The movement for corporate sustainability reporting (SR) came into the spotlight in the middle of the 1990s when the South African first king code of corporate governance, widely known as the “King I” report, was published (Dumay et al. 2016; Gleeson-White 2014)1. The stakeholder notion grabbed quick attention in the business world for its durable business growth without compromising stakeholders’ interests. Later, in 2002, the King II report introduced the concept of integrated reporting as a means of non-financial reporting in addition to financial reporting. This integrated reporting underpinned frameworks, such as the current Global Reporting Initiative (GRI), the Sustainability Accounting Standard Board (SASB), and the triple bottom line (Dumay et al. 2016; Gleeson-White 2014). Since then, organisations have been progressively motivated to report in line with such standards.

The SR aims to increase transparency in companies and their contribution to sustainable development (Elkington 1997; Herzig and Schaltegger 2006; Traxler et al. 2020). However, there are many reasons beyond transparency, pointing to the demands of the sustainability report, such as performance improvement, legitimacy, accountability, control, and stakeholder management (WBCSD 2015; Maas et al. 2016a, 2016b; Gond et al. 2012; Joseph 2012; Nigri and Del Baldo 2018). Direct and indirect pressure from stakeholders has sped up the disclosure process (Gleeson-White 2014; Jollands et al. 2018). For the sake of protecting shareholders and other stakeholders’ interests, the European Parliament issued the directive (European Union Directive 2104/95) on non-financial disclosure and diversity (La Torre et al. 2018). This new regulation requires larger companies with more than 500 employees and public interest entities to produce annual corporate reports with information on their social, environmental, human rights and anti-corruption policy, risks, and performance (European Union 2014). Thus, now many European countries, such as Sweden, Denmark, and Germany (Hoffmann et al. 2018), amend their voluntary disclosure, turning to higher degrees of mandatory disclosure.

There is a growing recognition that contribution to sustainable development requires organisations to embed considerations of the triple bottom line or ESG along with financial considerations into their managerial decision-making and organisational control process (Bonacchi and Rinaldi 2007; Perego and Hartmann 2009; Rahi et al. 2022b). Meanwhile, accounting scholars diverge in their opinions on whether SR and management control systems (MCS)2 should or should not be mixed into the same frameworks and clearly reflected in the sustainability report. Some scholars argue that SR is a mirror of managerial decision-making and control processes (Biswas and O’Grady 2016). In line with this, they provide frameworks of sustainability reporting management control systems (SRMCS) for bridging the relationship between them (i.e., Laughlin 1991; Morioka and de Carvalho 2016; Traxler et al. 2020; Tilt 2006). Researchers even warn of the risk of greenwashing if sustainability data solely is integrated into sustainability reports but not embedded in companies’ internal decision-making (Gray and Milne 2004; Milne and Gray 2013; Traxler et al. 2020). In contrast, other scholars see the links between SR and MCS as dangerous, risking direct management focus apart from the sustainability practice involving internal decision and management control processes (Bebbington et al. 2007; Riccaboni and Leone 2010; Maas et al. 2016b).

Despite the mixed scholarly views on the integration of sustainability reporting and management control, as well as how it spills over into companies’ sustainability practices, (i.e., what companies do and how they work), there is a growing consensus that SR should reflect the managerial motivations and attitudes within the company, as they respond directly to stakeholders’ demands. The development of sustainability reporting may, in line with this reasoning, be orientated towards improving sustainability practice in terms of management decision-making and work processes. Producing extensive sustainability reports may be considered inconsistent, with companies thereby claiming accountability and transparency while not linking sustainability to the company’s sustainability practice and MCS. Researchers see the effective implementation of successful sustainability strategies as requiring comprehensive MCS to ensure integration of sustainability into an organisation’s core operations and to push it towards transparency, performance improvement, legitimacy, accountability, control, and stakeholder management together (Epstein 1996; Epstein and Wisner 2005; Gond et al. 2012; Moon et al. 2011). In addition, empirical studies further identified that there is a clear linkage between sustainability reporting and financial performance (Oncioiu et al. 2020; Jones et al. 2007), and a proper contract of executive compensation helps in this regard (Al-Shaer and Zaman 2019). This means that sustainability reporting, employee motivation, financial performance, and stakeholder prosperity are endogenously and exogenously related to each other. There is a growing number of literature reviews focusing on sustainability and MCS separately. Their primary focus is performance management (i.e., Morioka and de Carvalho 2016) or MCS for sustainable development in general (i.e., Lueg and Radlach 2016), while neglecting the linkage between SR and MCS. A recent systematic review by Traxler et al. (2020) limits the review to a specific management control (MC) framework known as the Malmi–Brown framework.

2. Conceptual Background of SR and MCS and Their Relationships

2.1. Sustainability Reporting (SR)

2.2. Management Control Systems (MCS)