Enhancing Sustainability Reporting: The Role of Organizational Knowledge Management and Dynamic Capabilities
Summary
Implementing the Corporate Sustainability Reporting Directive (CSRD) poses significant challenges, with many companies relying on external assistance due to a lack of in-house expertise, resources, and capabilities. This study aims to bridge the gap in both literature and practice by examining the relationships between organizational capabilities and effective CSRD compliance. Specifically, it investigates how organizational knowledge management and dynamic capabilities contribute to effective CSRD-aligned sustainability reporting.
Utilizing the Knowledge Management Capabilities framework by Gold et al. (2001) and the Dynamic Capabilities framework by Teece (2007), this research employs a mixed-methods approach that integrates quantitative data and qualitative insights from PwC’s professional experience. The study explores the influence of these frameworks on CSRD-aligned sustainability reporting effectiveness and identifies best practices for organizations.
The findings reveal that robust knowledge management capabilities and dynamic capabilities significantly impact sustainability reporting. Key practices such as establishing strong data processes, fostering cross-functional collaboration, and engaging top executives are essential for CSRD compliance. Additionally, the study highlights the importance of a supportive technological, cultural, and structural infrastructure in facilitating effective sustainability reporting.
This research not only provides actionable insights for organizations aiming to enhance their sustainability reporting practices but also contributes to the academic understanding of the operationalization of knowledge management and dynamic capabilities in the context of CSRD compliance. Future research is recommended to validate the proposed model and further explore the micro-foundations of these capabilities across diverse organizational contexts.