1 Introduction

In addition to economic and financial effectiveness, environmental, social and governance issues are playing an increasingly important role in the assessment of the success of companies. Under the Non-Financial Reporting Directive (NFRD, Directive 2014/95/EU) since 2014 companies can report on their sustainability performance in their non-financial reports, which were subject to flexible regulation. The establishment of the European Green Goals, which aims to make Europe a carbon–neutral economy by 2050, has also brought new demands on the content of reporting. These have been reflected in the Corporate Sustainability Reporting Directive (EU) 2022/2464 (CSRD), which came into force on 5 January 2023, in the form of a more detailed reporting obligation for a wider range of corporate actors.

According to the NFRD public-interest entities, companies and parent companies of large groups of companies that are public-interest entities and have more than 500 employees on average have to meet the following requirements: inclusion in the management report of a non-financial statement containing information on environmental, social and employment issues, respect for human rights, the fight against corruption and bribery to the extent necessary for an understanding of the development, performance, position, and impact of the company's activities. The CSRD extends the reporting obligation to a wider range of companies: large companies (whether or not they are of public interest) and small and medium-sized enterprises, excluding micro-enterprises, which are defined as entities of public interest.

The new regulation raises the importance of sustainability reporting to a level equivalent to financial reporting. Stakeholders should include in their management report information necessary to understand the impact of the company on sustainability issues, as well as the content of how sustainability issues affect the development, performance, and position of the company.

Achieving Europe's green goals will require mobilising significant private capital towards sustainable activities. The EU Taxonomy Regulation (EU 2020/852) requires companies to report on how and to what extent their activities are linked to economic activities that are considered environmentally sustainable. The Member States and the European Union need to have a mutual understanding of what constitutes environmentally sustainable investment and to define a single set of criteria to ensure that the same criteria are met in each Member State. The taxonomy regulation establishes a set of criteria for sustainable activities as a critical step in facilitating this process. The regulation lists six environmental objectives to which a substantial contribution is a basic requirement for an activity to be “green”:

  • Climate change mitigation

  • Climate change adaptation

  • The sustainable use and protection of water and marine resources

  • The transition to a circular economy

  • Pollution prevention and control

  • The protection and restoration of biodiversity and ecosystems

The other criterion for sustainable economic activity is that it does not significantly harm (DNSH principle) any of the environmental objectives (Dobránszky-Bartus and Valdemar 2020). In addition to these two criteria, a further requirement for social standards is that the activity is conducted in accordance with the minimum safeguards laid down in the regulation and that this economic activity meets the technical screening criteriaFootnote 1 set by the European Commission (2021). The technical screening criteria are outlined in Commission Delegated Regulation (EU) 2021/2139 and 2023/2486.

An important aspect of the link between EU taxonomy and sustainability reporting is that, under paragraph 8 of the Taxonomy Regulation, companies (which are required to disclose non-financial information) must include information in their reports on how and to what extentFootnote 2 the company's activities are linked to environmentally sustainable economic activities. The information to be disclosed is set out in detail in the Commission Delegated Regulation (EU) 2021/2178. Regarding the content of sustainability reports, CSRD Directive defines in Chapter 6A, Article 29b(2)(a), information that meets the taxonomy objectives as environmental factors to be disclosed as part of sustainability reporting standards.

In regard to the implementation of the CSRD, the 27 EU Member States must transpose the directive into national law no later than 18 months after its entry into force. Companies currently covered by the NFRD will have to apply the new directive from 1 January 2024, with first reporting due from 2025. For large companies not covered by the NFRD, the CSRD will apply from 1 January 2025, with first mandatory reporting in 2026. For listed SMEs and other companies, its application will start from 1 January 2026, with reporting from 2027. However, SMEs will be exempt from the mandatory application of the directive until 2028 if justified.

The Hungarian sustainability legislative process is in line with EU rules (Act C of 2000 on accounting, Act XLIV of 2020 on Climate Protection and the National Clean Development Strategy, Act CVIII of 2023 on ESG). The Hungarian Central Bank (HCB) was the first in the Central and Eastern European region (CEE) to include a commitment to the green transition among its tasks (Act CXXXIX of 2013 on HCB, 3.Sect. 2).Footnote 3 The HCB published its annual series of studies, the green finance reports (GFR 2021), followed by the Green Recommendation and the official green finance website. At the same time the Budapest Stock Exchange published its ESG Guide (2019). The largest commercial bank (OTP) and the official export credit agency (EXIM) have also formulated their sustainable finance framework (SFF 2022; GFF 2023) and these are being continuously improved.

Companies are under increasing pressure to disclosure more and more non-financial information to meet investors’ expectations. The constantly tightening standards for the content of sustainability reports are intended to ensure that consistent and credible information is published, while at the same time this presents companies with increasing challenges. The disclosure of information will influence the perception of the companies’ sustainability performance, which will have an impact on their access to financial resources and on their development opportunities and thus their future competitiveness. The detailed and transparent disclosure of information will also help to reduce the incidence of greenwashing.

The main question is, both in theory and in practice, how companies can meet them in the future. Preparing for the green transition is expected to be reflected in sustainability reporting. Compliance will be easier for those who have already made efforts to operate and report in a more sustainable way.

Investigation of companies’ preparedness fits well with the EU's overall green transition regulatory procedure. A recent EU-wide renowned company study similarly examines sustainability reporting (from corporate readiness perspective) subject to the NFRD in anticipation of the forthcoming CSRD, thus confirming the relevance of our investigated topic (Hostert 2023).

However, several relevant studies were carried out in the topic of sustainability reporting, green finance, and EU Taxonomy in CEE countries (Habek and Wolniak 2016; Dumitru et al. 2017; Habek 2017, 2018; Hoffmann et al. 2018; Arraiano and Hategan 2019; Lippai-Makra and Kovács 2021; Boros et al. 2022; Chmieliński et al., 2022; Holúbek et al. 2023; Lámfalusi et al. 2023; Pókos and Kemény 2023). The sustainability reporting practices of food-processing sector from taxonomy perspectives have not yet been comprehensively studied in CEE and Hungary. Therefore our research is gap filler both at sectoral and macro-regional level. Our research provides feedback to the governmental sector, agri-food stakeholders and experts on the sector's preparedness for mandatory reporting, highlighting the consistency or lack of alignment between theory and practice.

The main aim of our study was therefore to conduct a detailed qualitative content analysis of sustainability documents published on a voluntary online platform in the selected sector, focusing on the relationships between taxonomy objectives and dimensions.

The main research questions are:

  1. 1.

    How to categorise the sustainability documents available online?

  2. 2.

    What level of quality and quantity of information is published by each company on the objectives and dimensions of the taxonomy?

  3. 3.

    How to characterise taxonomy information of the sample companies in terms of size and ownership?

The rest of the article is organized as follows. In Sect. 2 we synthesise the results of relevant publications on the topic, and then the content analysis methods, which are widely used to evaluate sustainability reports. Using the adaptation of the methods of the most relevant studies, we developed a scaling methodology. In Sect. 3 the description of the method is followed by the details of the financial characteristics and sectoral relevance of the sample companies. Section 4 details the results of the taxonomy focused investigations carried out, while Sect. 5 discusses the conclusions, limitations and potential avenues of future research.

2 Literature review

In this Section, we first illustrate the practical implementation of sustainability reporting including the related basic concepts and then we focus on the methodologies of the content analyses of the reports.

2.1 Sustainability reporting in practice

As there is currently no uniform global guidance on corporate sustainability reporting under the NFRD regulatory framework, the prevalence, quality and content of corporate sustainability reporting varies significantly across regions and countries. Companies can rely on a variety of tools when fulfilling their reporting obligations. The detailed overview study by Siew (2015) divided corporate reporting tools into three groups: frameworks, standards, and ratings and indices (Table 1). Frameworks and more formal standards help companies meet their disclosure obligations–they provide them with guidelines, principles, requirements, and standards. Ratings and indices are a third-party assessment of a company's ESG performance. ESG is the environmental, social and governance criteria or framework that is most widely used in the literature to measure sustainable performance. The ESG criteria were first introduced in the Global Compact (2004) and subsequently the UNEP-FI (2005) document, which served as a milestone in the adoption and diffusion of this triple criteria, first in the financial area (Delgado-Ceballos et al. 2023). In the EU regulatory environment, the concepts of sustainability and ESG are largely interchangeable. In the context of ESG assessments, the potential impact on financial profitability, i.e., whether an outstanding ESG performance might jeopardise corporate performance, has often been raised. Consequently, the financial materiality of ESG factors has received increasing attention over the last decade, which has further stimulated the spread of ESG data providers and metrics (van Zanten and Huij 2022). Based on their study, Mervelskemper and Streit (2017) found that the publication of an ESG report, regardless of its type (stand-alone or integrated report), positively affects the evaluation of a company's ESG performance.

Table 1 Sustainability reporting tools from an environmental perspective.
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The Global Reporting Initiative (GRI) is the most widely used reporting framework by companies (KPMG 2020). According to the GRI guidelines, a report should include the following areas: vision and strategy, corporate profile, governance structure and governance systems, GRI content index, and ESG performance criteria. In addition, the GRI Guidelines define materiality as criteria that reflect the company's “significant economic, environmental and social impacts or that would materially influence stakeholder assessments and decisions” (GRI 2011).

Although the flexibility of regulation means that sustainability reporting can vary in form and content, as well as in the reporting framework chosen, there are many commonalities. A comprehensive study by Turzo et al. (2022) aimed to review the different non-financial reporting practices and systematise the literature on content analysis of reports published between 2012 and 2020. The authors summarised the findings on reporting practices by grouping them into eight themes, three of which were found to be relevant to the issues addressed in this paper: content of non-financial reports (red cluster); integrated approach (green cluster); and environmental reports (black cluster).

The findings of Turzo et al. (2022) reflect the position of the majority of the literature, but there are some reference works that go beyond this, or that have expressed a different opinion or have highlighted additional factors that influence the content of the reports. An example of the former is the study by Topp-Becker and Ellis (2017), who agreed on the importance of the environmental dimension, but did not consider it sufficient, arguing that a balance of the three-pronged approach (ESG) should be sought. Gunawan et al. (2022) investigated the sustainability reporting practices of Indonesian companies by separating environmentally sensitive and non-sensitive industries. Their results show that companies in environmentally sensitive sectors disclosed more information than required compared to companies in less environmentally sensitive sectors. More frequent reporting by companies in environmentally sensitive industries is also supported by Székely and vom Brocke's (2017) research based on a text mining technique, which found that most reports came from the financial, energy, mining, and food and beverage sectors. Among the three primary areas studied, the frequency of mentions of terms related to economic sustainability increased sharply, social sustainability remained more or less stable, while the frequency of mentions of environmental sustainability decreased slightly between 1999 and 2015.

Another factor that strongly influences the content of sustainability reports is the size of the company and presence or absence of regulations on reporting. The role of company size in influencing reporting quality was highlighted by Isa (2014), who found that the quantitative content of reports is inversely proportional to the size of the company, with large companies generally publishing less sustainability-related information compared to smaller ones. The research of Atan et al. (2016) and Sierra-Garcia et al. (2018) suggested that reporting requirements have a positive effect on the quantity and quality of information published. Sustainability reports, according to Kang and Kim (2022), are an important source of information for reviewing a company's sustainability strategies and practises; however, metrics must be introduced to effectively measure the content of the reports.

Habek (2014) examined the form, content, and quality of sustainability reports published by Polish companies in 2011. Habek found that few firms produced such reports (32 firms) and that there was no increase in stakeholder expectations, which reduces the frequency of reporting. Based on their survey of Swedish multinational corporations, Arvidsson and Dumay (2022) go beyond mandatory reporting and advocate for the development of a common ESG methodology. To measurably improve not only the quantity and quality of ESG reporting, but also corporate ESG performance, value-relevant, credible, and comparable metrics must be developed. Lippai-Makra and Kovács (2021) in Hungary and Boros et al. (2022) based on Hungarian and other European companies’ sustainability disclosures draw similar conclusions on measurability. According to Lippai-Makra and Kovács (2021), the main challenge in Hungary is to produce and assess data of sufficient quality, which makes it difficult to compare non-financial performance of companies, and they suggest the use of a widely used standard (e.g., GRI) and a uniform format. Boros et al. (2022) argue that a proportion of company reports have only addressed ESG issues at a basic level, and a smaller proportion have reported on specific measures and results achieved, and thus advocate comparability of companies based on ESG indicators.

This theme is closely related to the UN SDGs, which are also reflected in sustainability reporting. According to a survey by Wilburn and Wilburn (2020), the majority of large multinational companies have set specific targets and indicators related to the SDGs. Some companies also had a materiality map showing how the SDGs contribute to the achievement of corporate goals. Delgado-Ceballos et al. (2023) also focused on the SDGs in their combined analysis of company-level sustainability and ESG factors. Their main conclusion is that, although ESG indicators are closely related to financial materiality, there are several examples where they include dual materiality (financial and sustainability) and are thus able to capture the role of the company in achieving the SDGs. However, the authors suggest that a simplification and standardisation of ESGs would be recommended. Studies by Pakkan et al. (2022) in India show that bringing the corporate sector and universities together can greatly improve the effectiveness of SDG target achievement.

As the aforementioned research by Gunawan et al. (2022) shows, the level of regulatory compliance may vary across firms in different sectors. Therefore, it is worth looking at sustainability reporting in each sector separately. There have been a number of studies that have looked at reporting in a particular sector, including the agri-food sector. According to Kozma and Bosnyák-Simon (2021), companies in the food, tobacco, and agriculture sectors in Hungary can be classified into three typical groups based on the sustainability-related documentation they publish: 1. Companies that produce sustainability reports; 2. Companies that publish an annual energy report; 3. Companies that publish environmental information on their websites or in brochures. The previously mentioned study by Topp-Becker and Ellis (2017), which examined the sustainability reports of 66 agricultural companies in the United States, is also sector-focused. Their research concluded that, despite a growing trend, sustainability reporting among agri-food supply chain companies is limited, with about a quarter of them reporting. Among the actors in the product chain, input manufacturers are the most prevalent, followed by processors and then traders. In their study, Ross et al. (2015) provided an overview of the corporate social responsibility (CSR) strategies of fourteen US companies operating in sectors of the US agri-food supply chain. Their study shows that the categories and types of sustainability initiatives can vary significantly between downstream (e.g., retailers and food service providers) and upstream (e.g., input providers and agricultural processors) operators in the supply chain (Table 2). These differences are related to specific sustainability issues experienced at various stages of the value chain. In their research, Toussaint et al. (2022) investigated the implementation of sustainability objectives at various levels of the food supply chain. Their results reveal strong differences at each level, particularly regarding social sustainability.

Table 2 Typical environmental programmes at different levels of the supply chain.
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The types of sustainability initiatives are also influenced by supply-chain relationships in agri-food firms. Processors can contractually impose expectations on suppliers for raw materials using standards and codes (Ross et al. 2015).

Bocken et al. (2020) developed a conceptual framework for a sufficient strategy in the food industry. They identified 15 business strategies to reduce demand and consumption, and thus production–including resource use–and pollution. The 15 potential strategies relate to the top 3 levels of the waste hierarchy: prevention, reduction, and recycling.

According to the position paper of the Food and Drink Europe (FDE) 2020, food and drink companies can combat climate change in seven key areas: using more renewable energy; reducing energy use; reducing food waste; improving product packaging and reducing packaging where possible; optimising water use; working with farmers (e.g., storing carbon in the soil through land restoration, conserving biodiversity, avoiding deforestation); and engaging consumers in healthy and sustainable eating and making the environmental impact of food transparent.

2.2 Methods used in the analysis of sustainability reports

Publications dealing with the analysis of information in sustainability reports typically use content analysis to evaluate documents (Topp-Becker and Ellis 2017; Jindrichkovská et al. 2020; Mion and Adaui 2019; Ross et al. 2015; etc.). Content analysis is, in Berelson's (1952) words, “a research technique for the objective, systematic and quantitative description of the manifest content of communication.” The content analysis technique involves the categorisation of qualitative information and their quantitative evaluation using quantitative scales (Abbott and Monsen 1979; Mion and Adaui 2019).

Several methods are available to measure and assess the qualitative information in sustainability reports, based on the reviewed literature. Depending on the purpose of the study, the authors identify the qualitative factors to be assessed and then evaluate them according to a set of criteria. For some authors, the evaluation covers the presence or absence of the criterion under consideration in the sustainability report–accordingly, a value of 0–1 is assigned (e.g., Atan 2016; Sierra-Garcia et al. 2018; Persic and Halmi 2018; Mion and Adaui 2019; Jindrichkovská et al. 2020) and the resulting quantitative values are used for further methodological and analytical steps (e.g., creating index, statistical analyses).

Another possible method of assessment is the use of scales, which reflect qualitative differences in addition to the presence of the criteria under consideration. An overview of studies that have used scales to assess sustainability reports is provided in Table 3.

Table 3 Review of studies assessing the quality of sustainability reporting–scaling assessment of the evaluation criteria.
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3 Method

3.1 Applied methodology

A scoring method based on the procedures of Habek and Wolniak (2016) and Hoffmann et al. (2018) and the IÖW (2021) methodology developed by Lautermann et al. (2021) was used for the content analysis of the sustainability reports. In accordance with the objectives and dimensions defined in EU Regulation 852/2020, the EU taxonomy-related information in each company's sustainability report was identified according to the order within the Regulation. The reports were then rated according to their quality on a scale of 0 to 3, in line with the standard four-point scale of IÖW (2021) parameters for environmental responsibility. In the current research the four-point scale has been defined in the following way:

0 points: no information;

1 point: only textual information;

2 points: simple numerical value (e.g., numerical value for a given year without comparison);

3 points: numerical values expressing progress–baseline, current year, future target. Complies with Article 1, Part 4.2(b) of the CSRD Regulation.

If a report contained information of varying quality related to a taxonomy dimension, resulting in multiple values, the highest scoring information was used. The maximum number of points that could be assigned to a taxonomy dimension was 3, with a maximum of 6 to 36 points assigned to each objective, depending on the number of dimensions (Table 4). The climate change mitigation objective has a total of eight dimensions (indicated by letters) in the taxonomy regulation; however, as a specific numerical value can be assigned to greenhouse gas emissions, this was assessed as a separate dimension (listed first in the relevant figures without an indication). The same was done for the objective for the transition to a circular economy, as in some sustainability reports the circular economy was mentioned by name, so here too an additional dimension was added, relative to the taxonomy. If a company report had included the highest level of information for each taxonomy dimension, it would have scored 105 points.

Table 4 Maximum scores for EU taxonomy objectives.
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By summing the scores obtained for each dimension and objective, an absolute figure for the food processing sector as a whole was obtained for the analysed 52 companies, and a relative value was calculated in relation to the maximum possible score. The relative scores calculated using the formulae below also made it possible to compare the different dimensions/objectives.

Several rounds of peer review within the research team were used to check the content analysis of the sustainability reports, the identification of taxonomy objectives, and the scoring assessment. Further analysis was possible by grouping companies according to different criteria and forming relative indicators. The grouping criteria were as follows:

  • Company size;

  • Ownership (100 percent domestic or majority foreign).

The relative scores used in the comparisons (which all fell within the 0–1 range) were calculated as follows (relative scores are presented as multiples of 100 for clarity):

\({{\varvec{P}}}_{{\varvec{t}}}:\) relative score of the t taxonomy objective:

$${P}_{t}=\frac{\sum_{i=1}^{52}\sum_{j=1}^{{n}_{t}}{x}_{ij}}{{n}_{t}*3*52}*100$$
$$t\in \left\{1, \dots ,6\right\}$$

\({n}_{t}:\) number of dimensions within the t taxonomy objective, \(\sum_{t=1}^{6}{n}_{t}=35 (\) Table 4).

\({x}_{ij}:\) dimension score per company within the t taxonomy objective,

$${x}_{ij}\in \left\{\mathrm{0,1},\mathrm{2,3}\right\}$$

\(i=1,\dots ,52:\) index of the number of companies.

\(j=1,\dots ,{n}_{t}:\) index of the number of dimensions within the t taxonomy objective.

3.2 The examined group of companies

The analysis was carried out among large food processing companies filing corporate tax returns in Hungary based on 2020 and 2021 financial reporting data series and sustainability documents.

For the research a database compiled by the National Tax and Customs Administration (NTCA) from corporate tax returns for the years 2020 and 2021 was used. In accordance with Article 3 of Directive 2013/34/EU, large companies were selected if any two of the following three indicators exceeded the following thresholdsFootnote 4: total assets of EUR 20 million, annual net revenue of EUR 40 million, and average number of employees in the financial year of 250. Based on this methodology and the 2021 data, a total of 82 companies were included in the group.

Of these 82 companies, based on the public sustainability documents available online, 30 companies with no online published information were found. Consequently, the analysis of the content was carried out on this narrower group of 52 companies. It is important to note that according to the NFRD regulations in force at the time of this paper, Hungarian food processing companies were not obliged to prepare non-financial reports, because they weren’t any companies with more than 500 employees that were of public interest. However, there were 2 Hungarian-based stand-alone companies in the group under review whose securities (shares or bonds) were listed on a stock exchange but their number of employees was below 500, and 9 subsidiaries whose parent company was listed on a stock exchange, in these cases the parent company was obliged to prepare a sustainability report.

The 52 companies represented only 1.2% of the total number of corporations in the sector in 2020 and 1.3% in 2021. However, in both years, the main financial data for the group under review represented a significant share compared to the whole sector (Fig. 1). The ratio of total net revenue, net profit, and foreign registered capital exceeded 50% in both years, the ratio of total assets reached 50% in 2021, and the ratio of equity and registered capital was 42% and 45% in both years. The ratios also reflected the strong financial concentration in the sector as a whole. Of the 52 companies, 30 were majority foreign-owned.

Fig. 1
figure 1

Source: own compilation of the authors based on NTCA database

Share of the main financial characteristics of the selected companies in relation to the whole sector (2020–2021).

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4 Results

Of the 52 food processors surveyed, only one third (16) of the sustainability reports were found to be stand-alone documents (ranging from 13 to 262 pages in length), and the information contained in them was detailed. Eight of these reports were prepared by the international parent company with a global approach, while another eight reports were specifically limited to sustainability issues of Hungarian companies (in some cases subsidiaries). Of the eight parent companies that produced sustainability reports, five were listed on international stock exchanges, i.e., reporting (NFR) is mandatory for them. Most of the reports examined (12) complied with the GRI framework and the same number of documents indicated their activities towards the SDGs in the relevant areas of the report. The number of ESG reports was only six, the TCFD (Task Force on Climate-related Financial Disclosures) methodology was followed by five companies and the SASB (Sustainability Accounting Standards Board) reporting standard by four. The use of the latter framework is limited to companies with an international parent company.

A separate sustainability report was prepared by one other company, but its length (4 pages) and the quantity and quality of the information it contains can be considered a simplified sustainability report (Fig. 2).

Fig. 2
figure 2

Source: own compilation of the authors

Type of sustainability reports investigated.

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Many food processing companies in Hungary do not produce a sustainability report, but instead publish other sustainability-related documents, such as a corporate social responsibility statement, a supplier code of conduct, a sustainability and shared value summary, and an environmental and quality policy. A distinction could also be made between these documents, whether they were short (1–2 pages) and did not contain figures, or whether they were comprehensive and detailed, containing quantitative information. The former criteria were met by 6 documents and the latter by 8. The energy expert report was not included as a stand-alone document because, although this type of report also contains sustainability information, it is mandatory to produce a report above a certain energy consumption.Footnote 5 Out of the 52 companies examined, only 6 had an energy expert report.

Of the companies surveyed, 15 did not produce a stand-alone report on their sustainability performance but reported on their sustainability efforts on their websites. Based on the information provided, it was also possible to distinguish between them according to the quality of the documents. Most companies (13) published more general, descriptive quality information, while 2 had a website with detailed figures.

Reporting on sustainability performance is slightly more common among foreign-owned companies than among Hungarian-owned. This is reflected in the fact that almost two thirds of the 30 companies (19 companies) that do not provide any form of sustainability information are Hungarian-owned, while the majority of the 52 companies (30 companies) that do provide some forms of disclosure are foreign-owned. Furthermore, 13 of the 16 companies reporting in the highest level of disclosure, i.e., detailed sustainability reporting, are foreign-owned (Table 5).

Table 5 Type of sustainability reports according to ownership and company size.
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Less clearly, but a similar pattern emerges by the size of the companies. Among the companies with more than 500 employees, the proportion of companies providing a detailed sustainability report (43.8%) exceeded the proportion of all surveyed companies (35.4%), and among the companies that did not provide a detailed sustainability report (30 plants), only eight had more than 500 employees.

4.1 Assessment of the reporting companies

For the 52 companies of the 6 taxonomic objectives examined, mitigation of climate change had the highest relative score (15.1), followed by sustainable use and protection of water and marine resources (12.2), and then the transition to a circular economy objective (10.4). The other objectives had much lower relative scores (Fig. 3).

Fig. 3
figure 3

Source: own compilation of the authors

Relative scores of taxonomy objectives.

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The individual taxonomy objectives or dimensions are not equally relevant in the food processing sector. For example, the dimensions of the protection and restoration of biodiversity and ecosystems objective are typically found in scope 3 areas,Footnote 6 i.e., at the level of the food industry suppliers, the farmers. The dimensions of the objective adaptation to climate change are also more relevant for scope 3 areas and, due to the nature of the activity, are less likely to occur in scope 1 areas (which is the processing company itself) but are highly relevant for agricultural companies. However, a food company with a strong focus on sustainability has a value chain approach and can take sustainability into account when choosing its partners or influencing them, for example through contractual conditions.

When analysing the dimensions of the objectives with the highest relative values, the following results are obtained. Within climate change mitigation, reduction of GHG emissions received the highest score (46.8), indicating that some companies, even if they do not mention a specific measure, consider GHG emissions reduction to be important. This was followed by (b) improving energy efficiency (41.7), and the third highest score (22.4) went to (a) use of renewable energy. The other dimensions received much lower scores (Fig. 4).

Fig. 4
figure 4

Source: own compilation of the authors (taxonomy dimension names are shortened based on 852/2020 EU Regulation)

Relative scores of the dimensions of the climate change mitigation objective.

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Within the area of sustainable use and protection of water and marine resources, the most prominent dimension is (c) improving water management and efficiency, with a relative score of 32.7. (b) Protecting the environment from the harmful effects of industrial effluents also appears among the actions taken by companies with 14.7 points. (d) Ensuring the sustainable use of marine ecosystem services (1.3) is not a relevant factor for Hungarian companies but may be a relevant factor for parent companies of multinationals. There were no measures on the dimension of (b) protecting human health from the adverse effects of contamination of water intended for human consumption among the companies surveyed (Fig. 5).

Fig. 5
figure 5

Source: own compilation of the authors (taxonomy dimension names are shortened based on 852/2020 EU Regulation)

Relative scores of the dimensions of the sustainable use and protection of water and marine resources objective.

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The highest scores in the circular economy transition objective were achieved in (f) increases the use of secondary raw materials (25.6) and (a) efficient use of natural resources (22.4) dimensions, but companies also pay attention to waste management. (h) waste reuse and recycling scored 19.2, (g) waste prevention or reduction 18.6 and (j) minimises the incineration of waste and avoids the disposal of waste 12.2 out of the maximum possible points. (b) Increases the durability of products and (e) prolongs the use of products dimensions did not appear as measures among the companies surveyed, presumably because these measures are less meaningful in the food industry due to the perishable nature of food products (Fig. 6).

Fig. 6
figure 6

Source: own compilation of the authors (taxonomy dimension names are shortened based on 852/2020 EU Regulation)

The relative scores of the dimensions of the transition to a circular economy objective.

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In the analysis of the quality of the sustainability reports, the highest possible score for each taxonomy dimension was 3, with numerical values for progress–baseline, current year, future target–also indicated, thus complying with Article 1, Part 4.2 (b) of the CSRD Regulation. In this paper, the number of companies whose sustainability reports include information with the highest score was examined.

For a total of 21 companies, there were taxonomy dimensions for which information with a level of detail corresponding to 3 was included in the sustainability report. One company had the highest score for 18 out of 35 taxonomy dimensions. This company is a multinational company with a long-term contractual relationship with suppliers, and therefore provided scores for scopes 1 and 3 in the sustainability report. The other companies provided information of a quality equivalent to a score of 3 for up to half of the dimensions (Fig. 7).

Fig. 7
figure 7

Source: own compilation of the authors

Number of dimensions evaluated for maximum score and number of relevant companies providing the environmental performance.

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The dimensions of climate change mitigation (35 cases) and transition to a circular economy (32 cases) were the taxonomy objectives where the quality of the information provided had the highest scoring. Within the climate change mitigation objective, the provision of specific figures on GHG emissions and their reduction was the most typical and the explanation of the actions taken to achieve this was the least typical; this dimension was therefore the most frequently scored (15 times) with a score of 3. The quality of information rated 3 was more evenly distributed among the dimensions of the objective of the transition to a circular economy. Sustainable use and protection of water and marine resources had the highest score 12 times. For the other dimensions, the highest quality of information was less frequent: 6 for biodiversity and ecosystem protection and restoration, 3 for pollution prevention and control, and 2 for climate change adaptation.

4.2 Assessment by size of companies

Of the 52 reporting companies, 21 had more than 500 employees and 31 had fewer than 500 employees. In terms of relative numbers, companies with more than 500 employees in all six objectives had a higher proportion of employees than those with fewer employees, meaning that the taxonomy objectives are more prominent in their sustainability reports than the former. The order of importance of the objectives is similar for both company sizes (Fig. 8).

Fig. 8
figure 8

Source: own compilation of the authors

The relative scores of taxonomy objectives according to company size categories.

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For companies with over 500 employees, the highest relative value is for climate change mitigation (17.6). The most important of these are the reducing greenhouse gas emissions and (b) improving energy efficiency (which reached almost half of the maximum), and (a) renewable energy production, transport, storage, distribution or (f) use and strengthening carbon sinks (the latter two reached one fifth of the maximum). Climate change mitigation is followed by the transition to a circular economy (15.1). Additionally, the dimensions of (f) increases the use of secondary raw materials (41.3); (a) more efficient use of natural resources (31.7); (h) waste reuse and recycling (30.2); and (g) waste prevention or reduction (27.0) are worth mentioning. The sustainable use and protection of water and marine resources (14.7) is only marginally behind the objective of transition to a circular economy, with the latter most affected by the dimensions of (c) improving water management and efficiency and (a) protecting the environment from the harmful effects of urban and industrial wastewater discharges. The remaining three objectives of the taxonomy are less important than the previous three, with biodiversity and ecosystem protection at 8.7, pollution prevention and control at 7.5, and adaptation to climate change at only 4.8. Among the dimensions within the biodiversity protection objective, (b) sustainable land use and management is the most prominent (16.0), while among the dimensions of the other objectives there are no outstanding areas in terms of the content of the sustainability reports.

For companies with fewer than 500 employees, only the order of the objectives ranked 2nd and 3rd is reversed compared to the previous sizes. Accordingly, the order and scores of the taxonomy objectives in the sustainability reports of companies with less than 500 employees are as follows: mitigating climate change (13.4); sustainable use and protection of water and marine resources (10.5); transition to a circular economy (7.2); biodiversity and ecosystem protection (3.2); pollution prevention and control (1.3); and adaptation to climate change (1.1). Therefore, it can be seen that the latter three are also of lower importance in the sustainability reports of smaller companies. The weight of the dimensions within the objectives is very similar for the two sizes of companies.

4.3 Assessment by property (including size)

Of the 52 reporting companies in the sample, 22 (42.3%) are Hungarian and 30 (57.7%) are majority foreign-owned. In terms of company size, those employing more than 500 persons are almost equally split between Hungarian and foreign ownership (with a slight Hungarian predominance), while foreign ownership clearly dominates in the case of those employing fewer than 500 persons, with one and a half times more foreign ownership than Hungarian ownership.

In terms of relative numbers, (majority) foreign-owned companies scored much higher than Hungarian companies in all six objectives, so the taxonomy objectives are much more prominent in their sustainability reports than the former. The order of importance of the objectives by ownership type is as follows: for foreign-owned companies, the highest score is for climate change mitigation (20.2) (Fig. 9). The most important of these are greenhouse gas emissions and (b) improving energy efficiency (the former scoring more than half of the maximum score, the latter slightly less than half), followed by (a) production, transport, storage or use of renewable energy (just over a third of the maximum score) and (f) strengthening carbon sinks (with a fifth of the maximum score), with the other dimensions scoring little or no priority. Climate change mitigation is followed by sustainable use and protection of water and marine resources (17.2), with two notable dimensions: (c) improving water management and efficiency (with almost half of the maximum score) and (a) protecting the environment from the harmful effects of urban and industrial wastewater discharges (with one fifth of the maximum score). The objective of the transition to a circular economy is also in the lead (14.1), the latter is the most prominent with over a third of the points awarded for (f) increasing the use of secondary raw materials and almost a third for (a) the efficient use of natural resources, while the dimension (g) to prevent or reduce waste generation scored around a quarter of the points awarded. In fourth place is biodiversity and ecosystem protection and restoration with a score of 9.4, while (b) sustainable land use and management is the only dimension to score a noteworthy 16.7. The remaining two objectives of the taxonomy are less prominent than the previous ones: preventing and controlling pollution (5.0) and adapting to climate change (4.4).

Fig. 9
figure 9

Source: own compilation of the authors

The relative scores of taxonomy objectives according to company size and ownership.

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Hungarian owned companies have a much lower penetration rate and coverage of taxonomy objectives compared to foreign owned companies. Accordingly, the ranking and scores of taxonomy objectives in the sustainability reports of Hungarian companies are as follows: mitigating climate change (8.1), with the dimensions of (b) improving energy efficiency and greenhouse gas emissions being the most prominent, as is the case for foreign-owned companies; sustainable use and protection of water and marine resources is in a dead heat with the objective of transition to a circular economy (5.3); pollution prevention and control (2.3) is in fourth place; while climate change adaptation and biodiversity and ecosystem protection score practically zero. It can therefore be concluded that the latter two objectives, which are essentially scope 3, are not included at all in the sustainability reports of Hungarian companies, reflecting the lack of cooperation within the value chain.

5 Conclusions

Non-financial reporting practices among food processing companies in Hungary meet the current requirements, but to meet the more stringent requirements of the future, greater emphasis will need to be placed on the preparation of reports and credibility of the content they contain. The majority of the sustainability reports (detailed and simplified) examined were prepared according to the GRI framework, in line with global trends (KPMG 2020), where this has also been found to be the most common. In addition, the presentation of efforts to meet the UN SDGs was also found to be common, but the ESG triple bottom line approach was used by just over 10% of the companies surveyed. The quality of sustainability documents and the use of the frameworks also clearly indicate that foreign-owned companies place more emphasis on reporting. However, a positive result in the direction of the CSRD is that there is also a tendency among solely Hungarian-owned companies to formulate sustainability objectives and to prepare non-financial reports. Within the first three categories of reporting quality (detailed and simplified sustainability reporting, other detailed document), a quarter of companies are Hungarian-owned. It would be logical to assume that among Hungarian-owned companies, those with a good financial performance, including high net profit, low indebtedness, and therefore sufficient capital strength–companies that can afford to employ a sustainability department or specialist–will produce a high-quality sustainability report. However, it can be shown that there are Hungarian-owned companies in the sample that are not profitable and do not have high capital strength, but still present detailed sustainability objectives, activities, and other detailed non-financial documents. Thus, it can be concluded that there is an existing and relevant market situation where a company, because of its own responsibility or as a means to survive in the market or to improve its competitive position, considers the integration of sustainability into its corporate processes and its communication to stakeholders as a possible means to improve its competitive position.

The qualitative and quantitative assessment of the published data and information in the taxonomy areas also showed a greater commitment to sustainability by foreign-owned companies, which scored significantly higher than their Hungarian-owned counterparts in all six objectives. Climate change mitigation, including greenhouse gas emissions, and (b) energy efficiency improvement emerged as the most important objectives for both types of ownership. In both cases, this was followed by the transition to a circular economy and the sustainable use and protection of water and marine resources, although these tend to be more important for foreign-owned companies. For the remaining three taxonomy objectives, they appear less prominently for both types of ownership, particularly for Hungarian-owned companies, where climate change adaptation and biodiversity and ecosystem protection and restoration do not feature at all.

In terms of size, larger food companies, i.e., those employing more than 500 people, have a higher proportion of taxonomic objectives in their sustainability reports than those with fewer employees. However, there is minimal difference in the order of importance of objectives between the two size categories. Climate change mitigation, with greenhouse gas emissions and (b) energy efficiency improvements as the most important dimensions, is the most important objective for both types of companies. This is followed by the transition to a circular economy for larger companies in terms of employment and sustainable use and protection of water and marine resources for smaller companies. For both types of companies, the key issues related to the transition to a circular economy are (f) use of secondary raw materials and waste management. Overall, in terms of the sustainability information provided by the two groups of companies, the larger companies, i.e., those with more than 500 employees, have an advantage, as they provide more (more and/or better quality) information than their multi-company counterparts with less than 500 employees, despite their smaller size. This also implies that the role of size in influencing the quality of reporting was the opposite in the case of Hungarian food processors compared to the experience of Isa (2014), who found that smaller companies disclosed relatively more sustainability-related information.

Generally speaking, companies scored a relatively low proportion of the total points available, both overall and by taxonomy. This can be explained, on the one hand, by the fact that the criteria for mandatory non-financial reporting were not met by Hungarian food processors at the time of the survey and, on the other hand, by the fact that the taxonomy regulation is not specific to the food industry. There are objectives or their dimensions that are not directly relevant to the food processing company's activities but are relevant for the rest of the food chain (e.g., the protection and restoration of biodiversity and ecosystem, (e) storage of CO2 in soil, (g) enhancement of carbon sinks). The way forward for making food production sustainable is to adopt a food chain approach, which food processors can achieve by working closely with farmers and by setting expectations for their partners (e.g., contract terms, use of standards, compliance with codes) (Ross et al. 2015). When preparing sustainability reports, it is therefore worthwhile for companies to address not only scope 1, but also scope 2 and 3. However, there are also activities that contribute to sustainable food production (FDE 2020; Bocken et al. 2020) and are included in sustainability reporting but not in the taxonomy objectives, such as raising consumer awareness towards sustainable consumption and product innovations towards healthy and sustainable diets. These efforts by manufacturing companies are not yet visible in taxonomy assessment.

The novelty of the study lies in the fact that the sustainability reports of the Hungarian food industry sector have not yet been examined using content analysis with a scoring method from a taxonomy perspective, but it is important to emphasise the limitation of the research. There was no feedback from the companies investigated, the content analysis is based only on reports available online. Consequently the research can be developed methodologically.

The examination can be extended geographically as well, as it provides a basis for similar investigation in the CEE region, the EU region or another continent (Ndue and Goda 2022).

As the sustainability reporting process and the amount of the information it contains will be significantly strengthened by the CSRD, consequently it is worthwhile to continue to carry out follow-up studies in the future. This article could be a reasonable basis for these examinations. For the purpose of conducting a longitudinal analysis, our investigation serves as a good benchmark, because the companies in the selected group meet the requirements defined under the CSRD rules, even if the number of companies will increase. Our research and potential follow-up studies would have an impact not only on food processing companies, but also on all stakeholders of the food chain (experts, financiers, consumers, policymakers) in improving green awareness.

The results and conclusions are relevant for governance and policy, or in practical terms, they provide important feedback on the sector's preparedness for mandatory reporting, highlighting the consistency or the lack of alignment between theory and practice. Based on this, it is worth helping food companies with the interpretation of the legislation and meeting sustainability targets through practical and understandable communication and tools.