The effect of the Corporate Sustainability Reporting Directive on the formulation of emission reduction targets in European annual reports

Abstract

This thesis looks at how the CSRD has shaped the way European companies talk about their emission reduction targets in annual reports. Using natural language processing methods like BERT text embeddings, dimensionality reduction, and word frequency analysis, the study explores whether companies’ language has changed since the CSRD came into effect. The findings show that even though the overall structure and tone of the reports have not changed much, companies are using clearer and more consistent language. Terms like 'scope 1' and 'netzero' are showing up more often, suggesting that firms are starting to bring their reporting in line with the CSRD’s focus on transparency. The classification models were able to show these shifts with moderate accuracy, which means that the changes are visible but still happening gradually. Overall, the study shows that natural language processing is a useful way to track how corporate reporting is evolving and it offers insights for policymakers and others who want to improve the quality and reliability of climate-related disclosures.