Norwegian NFR Quality Research: Key ERM Implications for Taiwan Enterprises

Winners Consulting Services Co., Ltd. has observed that a study on the quality of non-financial reporting by Norwegian companies reveals a critical warning equally applicable to Taiwanese enterprises: even when companies conduct ESG disclosure according to GRI Standards, a significant gap exists between a report being "filled out" and being of "high quality." This finding requires Taiwanese executives to re-examine the substantive depth of their sustainability reports rather than merely pursuing formal compliance.

About the Author and This Study

Anders Berg published this study on the arXiv platform in 2023, employing an abductive approach as its core methodology. This research design, which balances quantitative scoring with qualitative document analysis, is relatively uncommon in the field of non-financial reporting research. The abductive approach is characterized by researchers not presupposing a conclusion but instead seeking the best explanation for observed phenomena, allowing the findings to more closely reflect the complex and often unpredictable realities of corporate reporting practices.

The significance of this study lies in its methodological rigor: Berg used three dimensions—GRI Material Topic Standards, European Sustainability Reporting Standards (ESRS) Topical Standards, and the UN Sustainable Development Goals (SDGs)—to cross-evaluate the non-financial reports of Norwegian companies. As one of the world's advanced markets for ESG information disclosure, Norway's reporting quality serves as an important benchmark for other countries. For the Taiwanese market, which is rapidly strengthening its sustainability reporting requirements, this empirical study from Northern Europe offers a valuable opportunity for reflection.

Quality Assessment of Norwegian Non-Financial Reports: Key Findings from a Three-Framework Cross-Validation

The central question of Berg's research is: How do Norwegian companies' Non-Financial Reports (NFR) perform in terms of "quality"? The study established a scoring mechanism based on GRI indicators, cross-referenced with SDGs and ESRS topical standards, and specifically analyzed companies' materiality assessment methods and patterns of omission.

Key Finding 1: Formal Compliance Does Not Equal Content Quality

The study found that while the evaluated Norwegian companies generally met the formal disclosure requirements of GRI indicators, there was a significant gap in content depth and quality attributes. The research defines "quality" as a combination of attributes covering both format and content. This means that even if a company completely fills out GRI indicators, it cannot be considered a high-quality NFR without specific quantitative data, analytical context, or action plans. This is a direct warning to Taiwanese companies: adhering to the TWSE's Guidelines for the Preparation of Sustainability Reports on Material Topics is merely the starting point of the quality journey, not the destination.

Key Finding 2: Lack of Transparency in Materiality Assessment Methodology

Through document analysis, Berg found a general lack of transparency in how the evaluated companies described their materiality approach. Companies often claimed to have completed a materiality analysis, but the specific assessment process, stakeholder engagement methods, and topic selection logic were absent. This contrasts with the requirements of CSRD's double materiality principle, which mandates that companies disclose not only the results but also the methodological basis of their assessment. This finding highlights the fundamental difference between "claiming it's done" and "explaining how it was done."

Key Finding 3: ESRS Integration Creates Higher Assessment Pressure

By incorporating ESRS topical standards into the scoring framework, the study found that companies performed significantly weaker on the ESRS dimension compared to the GRI dimension. This reflects that the ESRS, introduced by the EU's Corporate Sustainability Reporting Directive (CSRD), indeed demands a higher level of disclosure capability from companies than the current GRI framework, particularly in the details of climate-related financial disclosures, biodiversity, and social issues. For Taiwanese supply chain companies, this signals a potential gap risk when facing audits from EU clients in the future.

Key Implications for Enterprise Risk Management (ERM) Practices in Taiwan

Berg's findings have three direct implications for the establishment of ERM frameworks in Taiwanese companies, which are made more urgent by the push for standardized sustainability information disclosure by Japan's Financial Services Agency in 2024.

First: Sustainability reporting quality is a prerequisite for ERM risk identification. ISO 31000:2018 emphasizes that risk identification must be based on complete and reliable information. If a company's non-financial report only achieves formal compliance without substantive quality, its identified ESG risk inventory will be distorted. The company might underestimate the financial impact of climate transition risks or overlook social responsibility gaps in its supply chain. Under the COSO ERM 2017 framework, this constitutes a fundamental weakness in the "Risk Assessment" component.

Second: Lack of transparency in materiality assessment constitutes a governance risk. Berg's findings show that companies tend to "claim compliance" rather than "explain how they comply." This pattern is also common among listed companies in Taiwan. According to the TWSE's disclosure examples for material topics in sustainability reports, companies should be able to clearly explain their stakeholder engagement process, topic selection criteria, and the logic behind their materiality matrix. The absence of this information creates a systemic gap under the "Communication and Consultation" principle of ISO 31000.

Third: Proactive ESRS integration helps mitigate the risk of losing supply chain orders. If Taiwanese export-oriented companies fail to enhance their ESRS alignment capabilities before 2026, they will be at a disadvantage when facing ESG due diligence from EU clients. The ERM risk matrix should classify "ESRS compliance gap" as a high-probability, high-impact strategic risk, and corresponding Key Risk Indicators (KRIs) should be designed for continuous monitoring.

Winners Consulting Services Helps Taiwanese Companies Integrate Sustainability Reporting Quality with ERM

Winners Consulting Services Co., Ltd. assists Taiwanese companies in implementing ISO 31000 and COSO ERM frameworks, establishing risk matrices and Key Risk Indicators (KRIs), strengthening board-level risk governance, and integrating sustainability reporting quality assessment into the overall corporate risk management mechanism.

1. Non-Financial Reporting Quality Gap Diagnosis (Months 1-2): Based on the "format × content" dual-dimension scoring concept from Berg's study, we conduct a structural quality assessment of the company's current sustainability report. By comparing it against GRI Material Topic Standards and ESRS requirements, we identify disclosure items that are formally compliant but substantively weak, producing a quantitative quality gap report.
2. Materiality Assessment Process Reconstruction and Transparency Enhancement (Months 3-5): In line with the ISO 31000 "Communication and Consultation" principle and COSO ERM's stakeholder management requirements, we redesign the materiality assessment process to establish an auditable document trail, ensuring the methodology can be clearly explained externally. We also link material topics to the risk matrix and set KRI monitoring thresholds.
3. ESRS Alignment Roadmap and KRI Dashboard Implementation (Months 6-12): For the company's most critical ESRS topics (e.g., climate, supply chain, labor conditions), we create an action roadmap to progressively deepen disclosure. Within the ERM framework, we design ESRS compliance progress KRIs to be reported quarterly to the board's risk committee, ensuring the organic integration of sustainability and financial governance.

Frequently Asked Questions

What are the direct implications of the Norwegian non-financial reporting quality study for current sustainability reporting practices in Taiwan?

Berg's (2023) core finding is that formal compliance does not equal substantive quality. While Taiwanese companies generally follow GRI Standards to structure their sustainability reports, there is significant room for improvement in the completeness of quantitative data, transparency of the materiality assessment process, and the specificity of action plans. For listed companies meeting the TWSE's disclosure threshold, report quality that fails to meet the standards of institutional investors or EU supply chain clients will directly impact their cost of capital and order stability. It is recommended that companies use the study's "format × content" dual-dimension quality framework for a structured self-assessment and integrate improvement plans into their annual ERM objectives.

What are the most common compliance challenges for Taiwanese companies when implementing dual GRI and ESRS disclosure?

The three most common challenges are: First, the scope and definition of material topics differ between GRI and ESRS, requiring companies to maintain two separate disclosure logics for the same issue. Second, ESRS demands significantly more quantitative data (e.g., Scope 3 emissions, biodiversity impact) than GRI, and companies often lack the necessary data collection infrastructure. Third, auditable records of stakeholder engagement in the materiality assessment process are commonly absent in Taiwanese corporate practices. According to the ISO 31000 "risk identification" process, these challenges should be listed in the ERM risk inventory with specific improvement milestones. Within the COSO ERM 2017 framework, this represents a systemic gap in the "Risk Assessment" component.

What are the specific requirements of ISO 31000 for non-financial reporting quality management, and what are the implementation steps?

ISO 31000:2018's principles of "Communication and Consultation" (Clause 6.2) and "Monitoring and Review" (Clause 6.6) are directly applicable to a company's ESG information management. The recommended implementation steps are: Months 1-3, conduct a current-state diagnosis, assessing the integration of the existing ERM mechanism with sustainability reporting processes against the eight ISO 31000 principles. Months 4-6, design the integrated mechanism, embedding materiality assessment results into the Risk Register. Months 7-12, establish a KRI monitoring system, setting key risk indicators related to reporting quality for quarterly reports to the governance committee. The entire implementation cycle targets a 12-month timeframe, with parallel validation against the five components of COSO ERM 2017.

How many resources are needed to improve sustainability reporting quality, and what are the expected benefits?

Resource investment varies by company size, but based on industry practice, a mid-sized listed company (500-2,000 employees) typically requires one to two dedicated internal staff members plus external consultant collaboration to enhance GRI and ESRS dual disclosure quality within 12 months. In terms of expected benefits, multiple studies have shown that high-quality sustainability reports can lower the Weighted Average Cost of Capital (WACC) by 0.5 to 1.5 percentage points and improve ESG ratings, broadening the shareholder base to include more ESG-focused funds. For export-oriented companies, it also significantly increases the probability of passing EU supply chain ESG due diligence, directly mitigating the risk of order loss due to compliance gaps.

Why choose Winners Consulting Services for Enterprise Risk Management (ERM) related issues?

Winners Consulting Services Co., Ltd. possesses systematic professional advantages in ERM and sustainability governance for Taiwanese enterprises. We are proficient in multiple international frameworks, including ISO 31000, COSO ERM 2017, GRI, and ESRS, enabling us to help clients meet diverse regulatory requirements within a single, integrated structure to avoid redundant efforts. We provide end-to-end support from gap analysis and mechanism design to KRI dashboard implementation, ensuring tangible results. Crucially, we understand the local context of board governance, information disclosure, and supply chain management for listed companies in Taiwan, offering practical, actionable advice rather than simply transplanting generic templates from Western companies. We commit to establishing an ISO 31000-compliant mechanism within 7 to 12 months.