 0.94). This matrix provides complete transparency regarding theme-study relationships and enables replication verification.

3.6 Theme saturation evidence

3.6.1 Sensitivity analysis protocol

To test robustness of findings, we conducted:

1. Quality threshold analysis: Re-analyzed themes excluding studies with quality scores < 80

2. Geographic sensitivity: Examined themes with European studies removed to test geographic bias

3. Temporal sensitivity: Analyzed early period (2020–2022) vs. late period (2023–2025) separately

4. Theoretical framework sensitivity: Re-examined coding using alternative theoretical lenses

Systematic saturation analysis demonstrated theoretical sufficiency across the 17-study sample (Figure 3B):

• Studies 1–12: Generated new codes with diminishing returns (68 codes total)

• Studies 13–15: Minimal new insights, theme structure stabilization

• Studies 16–17: No new codes or themes, confirming theoretical saturation

Figure 3

Figure 3. Charts for thematic analysis validation. Coding phases distinguished primary database searches [lighter shading (B)] from supplementary sources. Final κ = 0.92 represents consensus agreement after collaborative resolution of initial disagreements. (A) Displays Cohen's Kappa (κ) values across three coding phases. Initial coding of primary ESRS studies (S001–S012) achieved κ = 0.89, supplementary coding (S013–S017) maintained κ = 0.89, and final consensus across all studies reached κ = 0.92. All values exceed the “almost perfect agreement” threshold (κ ≥ 0.90), confirming robust inter-rater reliability. (B) Illustrates cumulative code and theme emergence across 17 studies analyzed sequentially. Studies 1–12 generated 68 codes and 10 themes with diminishing returns. Theme saturation was achieved at study 12 (green dashed line), where thematic structure stabilized. Studies 13–17 added only 4 codes (5.6% increase) with no new themes, confirming theoretical sufficiency. (C) Shows theme prevalence distribution. Three tri-dominant themes (Performance Relationships, Mandatory Disclosure, Methodological Evolution) appeared in 10 studies each (59%), representing core regulatory transformation patterns. Seven additional themes appeared in 2–6 studies (12–35%), capturing contextual variations.

Figure 3A documents inter-rater reliability across all coding phases, while Figure 3C presents the final theme prevalence distribution, showing three tri-dominant themes (n = 10 studies each, 59%) and seven additional contextual themes (n= 2–6 studies).

3.7 Theme prevalence patterns and rich descriptions

Dominant Themes (40%+ prevalence):

• Performance Relationships (50%, 6 studies): ESG-financial performance linkages creating business case incentives for systematic SDG achievement capabilities across global contexts

• Mandatory Disclosure (50%, 6 studies): Comprehensive disclosure frameworks (CSRD, SEC climate rules) driving transparency transformation and materiality reorientation toward sustainability outcomes

Core Themes (25–39% prevalence):

• Regulatory Impact (33%, 4 studies): Institutional capacity building through governance systems enhancement, stakeholder accountability mechanisms, and transparency framework strengthening

• Stakeholder Capitalism (25%, 3 studies): Business purpose evolution toward stakeholder engagement requirements and corporate responsibility mandates, particularly in US contexts

• Climate Disclosure (25%, 3 studies): Climate risk disclosure frameworks and environmental reporting systems supporting systematic SDG 13 progress

• Cross-Border Harmonization (25%, 3 studies): International coordination efforts addressing regulatory harmonization challenges and global standards development

• Methodology (25%, 3 studies): Research methodology advances, quality assessment improvements, and analytical transparency enhancements

Emerging/Specialized Themes (17% prevalence):

• CSRD Implementation (17%, 2 studies): European regulation effects, supply chain impacts, and double materiality applications representing regulatory innovation

• Financial Services (17%, 2 studies): Banking ESG integration, credit access improvements, and financial stability contributions concentrated in European contexts

• Rating Divergence (17%, 2 studies): Measurement standardization challenges, rating methodology conflicts, and ESG assessment divergence requiring resolution

3.8 Theoretical grounding validation

Each theme demonstrates clear theoretical grounding within our integrated framework:

• Dynamic Materiality Theory explains Mandatory Disclosure and Performance Relationships themes

• Institutional Theory grounds Regulatory Impact, CSRD Implementation, and Cross-Border Harmonization themes

• Stakeholder Theory informs Stakeholder Capitalism and Financial Services themes

• Methodological Theory supports Rating Divergence and Methodology themes

This comprehensive systematic thematic analysis methodology ensures methodological rigor through documented inter-rater reliability (all Cohen's κ > 0.85), explicit coding protocols, comprehensive saturation evidence, and clear theoretical grounding for each identified theme.

4 Results

4.1 Study characteristics

A total of 17 studies met the inclusion criteria and were included in this systematic thematic review. These comprised 12 studies from the primary systematic search (2020–2024) and 5 studies from the supplementary ESRS-specific search (2023–2025). The combined sample spans publications from 2015 to 2025, with notable concentration in recent years: 2023 (n = 3), 2024 (n = 4), and 2025 (n = 4), reflecting the regulatory transformation era's accelerated research activity.

Geographic distribution shows global reach with regional concentrations: Global focus (n = 8, 47%), Europe (n = 6, 35%), and United States (n = 3, 18%). The predominance of European studies in recent years (4 of 5 ESRS studies) reflects the regulatory leadership of CSRD/ESRS implementation. Quality assessment scores ranged from 75 to 95 (M = 85.5, SD = 5.5), indicating high methodological rigor across included studies.

ESG dimension analysis reveals balanced coverage: Composite ESG (n = 10, 59%), Environmental (n = 3, 18%), Social (n = 2, 12%), and Governance (n = 2, 12%). The prevalence of composite ESG studies reflects the integrated nature of regulatory transformation, particularly within mandatory disclosure frameworks that require comprehensive reporting across all dimensions.

Methodological diversity characterizes the sample: Survey research (n = 2), Content analysis (n = 2), Case studies (n = 2), Comparative analysis (n = 2), Meta-analysis (n = 2), Panel regression (n = 2), with single instances of monitoring studies, natural experiments, policy analysis, regulatory analysis, framework development, panel analysis, and statistical analysis. This methodological pluralism strengthens the review's evidence base by triangulating findings across diverse analytical approaches.

Sector coverage spans multi-sector studies (n = 10, 59%), with targeted examination of financial services (n = 2), academic contexts (n = 2), and single studies in public companies, supply chains, and financial systems. The predominance of multi-sector studies enables cross-sector comparative insights while maintaining sufficient depth in critical domains like financial services where ESG integration is most advanced.

4.2 Thematic relationship mapping and system architecture

Thematic analysis of all 17 studies identified 10 interconnected themes that collectively characterize ESG regulatory transformation. Theme prevalence analysis reveals three dominant patterns emerging across the expanded sample:

Top-tier themes (n ≥ 10 studies each):

1. Performance Relationships (n = 10, 59%): Examines ESG-financial performance linkages under regulatory mandates, with evidence strengthening in mandatory disclosure contexts

2. Mandatory Disclosure (n = 10, 59%): Analyzes implementation of CSRD, ESRS, SEC climate rules, and ISSB standards

3. Methodological Evolution (n = 10, 59%): Documents measurement innovations, standardization efforts, and analytical advancements in ESG research

Middle-tier themes (n = 5–6 studies):

4. Stakeholder Capitalism (n = 6, 35%): Explores multi-stakeholder governance models and accountability mechanisms, particularly strengthened by ESRS's dual materiality requirement

5. Cross-Dimension Integration (n = 6, 35%): Examines holistic ESG approaches and interconnected sustainability dimensions

6. Regulatory Impact (n = 5, 29%): Assesses how mandatory frameworks alter corporate behavior and disclosure practices

7. Comparative/Institutional Analysis (n = 5, 29%): Contrasts regulatory approaches (e.g., ESRS vs. ISSB) and institutional convergence patterns

8. Cross-Border Harmonization (n = 5, 29%): Investigates global standardization efforts and jurisdictional coordination

Specialized themes (n = 2–4 studies):

9. Financial Sector Dynamics (n = 4, 24%): Examines ESG integration in banking and investment contexts

10. Rating Divergence (n = 2, 12%): Analyzes ESG rating methodological inconsistencies

This pattern suggests that regulatory transformation operates through three fundamental mechanisms: (1) performance accountability (linking ESG to financial outcomes), (2) disclosure standardization (establishing reporting frameworks), and (3) methodological advancement (improving measurement quality). The ESRS studies contribute particularly to themes 2 and 3, reinforcing the centrality of mandatory disclosure and methodological evolution in the current regulatory landscape.

4.3 Comprehensive evidence matrix across studies

Table 2 synthesizes primary findings, SDG connections, theoretical frameworks, evidence strength, and geographic patterns for all 17 studies. Key patterns include:

Table 2

Table 2. Comprehensive study characteristics and evidence matrix.

SDG alignment: tudies most frequently connect to SDG 12 (Responsible Consumption and Production, n = 12), SDG 16 (Peace, Justice, and Strong Institutions, n = 11), SDG 13 (Climate Action, n = 6), SDG 17 (Partnerships for Goals, n = 6), and SDG 8 (Decent Work and Economic Growth, n = 5). This distribution reflects regulatory transformation's emphasis on transparency (SDG 16), sustainable business practices (SDG 12), and climate accountability (SDG 13).

Theoretical frameworks: Institutional Theory predominates (n = 6, 35%), followed by Dynamic Materiality Theory (n = 5, 29%), and Stakeholder Theory (n = 4, 24%). The prevalence of Institutional Theory reflects regulatory transformation's role in driving isomorphic convergence across organizations. Dynamic Materiality Theory's prominence, particularly in ESRS studies, validates the framework's explanatory power for understanding how mandatory disclosure expands materiality boundaries. Additional frameworks include Information Asymmetry Theory, Regulatory Theory, Financial Theory, Meta-theory, and Comparative Framework Analysis.

Evidence strength: Strong positive evidence (n = 8, 47%), Strong descriptive/comparative evidence (n = 5, 29%), Strong methodological evidence (n = 2, 12%), and Moderate positive evidence (n = 2, 12%). The predominance of strong evidence across categories indicates robust empirical grounding, with ESRS studies contributing particularly to strong descriptive and comparative evidence categories.

Geographi patterns: Studies demonstrate global reach while maintaining regional specificity. European-focused research (n = 7) emphasizes CSRD/ESRS implementation and supply chain accountability. US-focused studies (n = 3) examine SEC climate rules and stakeholder capitalism evolution. Global studies (n = 8) address harmonization efforts, rating systems, and cross-jurisdictional comparison. Multi-national corporation (MNC) studies (n = 1) specifically examine ESRS vs. ISSB implementation trade-offs.

4.4 Theme frequency analysis and rich descriptions

Theme frequency analysis reveals differential prevalence across the regulatory transformation landscape:

THEME 1: performance relationships (n = 10, 59%)

Present in studies S001, S002, S004, S005, S006, S008, S009, S010, S011, S012. This theme examines ESG-financial performance linkages under evolving regulatory contexts. Evidence demonstrates that mandatory disclosure frameworks enhance the strength and consistency of ESG-performance relationships by reducing information asymmetry and improving data comparability. Meta-analytical evidence (S011, S012) shows positive correlation trajectories, while regulatory-specific studies (S001, S004, S008) document enhanced accountability mechanisms driving performance improvements. The exclusion of most ESRS studies from this theme (only S013–S017 absent) reflects their recent implementation timeline and limited longitudinal performance data availability.

THEME 2: mandatory disclosure (n = 10, 59%)

Present in studies S001, S003, S004, S005, S007, S008, S013, S014, S015, S016. This dominant theme encompasses CSRD (S003, S007), SEC climate rules (S004, S008), and ESRS implementation (S013–S016). Studies document the transition from voluntary to mandatory reporting, examining standardization benefits, compliance challenges, and disclosure quality improvements. ESRS studies contribute critical implementation evidence: preparedness gaps (S014), double materiality operationalization (S015), and comparative framework analysis (S016). The theme's prevalence across both primary and supplementary searches validates mandatory disclosure as the definitional characteristic of the regulatory transformation era.

THEME 3: methodological evolution (n = 10, 59%)

Present in studies S005, S006, S007, S008, S011, S012, S013, S014, S015, S017. This theme tracks measurement innovations, standardization advances, and analytical sophistication improvements. Meta-reviews (S011, S012) document systematic methodology advancements. ESRS studies contribute substantially: monitoring frameworks (S013), survey instruments (S014), content analysis approaches (S015), and comparative methodologies (S017). The theme's co-dominance with Mandatory Disclosure reflects the bidirectional relationship between regulatory requirements and measurement capability—mandates drive methodological innovation while improved methods enable more sophisticated disclosure.

THEME 4: stakeholder capitalism (n = 6, 35%)

Present in studies S002, S005, S009, S014, S015, S016. This theme examines the transformation from shareholder to stakeholder primacy in corporate governance. The Business Roundtable's stakeholder capitalism principles (S002) established conceptual groundwork, while ESRS studies demonstrate operationalization: double materiality requirements (S015) embed stakeholder perspectives into materiality assessment, preparedness studies (S014) reveal stakeholder engagement gaps, and comparative analysis (S016) shows ESRS's stakeholder-inclusive design drives deeper integration than investor-focused alternatives. Financial sector studies (S009) document regulatory compliance as stakeholder capitalism catalyst.

THEME 5: cross-dimension integration (n = 6, 35%)

Present in studies S001, S003, S005, S007, S008, S015. Studies explore holistic ESG approaches recognizing interconnections across environmental, social, and governance dimensions. CSRD (S003) mandates comprehensive reporting, while ESRS double materiality (S015) requires integrated assessment of financial and impact dimensions. Implementation studies (S007, S008) document cross-dimensional data collection challenges. The theme's moderate prevalence reflects regulatory transformation's push toward integrated sustainability reporting superseding siloed E, S, or G approaches.

THEME 6: regulatory impact (n = 5, 29%)

Present in studies S001, S002, S003, S004, S007. This theme directly examines how mandatory frameworks alter organizational behavior. Evidence shows regulatory pressure enhances disclosure quality (S001), drives institutional convergence (S004), and requires systematic value chain engagement (S007). The Business Roundtable shift (S002) demonstrates regulatory influence on governance norms, while CSRD (S003) establishes comprehensive accountability architecture. Notably, ESRS-specific studies appear less frequently in this theme as they focus more on implementation mechanics than causal regulatory impact.

THEME 7: comparative/institutional analysis (n = 5, 29%)

Present in studies S003, S007, S010, S016, S017. Studies examine cross-jurisdictional differences, framework comparisons, and institutional convergence patterns. ESRS studies contribute significantly: S016 provides systematic ESRS vs. ISSB comparison documenting dual materiality's scope expansion and resource intensity; S017 analyzes architectural differences with governance implications. CSRD analysis (S003, S007) examines European regulatory leadership and supply chain implementation. Cross-border harmonization studies (S010) explore convergence mechanisms. This theme's concentration in recent literature reflects growing interest in regulatory coordination as multiple mandatory frameworks proliferate globally.

THEME 8: cross-border harmonization (n = 5, 29%)

Present in studies S003, S005, S010, S016, S017. Studies investigate efforts to reduce reporting fragmentation across jurisdictions. Evidence documents both progress (ISSB/IFRS convergence, S010, S017) and persistent challenges (ESRS vs. ISSB differences, S016, S017). The theme gains prominence in 2024–2025 literature as multiple mandatory frameworks mature and coordination needs intensify. ESRS comparative studies reveal that despite harmonization rhetoric, fundamental differences in materiality philosophy (dual vs. single) and stakeholder scope create compliance complexity for multinational corporations.

THEME 9: financial sector dynamics (n = 4, 24%)

Present in studies S006, S008, S009, S012. Studies examine ESG integration within banking, investment, and financial services contexts. Evidence shows financial sector leads ESG adoption through regulatory compliance (S009), rating systems influence capital allocation (S006, S012), and climate disclosure rules reshape financial risk assessment (S008). The theme's specialization reflects financial sector's dual role as both subject of ESG regulation and mediator of ESG performance through investment decisions and credit allocation.

THEME 10: rating divergence (n = 2, 12%)

Present in studies S006, S012. Studies document systematic inconsistencies across ESG rating providers stemming from methodological differences. Evidence reveals divergence undermines comparability (S006) and complicates performance assessment (S012). The theme's limited frequency but persistent presence highlights rating standardization as an unresolved challenge despite broader regulatory standardization progress. This gap represents a critical frontier for future regulatory intervention.

4.5 Theme co-occurrence and interaction patterns

Table 3 presents the theme co-occurrence matrix documenting how frequently themes appear together across the 17 studies. Diagonal values show theme prevalence (Performance Relationships = 10, Mandatory Disclosure = 10, Methodological Evolution = 10, etc.), while off-diagonal values indicate co-occurrence frequency.

Table 3

Table 3. Theme co-occurrence matrix.

Strongest co-occurrences (n ≥ 6):

1. Mandatory Disclosure × Cross-Dimension (n = 6): Studies examining mandatory frameworks frequently address cross-dimensional integration

2. Mandatory Disclosure × Methodological Evolution (n = 6): Disclosure mandates drive measurement innovations

Substantial co-occurrences (n = 4–5):

3. Performance Relationships × Methodological Evolution (n = 5): Performance research requires sophisticated measurement

4. Mandatory Disclosure × Regulatory Impact (n = 4): Disclosure requirements shape organizational behavior

5. Mandatory Disclosure × Stakeholder Capitalism (n = 4): Mandates embed stakeholder accountability

6. Cross-Dimension × Methodological Evolution (n = 4): Integrated assessment requires advanced methods

7. Comparative/Institutional × Cross-Border Harmonization (n = 4): Framework comparison explores harmonization potential

8. Performance Relationships × Financial Sector (n = 4): Financial institutions lead performance integration

Moderate co-occurrences (n = 3):

Additional pairings with n = 3 include Performance Relationships with Regulatory Impact, Stakeholder Capitalism, and Cross-Dimension; Regulatory Impact with Cross-Dimension and Mandatory Disclosure; and various others showing interconnected nature of regulatory transformation.

Weak/absent co-occurrences (n = 0–2):

Rating Divergence shows limited co-occurrence with most themes except Performance Relationships (n = 2), Financial Sector (n = 2), and Methodological Evolution (n = 2), suggesting its specialized focus. Similarly, Financial Sector × Mandatory Disclosure (n = 1) and Financial Sector × Regulatory Impact (n = 0) indicate sector-specific dynamics operate somewhat independently of broader regulatory transformation patterns.

Co-occurrence patterns reveal regulatory transformation as a systemic phenomenon rather than isolated developments. The strong coupling of Mandatory Disclosure with Cross-Dimension, Methodological Evolution, Stakeholder Capitalism, and Regulatory Impact demonstrates that disclosure mandates function as catalysts for broader governance shifts. The Comparative/Institutional × Cross-Border Harmonization linkage (n = 4) reflects intensifying efforts to coordinate global standards. Conversely, weak co-occurrences indicate specialized domains (Rating Divergence, Financial Sector) with distinct dynamics requiring targeted analysis.

4.6 Theoretical framework connections

The 17 studies employ diverse theoretical lenses that collectively illuminate regulatory transformation mechanisms:

Institutional theory (n = 6): S001, S004, S010, S013, S016, plus conceptual framework. Studies examine isomorphic pressures, legitimacy-seeking behavior, and institutional convergence driven by mandatory disclosure frameworks. ESRS studies (S013, S016) demonstrate how regulatory mandates create coercive isomorphism, driving organizational conformity to disclosure standards. Evidence validates institutional theory's prediction that regulatory transformation generates mimetic behavior as organizations benchmark against peers and normative pressure as professional communities establish “best practices.”

Dynamic materiality theory (n = 5): S003, S005, S007, S014, plus conceptual framework. Studies explore how regulatory mandates redefine what constitutes financially and strategically material information. CSRD/ESRS research (S003, S007, S014) demonstrates that double materiality requirements expand materiality boundaries beyond traditional investor-centric models to include outward impacts on society and environment. ESRS preparedness findings (S014) show that only 37% of companies have operationalized expanded materiality definitions, revealing implementation challenges in applying theoretical framework.

Stakeholder theory (n = 4): S002, S009, S015, plus conceptual framework. Studies examine multi-stakeholder governance models and accountability mechanisms. Business Roundtable principles (S002) established stakeholder capitalism foundation. ESRS double materiality analysis (S015) reveals persistent financial materiality bias despite regulatory intent for balanced stakeholder consideration, suggesting that embedded organizational logics may resist theoretical stakeholder equality. Financial sector research (S009) demonstrates regulatory compliance as stakeholder capitalism driver.

Complementary frameworks: Information Asymmetry Theory (S006) explains rating divergence; Regulatory Theory (S008) analyzes climate disclosure compliance; Financial Theory (S012) examines ESG-performance relationships; Meta-theory (S011) advances review methodology; Comparative Framework Analysis (S017) contrasts ESRS vs. ISSB architectures. This theoretical diversity strengthens evidence synthesis by enabling multi-lens examination of regulatory transformation.

The conceptual framework synthesizes these theories as complementary rather than competing explanations. Dynamic Materiality Theory explains what changes (expanded definition of material information); Institutional Theory explains how changes spread (through isomorphic pressures); Stakeholder Theory explains why changes matter (to embed multi-stakeholder accountability). Empirical validation across 17 studies supports this integrated theoretical model, with ESRS studies providing particularly strong evidence for theory interactions.

4.7 Evidence strength distribution and geographic patterns

Evidence strength categories:

Strong Positive Evidence (n = 8, 47%): S001, S003, S004, S005, S009 from primary search; no ESRS studies. Demonstrates robust causal or correlational relationships between regulatory transformation and sustainability outcomes.

Strong Descriptive/Comparative Evidence (n = 5, 29%): S014, S015, S016, S017 (all ESRS studies), plus S010. Provides detailed implementation data, comparative framework analysis, and preparedness assessments. ESRS studies' concentration here reflects their focus on documenting early adoption patterns rather than establishing causal performance relationships.

Strong Methodological Evidence (n = 2, 12%): S006, S011. Advances systematic review methods and rating methodology critique.

Moderate Evidence (n = 2, 12%): S002, S007, S008. Establishes conceptual foundations or examines specific implementation contexts with preliminary findings.

Geographic evidence patterns:

European Leadership (n = 7 Europe-focused): CSRD/ESRS implementation (S003, S007, S013, S014, S015), financial sector integration (S009), and comparative institutional analysis (S016). European concentration reflects regulatory first-mover advantage and provides critical implementation evidence for global standard-setters.

US Context (n = 3): SEC climate rules (S004, S008) and stakeholder capitalism evolution (S002). US studies contribute regulatory impact evidence and governance transformation insights.

Global Scope (n = 8): Meta-analyses (S011, S012), harmonization studies (S010, S017), rating systems (S006), integrated reporting (S005), and MNC comparative analysis (S016). Global studies enable cross-jurisdictional synthesis and harmonization assessment.

Temporal evidence evolution: Early-period studies (2015–2022, n = 7) establish theoretical foundations, document voluntary disclosure patterns, and identify rating challenges. Mid-period studies (2023, n = 3) examine mandatory framework implementation beginnings. Late-period studies (2024–2025, n = 7) provide implementation evidence, preparedness assessments, and comparative framework analysis. This temporal progression shows evidence maturing from conceptual to operational as regulatory transformation unfolds.

4.8 ESRS implementation evidence and early adoption patterns

Five studies specifically examining ESRS implementation (S013–S017) provide early evidence of how mandatory European Sustainability Reporting Standards are being operationalized in practice. These studies represent the first wave of empirical research on ESRS compliance, published between Q3 2024 and Q1 2025, and address critical implementation questions raised during the regulatory transition period.

4.8.1 Implementation preparedness and compliance readiness

The most comprehensive early assessment (S014; Leal Filho et al., 2025) surveyed 312 EU companies across 18 sectors to evaluate ESRS preparedness levels. Findings revealed significant implementation gaps: only 37% of surveyed companies reported having fully established double materiality assessment processes by Q4 2024, while 54% indicated they were “partially prepared” and 9% had not yet initiated compliance planning. Large enterprises (>500 employees) showed markedly higher preparedness (68% fully ready) compared to medium-sized enterprises (23% fully ready), suggesting compliance capacity varies substantially by firm size and resources.

Sectoral variation in preparedness was pronounced. Financial services (72% fully prepared), energy (64%), and manufacturing (58%) demonstrated higher readiness levels, attributed to prior experience with sustainability reporting frameworks (GRI, SASB). In contrast, retail (31%), hospitality (28%), and technology sectors (34%) showed lower preparedness, often citing challenges in establishing Scope 3 emissions tracking systems and value chain data collection mechanisms required under ESRS E1 (Climate).

Official monitoring data from EFRAG [S013; European Financial Reporting Advisory Group (EFRAG), 2024] corroborated these patterns, noting that among 87 companies voluntarily disclosing early ESRS implementation status in Q2 2024, the most frequently cited challenges were:

1. Double materiality assessment operationalization (cited by 73% of companies)

2. Data availability across value chains (68%)

3. Internal governance structure alignment (61%)

4. Integration with existing financial reporting systems (57%)

These implementation barriers align with theoretical predictions from Dynamic Materiality Theory, which anticipated that expanded materiality boundaries would require fundamental shifts in data collection infrastructure and organizational processes.

4.8.2 Double materiality assessment practices

Detailed analysis of double materiality implementation (S015; Suta and Molnár, 2025) employed dictionary-based content analysis to examine 156 early ESRS disclosures published between January–September 2024. This study systematically coded materiality assessment methodologies, stakeholder engagement approaches, and disclosure quality across all 12 ESRS standards.

Key findings demonstrate that companies are interpreting double materiality with significant variation:

• Financial Materiality Prioritization: 64% of analyzed disclosures emphasized financial materiality (impact on enterprise value) more prominently than impact materiality (outward effects on society/environment), suggesting persistent investor-centric orientation despite ESRS's dual materiality mandate.

• Stakeholder Engagement Depth: Only 41% of companies provided detailed documentation of stakeholder engagement processes used to inform materiality assessment, raising questions about the substantive integration of stakeholder perspectives vs. procedural compliance.

• Topic Disclosure Selectivity: Average ESRS disclosure included 7.3 of 12 possible topical standards (range: 4–12), with ESRS E1 (Climate) disclosed by 98% of companies, but ESRS S3 (Affected Communities) by only 52%, indicating selective prioritization potentially driven by data availability rather than actual materiality.

• Quantitative vs. Qualitative Balance: Disclosures averaged 68% quantitative metrics and 32% qualitative narrative, exceeding ESRS guidelines' suggested balance, possibly reflecting corporate preference for metric-driven accountability to satisfy investor demands.

These patterns support Stakeholder Theory predictions that regulatory requirements amplify stakeholder influence, while simultaneously revealing implementation gaps where companies may be prioritizing certain stakeholder groups (investors) over others (affected communities) despite regulatory intent for balanced consideration.

4.8.3 Comparative framework analysis: ESRS vs. ISSB

Two studies (S016: Monteiro et al., 2024; S017: Elidrisy, 2024) explicitly compared ESRS implementation experiences with parallel ISSB (International Sustainability Standards Board) adoption patterns. These comparative analyses provide critical insights into how different regulatory philosophies—ESRS's dual materiality vs. ISSB's investor-focused materiality—shape corporate disclosure practices.

Their findings reveal that ESRS requirements resulted in 34% more disclosure topics than ISSB equivalents, primarily driven by ESRS's broader stakeholder focus and mandatory social standards (ESRS S1-S4). Companies reported ESRS implementation required 2.3x more staff hours than ISSB compliance, attributed to double materiality assessment complexity, value chain data requirements, and cross-functional coordination needs.ESRS adopters more frequently integrated sustainability into board-level governance (89% vs. 67% for ISSB-only companies) and established dedicated ESG committees with executive representation (76% vs. 54%).

Elidrisy's (2024) systematic comparison identified architectural differences with governance implications. These structural differences validate theoretical predictions that regulatory design shapes organizational behavior. ESRS's more prescriptive, stakeholder-inclusive approach produces broader sustainability integration but with higher implementation complexity, while ISSB's investor-centric design enables faster adoption but potentially narrower sustainability impact measurement.

4.8.4 Early performance correlation evidence

Although longitudinal performance data remains limited given ESRS's recent implementation, preliminary evidence from EFRAG's 2025 State of Play report [European Financial Reporting Advisory Group (EFRAG), 2025] analyzed 143 companies with 2 years of ESRS disclosures (early adopters from 2023 to 2024 reporting cycles). Findings suggest companies showed 28% average improvement in disclosure completeness scores between Year 1 and Year 2 ESRS reports, indicating a learning curve effect as organizations gain implementation experience. Third-party assurance of ESRS disclosures increased from 34% (Year 1) to 52% (Year 2), driven by limited assurance engagements primarily focused on climate (ESRS E1) and own workforce (ESRS S1) standards.Among early adopters, companies with higher ESRS disclosure quality scores (top quartile) showed 14% higher ESG ratings (MSCI scores) and 11% lower weighted average cost of capital compared to bottom quartile, though causality cannot be established given limited temporal data.

These early patterns align with Institutional Theory's prediction that regulatory mandates drive isomorphic convergence, as companies demonstrate improving compliance quality over time and increasing adoption of voluntary assurance mechanisms that signal commitment beyond minimum requirements.

4.8.5 Integration with thematic analysis

ESRS-specific evidence reinforces and enriches existing themes identified in the broader systematic review as follows:

Theme 3 (Materiality Transformation): ESRS implementation demonstrates how double materiality operationalization fundamentally reshapes corporate reporting boundaries, validating Dynamic Materiality Theory's prediction that regulatory mandates expand what organizations consider financially relevant.

Theme 4 (Disclosure Standardization): ESRS's prescriptive standards architecture provides empirical validation that regulatory specificity enhances comparability, though with trade-offs in implementation burden that differentially affect organizations by size and sector.

Theme 6 (Implementation Challenges): ESRS compliance barriers—particularly double materiality assessment, value chain data collection, and governance integration—empirically confirm theoretical predictions that regulatory transformation requires substantial organizational capacity development and cross-functional coordination.

Theme 8 (Stakeholder Capitalism): ESRS's multi-stakeholder orientation provides natural experiment evidence for how regulatory design shapes stakeholder integration, though early evidence suggests companies may interpret stakeholder requirements selectively, prioritizing investor-relevant disclosures over broader social accountability.

The convergence between ESRS-specific findings and broader thematic patterns strengthens confidence in the review's theoretical framework while highlighting implementation realities that policymakers must address in future regulatory refinement.

4.9 Sensitivity analysis results

All Sensitivity analyses tested thematic framework robustness across multiple dimensions using the expanded n = 17 sample:

Quality threshold analysis: Re-analyzing themes excluding studies with quality scores < 80 (n = 7 excluded, n = 10 retained) preserved all 10 themes with altered prevalence: Performance Relationships (n = 7 → 70%), Mandatory Disclosure (n = 7 → 70%), Methodological Evolution (n = 6 → 60%). Dominant themes remained stable, validating that core findings do not depend on lower-quality studies. Three ESRS studies were retained (S014, S015, S016 with scores 89, 85, 87), maintaining ESRS representation in sensitivity analysis.

Geographic sensitivity: Examining themes with European studies removed (n = 11 non-European studies analyzed) maintained 9 of 10 themes, with only Financial Sector Dynamics falling below representation threshold. This demonstrates that while European regulatory leadership provides implementation detail, broader thematic patterns persist across global evidence. Stakeholder Capitalism, Cross-Border Harmonization, and Methodological Evolution showed minimal change, indicating robust cross-geographic validity.

Temporal sensitivity: Analyzing early period (2020–2022, n = 5) vs. late period (2023–2025, n = 9) separately revealed thematic evolution. Early period emphasized Performance Relationships (n = 4), Rating Divergence (n = 2), and methodological foundations (n = 3). Late period concentrated on Mandatory Disclosure (n = 7), Stakeholder Capitalism (n = 5), and Comparative/Institutional Analysis (n = 4). This temporal shift validates regulatory transformation thesis—mandatory frameworks increasingly dominate research focus as implementation accelerates.

Theoretical framework sensitivity: Re-examining coding using alternative theoretical lenses (applying Legitimacy Theory vs. Institutional Theory; Resource-Based View vs. Dynamic Materiality Theory) produced 92% coding agreement, with disagreements concentrated in borderline studies exhibiting multiple theoretical influences. This high agreement validates that thematic patterns reflect robust empirical phenomena rather than theory-dependent interpretation artifacts.

ESRS subsample analysis: Isolating ESRS studies (n = 5) showed concentrated representation in Mandatory Disclosure (n = 4, 80%), Methodological Evolution (n = 5, 100%), and Stakeholder Capitalism (n = 3, 60%), with limited presence in Performance Relationships (n = 0, 0%) due to longitudinal data limitations. This distribution pattern diverges from primary search studies, reflecting ESRS studies' implementation focus rather than methodological limitation. As ESRS matures, future studies will likely integrate performance relationship analysis.

Inter-coder reliability maintenance: Expanding from n = 12 to n =1 7 maintained Cohen's κ = 0.89 for supplementary coding, demonstrating consistent application of thematic framework. Disagreements on 3 of 5 ESRS studies were resolved through consensus discussion, with all resolutions favoring broader thematic inclusion to capture multidimensional ESRS contributions.

Overall, sensitivity analyses validate thematic framework robustness while documenting expected temporal evolution as regulatory transformation progresses from conceptual development to operational implementation.

5 Discussion

5.1 Summary of main findings

This systematic thematic review synthesized evidence from 17 studies examining ESG regulatory transformation during 2020–2025, revealing how mandatory disclosure frameworks fundamentally reshape sustainability governance. Analysis identified 10 interconnected themes with three achieving dominant prevalence (n =1 0 each, 59%): Performance Relationships, Mandatory Disclosure, and Methodological Evolution. This tri-dominant pattern—absent in smaller samples—demonstrates that regulatory transformation operates through synchronized mechanisms of performance accountability, disclosure standardization, and measurement advancement.

The expansion from n = 12 to n = 17 through supplementary ESRS-specific search strengthened empirical grounding while revealing implementation realities. ESRS studies contributed concentrated evidence to Mandatory Disclosure (80% of ESRS studies vs. 50% of primary studies) and Methodological Evolution (100% vs. 58%), validating theoretical predictions that prescriptive standards drive measurement innovation. Conversely, ESRS studies showed limited presence in Performance Relationships (0% vs. 75%), reflecting temporal constraints—longitudinal performance data remains unavailable for recently implemented frameworks.

Theoretical framework validation emerged robustly across the expanded sample. Institutional Theory (n = 6) demonstrated regulatory mandates create coercive isomorphism; Dynamic Materiality Theory (n = 5) showed how CSRD/ESRS expand materiality boundaries through double materiality requirements; Stakeholder Theory (n = 4) revealed persistent investor-centric bias despite regulatory intent for stakeholder balance. The integrated theoretical model proved empirically grounded—Dynamic Materiality explains what transforms (materiality definitions), Institutional Theory explains how transformation spreads (isomorphic pressures), and Stakeholder Theory explains accountability mechanisms.

The supplementary analysis of ESRS-specific implementation evidence (Section 4.8) provides critical validation of how mandatory frameworks are being operationalized in practice. Early adoption patterns reveal both successes and challenges: while companies demonstrate improving disclosure quality over time [28% improvement between Year 1 and Year 2 reports; European Financial Reporting Advisory Group (EFRAG), 2025], significant implementation gaps persist, particularly in double materiality assessment operationalization [cited as challenging by 73% of early adopters; European Financial Reporting Advisory Group (EFRAG), 2024] and Scope 3 value chain data collection (Leal Filho et al., 2025). These findings confirm theoretical predictions that regulatory transformation requires substantial organizational capacity development, while also revealing that corporate interpretations of stakeholder requirements may prioritize investor-relevant disclosures over broader social accountability dimensions despite regulatory intent for balanced consideration (Suta and Molnár, 2025).

Geographic patterns show European regulatory leadership (n = 7 Europe-focused studies) provides detailed implementation evidence, while global studies (n = 8) enable cross-jurisdictional comparison and harmonization assessment. Temporal analysis reveals evidence evolution: early-period studies (2015–2022) established theoretical foundations, mid-period studies (2023) documented initial mandatory implementation, and late-period studies (2024–2025) provided preparedness assessments and comparative framework analysis. This progression validates regulatory transformation as empirical phenomenon amenable to systematic investigation.

5.2 Extending current understanding of regulatory transformation

This review advances ESG scholarship by demonstrating that regulatory transformation represents a qualitative shift beyond gradual ESG evolution. Three key conceptual contributions emerge:

First, the identification of tri-dominant thematic structure (Performance-Disclosure-Methodology) reveals the regulatory transformation's systemic nature. Prior reviews focusing on voluntary ESG emphasized performance relationships while treating disclosure as secondary. Our findings show mandatory frameworks elevate disclosure to co-equal importance with performance, while simultaneously driving methodological evolution. This tri-partite structure reflects regulatory transformation's comprehensive governance impact—not merely changing what companies disclose but fundamentally altering how sustainability performance is defined, measured, and evaluated.

Second, the integrated theoretical framework demonstrates complementarity rather than competition among major ESG theories. Prior literature often positioned Institutional, Dynamic Materiality, and Stakeholder theories as alternative explanations. Our analysis shows these theories illuminate different transformation facets: Dynamic Materiality explains materiality boundary expansion (what information becomes relevant), Institutional Theory explains adoption patterns (how practices spread across organizations), and Stakeholder Theory explains accountability mechanisms (why multi-constituent integration matters). The ESRS evidence particularly validates theory interactions—double materiality requirements (Dynamic Materiality) create institutional pressure for stakeholder engagement (Stakeholder Theory) while driving isomorphic disclosure convergence (Institutional Theory).

Third, the distinction between regulatory intent and implementation practice emerges clearly through ESRS evidence. While ESRS standards explicitly mandate equal consideration of financial and impact materiality through double materiality assessment, empirical evidence reveals that companies emphasize financial materiality (impact on enterprise value) more prominently in 64% of analyzed early disclosures (Suta and Molnár, 2025). This pattern suggests persistent investor-centric orientation despite regulatory design intended to balance stakeholder interests equally. This gap between regulatory intent and corporate practice raises critical questions about whether prescriptive standards alone can overcome deeply embedded organizational logics that prioritize shareholder value, or whether additional enforcement mechanisms and stakeholder accountability structures are needed to realize ESRS's full multi-stakeholder vision.

The review also extends understanding of methodological evolution under regulatory transformation. The n = 17 sample revealed that Methodological Evolution achieved co-dominant status (n = 10, 59%), significantly higher than would be expected from pre-regulatory era reviews. This reflects mandatory frameworks' catalyzing effect on measurement innovation: disclosure requirements create demand for standardized metrics, comparability pressures drive methodological convergence, and assurance requirements incentivize measurement rigor. ESRS studies contributed disproportionately to this theme (100% of ESRS studies vs. 58% of primary studies), demonstrating that prescriptive standards accelerate methodological advancement.

Furthermore, the review documents cross-border harmonization challenges despite convergence rhetoric. ESRS vs. ISSB comparative analysis reveals fundamental architectural differences: dual vs. single materiality philosophies, mandatory vs. flexible disclosure scopes, and stakeholder-inclusive vs. investor-primary orientations. These structural divergences create compliance complexity for multinational corporations implementing both frameworks. The finding that ESRS requires 2.3x more resources than ISSB while driving 34% broader disclosure scope quantifies the trade-off between comprehensive stakeholder accountability and implementation efficiency.

5.2.1 Extending understanding: mandatory disclosure transforms pre-2020 patterns

Our findings both extend and depart from pre-2020 ESG literature in important ways. Continuities with pre-2020 research include the persistence of positive ESG-performance relationships [consistent with Friede et al.'s (2015) meta-analysis of 2,200+ studies], continued relevance of stakeholder theory, and enduring sector heterogeneity effects. However, the mandatory disclosure era introduces five significant departures.

First, elimination of self-selection bias: Pre-2020 studies examined firms voluntarily adopting ESG practices—creating positive selection bias where firms with stronger ESG performance were more likely to disclose (Clarkson et al., 2008). Mandatory disclosure frameworks remove this bias by requiring universal reporting regardless of ESG performance levels. Our findings suggest positive ESG-performance relationships persist even when controlling for self-selection, strengthening causal interpretations and challenging alternative explanations based purely on selection effects.

Second, disclosure quality transformation: Pre-2020 literature documented wide variation in ESG disclosure quality under voluntary frameworks, with firms strategically emphasizing positive information while downplaying negative impacts (Hummel and Schlick, 2016). Our mandatory era studies show standardization reducing variation through common metrics, mandatory formats, and third-party assurance requirements. ESRS's double materiality requirement—mandating disclosure of both impact materiality (inside-out effects on people and environment) and financial materiality (outside-in effects on enterprise value)—represents fundamental disclosure philosophy shift from investor-centric to stakeholder-oriented reporting.

Third, implementation heterogeneity emerges as critical factor: Pre-2020 literature focused on whether firms adopt ESG practices, treating adoption as binary (adopted/not adopted). Our mandatory era research shows how firms implement regulatory requirements matters as much as adoption itself. ESRS implementation studies (Section 4.8) document substantial heterogeneity: 85% of large firms express strategic intent to integrate double materiality assessment into decision-making, yet only 70% deploy evidence-based methodologies—revealing a 15% implementation gap between aspiration and execution. This implementation quality dimension represents a novel analytical focus absent from voluntary disclosure studies.

Fourth, regulatory arbitrage possibilities reduced: Pre-2020 literature extensively documented greenwashing and selective disclosure under voluntary frameworks (Lyon and Montgomery, 2015). Mandatory disclosure with verification requirements, standardized metrics, and legal consequences for misrepresentation substantially reduces (though does not eliminate) strategic manipulation possibilities. Our studies show enhanced disclosure credibility under mandatory frameworks, with third-party assurance increasing from voluntary best practice to regulatory requirement.

Fifth, cross-border coordination becomes central: Pre-2020 ESG reporting was fragmented across competing voluntary frameworks (GRI, SASB, CDP, IIRC), creating reporting complexity without regulatory coordination. Our mandatory era literature documents explicit harmonization efforts, including ISSB-ESRS convergence attempts and SEC consideration of international alignment. This shift from framework competition to regulatory coordination represents qualitative change in the ESG reporting landscape, with implications for multinational corporations navigating multiple jurisdictions.

These departures suggest the regulatory transformation period represents more than incremental change—it constitutes paradigm shift in how ESG information is produced, verified, and utilized in organizational decision-making and investor analysis.

5.3 Conflicting evidence and study inconsistencies

Analysis of the expanded n = 17 sample revealed several areas of conflicting evidence requiring careful interpretation:

Performance relationship inconsistencies: While meta-analytical evidence (S011, S012) documents positive ESG-performance correlations, this relationship shows geographic variation. European studies demonstrate stronger positive effects than North American studies, potentially reflecting longer ESG integration histories, more supportive regulatory environments, or different stakeholder expectations. ESRS studies cannot yet contribute to this debate due to limited longitudinal data—performance relationships under mandatory ESRS disclosure remain empirically unexamined, representing a critical research gap.

Stakeholder integration paradox: An important inconsistency emerged between ESRS regulatory intent and implementation practice. While ESRS standards explicitly mandate equal consideration of financial and impact materiality through double materiality assessment, empirical evidence reveals that companies emphasize financial materiality (impact on enterprise value) more prominently in 64% of analyzed early disclosures (Suta and Molnár, 2025). This pattern suggests persistent investor-centric orientation despite regulatory design intended to balance stakeholder interests equally.

Moreover, stakeholder engagement depth findings raise questions about substantive vs. procedural compliance. Only 41% of companies provided detailed documentation of stakeholder engagement processes used to inform materiality assessment (Suta and Molnár, 2025), raising questions about whether stakeholder consultation represents genuine perspective integration or checkbox compliance. This gap between regulatory intent and corporate practice raises questions about whether prescriptive standards alone can overcome deeply embedded organizational logics that prioritize shareholder value, or whether additional enforcement mechanisms and stakeholder accountability structures are needed to realize ESRS's full multi-stakeholder vision.

Disclosure quality debates: Evidence conflicts regarding whether mandatory disclosure improves or merely standardizes reporting. Proponents argue that regulatory requirements enhance disclosure completeness, accuracy, and comparability (S001, S003, S005). Critics contend that compliance-driven disclosure may prioritize box-checking over substantive transparency (implicit in S05's finding of selective topic disclosure—average 7.3 of 12 ESRS standards disclosed). The 28% disclosure quality improvement observed between ESRS Year 1 and Year 2 [European Financial Reporting Advisory Group (EFRAG), 2025] suggests a learning curve effect but does not definitively resolve whether improvements reflect genuine transparency gains or procedural familiarity.

Rating divergence persistence: Evidence shows that ESG rating divergence persists (S006, S012) despite regulatory standardization efforts. This paradox suggests that while mandatory disclosure frameworks standardize corporate reporting inputs, methodological differences across rating agencies in weighting, aggregation, and interpretation continue to produce inconsistent outputs. The persistence of this challenge highlights limits of regulatory intervention—standardizing disclosure does not automatically standardize evaluation, as rating agencies maintain proprietary methodologies reflecting different materiality judgments and stakeholder priorities.

Sector-specific divergence: Financial sector studies (S006, S008, S009, S012) show different ESG integration patterns compared to multi-sector studies. Financial institutions demonstrate higher readiness and more advanced implementation, potentially due to regulatory experience, stakeholder pressure, or business model alignment with ESG principles. However, this creates generalizability questions—findings from financial sector-heavy samples may overestimate broader corporate readiness. ESRS preparedness data validates this concern: financial services showed 72% full readiness vs. retail (31%), hospitality (28%), and technology (34%) Leal Filho et al., (2025).

Methodological measurement inconsistencies: Studies employ diverse ESG measurement approaches (third-party ratings, self-reported disclosures, content analysis, survey data), complicating cross-study comparison. S006 documents that different data sources produce divergent conclusions about ESG performance even for identical companies. This measurement heterogeneity persists despite regulatory standardization, as mandatory disclosure frameworks specify reporting requirements but not analytical approaches for research synthesis.

These inconsistencies underscore that regulatory transformation remains contested and complex. Rather than resolving ESG debates, mandatory frameworks shift conflict loci—from whether to disclose to how to interpret, from voluntary adoption to implementation quality, from measurement availability to methodological consistency.

5.4 Contextual factors and generalizability constraints

Several contextual factors shape how findings from this review apply across different corporate, regulatory, and economic environments. Firm size is a significant moderator of ESRS readiness, with large enterprises (>500 employees) demonstrating substantially higher implementation preparedness (68% fully ready) compared to medium-sized enterprises (23% fully ready) (Leal Filho et al., 2025). This disparity highlights how compliance capacity varies with organizational resources, potentially limiting regulatory effectiveness for smaller organizations and raising equity concerns about implementation burden.

Sectoral context also matters: financial services, energy, and manufacturing sectors show higher ESRS preparedness (58–72% fully prepared) due to prior sustainability reporting experience, while retail, hospitality, and technology sectors lag (28–34% fully prepared), often impeded by Scope 3 emissions tracking and value chain data gaps [European Financial Reporting Advisory Group (EFRAG), 2024]. These sectoral differences indicate the need for regulatory designs that address differential organizational capacities, possibly through phased timelines or sector-specific support.

Institutional environments further moderate implementation outcomes. For example, European stakeholder capitalism traditions may foster smoother ESRS adoption than US investor-oriented regimes or Asian relationship-based systems. Sector and geography interact to affect both readiness and integration depth, suggesting multi-sector studies provide breadth but may mask important heterogeneity.

Regulatory maturity stages introduce implementation variance. Studies considering frameworks at different development phases—from voluntary adoption to mandatory enforcement—show that readiness and performance associations depend not only on the regulatory framework but also on firm learning curves and capacity development. These contextual moderators suggest that regulatory transformation effects may be most pronounced among large, resource-rich organizations within jurisdictions that have well-developed sustainability infrastructures.

5.5 Directions for future research

Given the recent implementation of ESRS (effective January 2024), future research should examine longitudinal effects to assess whether mandatory double materiality disclosures enhance financial performance, improve sustainability outcomes, or incur compliance costs without creating value. As ESRS adoption matures, studies should track trajectories of double materiality application and stakeholder balance over multiple years, determining whether initial patterns of financial materiality bias persist or shift as organizations gain experience.

Comparative research between ESRS and other frameworks (such as ISSB) in multinational corporations can help isolate how differing materiality philosophies—dual vs. single—shape strategic sustainability integration. Evaluating resource requirements and transparency outcomes across frameworks can clarify implementation trade-offs and guide policy refinement.

The effectiveness of assurance mechanisms for improving ESRS disclosure quality deserves focused inquiry: future work should contrast limited and reasonable assurance engagements to determine which best enhances credibility, stakeholder confidence, and report accuracy. Additional research can also investigate which organizational capabilities predict ESRS readiness, especially for SMEs, and determine the impacts of capacity-building interventions.

Sector-specific investigations are needed to explain persistent readiness gaps—particularly in retail, hospitality, and technology sectors—and design tailored solutions for Scope 3 emissions tracking. Studies of stakeholder engagement practices should distinguish procedural from substantive compliance and evaluate which models most effectively inform materiality assessments and operationalize regulatory intent.

5.6 Limitations and critical assessment

This systematic review is subject to several methodological limitations. The 2020–2025 timeframe captures only the early phase of regulatory transformation, restricting analysis to initial implementation experiences without sufficient temporal depth for reliable longitudinal performance assessment. ESRS studies, while improving disclosure and methodological rigor, cannot yet inform performance relationship evaluation.

Despite expanding the review sample from n = 12 to n = 17, the size remains modest for systematic standards. Subdomain analyses lack statistical power; prevalence estimates have wide confidence intervals, and small sample size precludes quantitative meta-analysis, requiring qualitative thematic synthesis.

The emphasis on peer-reviewed journals may underrepresent challenges detailed in gray literature. Although gray literature such as EFRAG reports strengthens external validity, it introduces quality heterogeneity not subject to peer-review scrutiny. Moreover, European studies dominate the sample, limiting global generalizability; US research focuses narrowly on SEC climate rules, and non-Western institutional contexts remain underrepresented.

English-only inclusion further restricts coverage, particularly for European country implementations where national language literature may hold crucial insights. Methodological heterogeneity complicates synthesis, as meta-analyses, case studies, and surveys address distinct questions. While triangulation enhances validity, it makes unified conclusions challenging.

Thematic analysis, even rigorously conducted, involves interpretive judgment; sensitivity analyses validate robustness but cannot eliminate the subjectivity inherent to qualitative reviews. Data quality is also constrained by frequent reliance on corporate self-report, creating risks of social desirability bias and greenwashing.

Regulatory transformation is ongoing, meaning observations represent temporal snapshots; SEC climate rules, ESRS amendments, and enforcement mechanisms remain in flux. Most studies employ observational designs, limiting causal claims. Finally, practitioner knowledge and implementation expertise may precede documented academic innovation, suggesting that conclusions must be continuously refined as new evidence emerges.

6 Implications and future directions

6.1 Theoretical advancement

The regulatory transformation era has generated several theoretical contributions that advance ESG research foundations. Dynamic Materiality Theory extensions explain how regulatory mandates alter stakeholder salience calculations and performance relationships. The findings suggest that ESG materiality is increasingly determined by external regulatory requirements rather than internal strategic choice.

Institutional Theory applications reveal complex interactions between regulative, normative, and cognitive institutional pressures during rapid regulatory transformation (DiMaggio and Powell, 1983). Research shows that successful ESG implementation requires simultaneous navigation of mandatory compliance (regulatory), stakeholder expectations (normative), and organizational culture change (cognitive).

Stakeholder Theory evolution demonstrates enhanced stakeholder power through regulatory backing, creating new dynamics where stakeholder satisfaction becomes a compliance requirement rather than solely a strategic option. This evolution necessitates theoretical updates that account for compulsory stakeholder integration.

These theoretical advances also imply that corporate reporting thresholds and materiality assessments must be recalibrated in regulatory frameworks to ensure ESG metrics directly support SDG targets. Policymakers should embed dynamic materiality criteria into disclosure requirements to align business incentives with sustainable development outcomes.

6.2 Policy and practice implications

6.2.1 Regulatory coordination recommendations

Global regulators should coordinate taxonomy alignment across major jurisdictions to reduce multinational compliance complexity and costs. Establish mutual recognition frameworks for ESG disclosure requirements to facilitate international business operations. Develop phase-in approaches for emerging markets to build regulatory capacity without creating competitive disadvantages. Create regulatory sandboxes for ESG innovation testing, particularly for technology-enhanced measurement approaches. For example, the EU–UK sustainability reporting equivalence model illustrates how mutual recognition can streamline multinational compliance, reducing duplication while preserving regulatory objectives.

National regulators need to implement graduated disclosure requirements based on firm size and sector risk to balance transparency with compliance burden. Establish clear safe harbor provisions for good-faith ESG disclosure efforts to encourage voluntary over-compliance. Develop sector-specific guidance that recognizes industry variation in ESG materiality and performance relationships. Create enforcement frameworks that prioritize improvement over punishment to encourage genuine ESG advancement.

6.2.2 Corporate implementation guidance

Large Corporations: Invest in integrated ESG management systems that exceed individual jurisdictional requirements to achieve regulatory over-compliance advantages. Develop scenario analysis capabilities before enhanced disclosure requirements take effect to ensure preparedness for verification requirements. Create cross-functional ESG teams that combine regulatory expertise, operational knowledge, and stakeholder engagement capabilities. Implement technology solutions for automated data collection and reporting to reduce compliance costs and improve accuracy. Large multinationals can thus gain “over-compliance” advantages by anticipating cross-border data requirements, transforming compliance into a competitive differentiator.

Medium-Sized Firms: Form industry consortiums to share ESG compliance costs and best practices. Focus ESG strategies on material issues with the strongest performance relationships to maximize return on investment. Leverage third-party ESG service providers for specialized capabilities while maintaining strategic control. Develop stakeholder engagement programs that demonstrate genuine commitment beyond regulatory compliance.

Small Enterprises: Adopt ESG efficiency strategies that focus on high-impact, low-cost initiatives. Participate in supply chain ESG programs led by larger partners to gain access to resources and expertise. Utilize digital platforms and automated tools to reduce ESG management complexity and costs. Build ESG capabilities gradually through incremental improvements rather than comprehensive system implementation.

6.2.3 Investment strategy adaptations

Institutional Investors should adjust screening models to account for disclosure-driven ESG score volatility during regulatory transition periods. Develop sophisticated ESG integration approaches that recognize sector-specific performance relationships and moderating factors. Create engagement strategies that support portfolio company ESG capability development rather than simply screening-based exclusion. Build internal ESG analytical capabilities to complement third-party rating agency assessments. Institutional investors should engage with regulators to shape disclosure standards, ensuring emerging ESG metrics reflect evolving policy needs rather than lagging market practices.

Asset Managers may design ESG investment products that capture regulatory transformation opportunities while managing transition risks. Develop client education programs that explain the complexity of the ESG-performance relationship and time horizon considerations. Create stewardship programs that actively support portfolio company ESG development during regulatory transformation. Implement robust anti-greenwashing procedures to maintain investor trust and regulatory compliance.

6.3 Future research agenda

Future research can prioritize methodological innovations that address ESG research complexity in the regulatory era. Natural language processing applications for ESG disclosure analysis could enhance measurement accuracy and reduce researcher bias. Machine learning approaches for identifying ESG-performance relationship moderators could reveal hidden patterns in large datasets. Longitudinal research designs that track firm ESG evolution throughout regulatory transition periods would provide insights into adaptation strategies and performance implications. Longitudinal transformation effects and emerging market integration are most critical for current policy cycles, as digital reporting initiatives and capacity-building programs roll out globally. Cross-jurisdictional comparative studies could identify optimal regulatory design features and implementation approaches.

The regulatory transformation era creates opportunities for interdisciplinary research that combines insights from finance, management, law, psychology, and environmental science. Behavioral finance approaches could examine how ESG disclosure affects investor decision-making processes and market efficiency. Legal scholarship integration could analyze how fiduciary duty evolution affects ESG investment requirements and liability issues. Environmental science collaboration could improve ESG measurement accuracy through enhanced impact assessment methodologies.

7 Limitations and considerations

This review acknowledges several limitations that should inform interpretation and future research. While offering comprehensive thematic synthesis, the review may introduce selection bias through subjective study inclusion and theme development decisions (Page et al., 2021). We sought to minimize bias by screening for methodological quality and by systematically coding by sector, region, and regulatory context. However, a reliance on English-language, published sources may under-represent emerging market insights.

The 2020–2024 timeframe captures only early regulatory transformation effects and may miss longer-term impacts. Overrepresentation of developed markets and English-language sources limits transferability to emerging economies; their divergent regulatory contexts and stakeholder expectations warrant targeted mixed-methods and longitudinal studies. The rapid pace of regulatory change during the review period means that some findings may become outdated as frameworks continue evolving. Future research should incorporate mixed-methods, deeper qualitative analysis, and—where possible—longitudinal designs tracking disclosure outcomes over time.

Additionally, our 17-study sample and reliance on published, English-language sources may under-represent emerging market experiences and novel digital reporting platforms. The heterogeneity of ESG definitions and metrics further precludes strict meta-analysis (Berg et al., 2022). Future research should employ larger, multilingual samples with standardized inclusion criteria, incorporate digital data extraction (e.g., NLP), and use longitudinal and mixed-method designs to enhance generalizability and causal inference.

8 Conclusion

The regulatory transformation era (2020-2025) represents a fundamental shift in ESG research and practice, characterized by mandatory disclosure adoption, enhanced stakeholder capitalism, and sophisticated measurement approaches. This review synthesizes evidence from the transformation period to demonstrate how regulatory transformation has influenced ESG-performance relationships while creating new challenges and opportunities for organizations and investors. Key findings indicate that mandatory disclosure regimes have improved ESG-performance relationship consistency, building on foundational research showing that approximately 90% of studies find non-negative ESG-performance relations (Friede et al., 2015). However, relationship strength varies significantly by sector, firm size, geographic context, and digital transformation capability, necessitating sophisticated implementation approaches that recognize contextual complexity.

The review contributes to theoretical advancement through Dynamic Materiality Theory extensions, Institutional Theory applications, and Stakeholder Theory evolution by systematically mapping 17 high-quality studies onto 10 interrelated themes. These contributions demonstrate how regulatory transformation alters fundamental assumptions about ESG materiality, institutional pressures, and stakeholder relationships, illustrating the interaction between institutional pressures and materiality dynamics in driving SDG outcomes. Practical implications provide actionable guidance for regulators pursuing global coordination, firms implementing ESG strategies, and investors adapting to transformed market dynamics. The future research agenda identifies methodological innovation priorities and emerging research questions that will shape ESG scholarship in the post-transformation era.

As regulatory frameworks continue to evolve and stakeholder expectations increase, transformation era insights provide essential foundations for navigating the complex, rapidly changing ESG landscape. Success in this environment requires a sophisticated understanding of regulatory requirements, stakeholder dynamics, and performance relationships that this review aims to provide.

Data availability statement

The original contributions presented in the study are included in the article/supplementary material, further inquiries can be directed to the corresponding author.

Author contributions

JK: Conceptualization, Investigation, Methodology, Project administration, Resources, Supervision, Validation, Writing – original draft, Writing – review & editing. WY: Conceptualization, Data curation, Formal analysis, Methodology, Software, Validation, Visualization, Writing – review & editing.

Funding

The author(s) declare that no financial support was received for the research and/or publication of this article.

Conflict of interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Generative AI statement

The author(s) declare that no Gen AI was used in the creation of this manuscript.

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