Squaring Disclosure Regulation and Competitiveness
HEC Paris Policy Paper 1
October 2025
Could Europe achieve its sustainability goals without undermining competitiveness? In this policy paper, HEC Paris set out one way: shifting disclosure rules from companies to products. A fundamental redesign, centred on product scorecards, could reconcile competitiveness with environmental and social ambitions. Done properly, it would enable the EU not just to defend its standards but to project them globally.
Executive Summary
Sustainability disclosure regulation faces growing scrutiny in the EU and beyond, with the Draghi Report’s concerns about its impact on competitiveness, deregulatory trends in the US and ideological resistance within the EU all sharpening the debate.
Within this landscape, the Corporate Sustainability Reporting Directive (CSRD) faces two main critiques, which are also levelled against the Corporate Sustainability Due Diligence Directive (CSDDD). First, they are claimed to put EU firms at a competitive disadvantage relative to some non-EU rivals. Second, they are portrayed as administratively burdensome, with implementation proving complex and costly.
These criticisms do not challenge the objectives of EU sustainability regulation, which remain widely supported by citizens and firms. Instead, they question whether the regulatory design adopted serves these goals efficiently, prompting an open-minded appraisal of alternatives.
This report recommends a new addition to the regulatory toolkit: smart product-level sustainability disclosure. Leveraging the potential of product-level (rather than firm-level) reporting, it involves digital, standardised scorecards for each product. These scorecards present objective, concise, comparable indicators—typically quantitative or categorical rather than narrative—on the key sustainability domains covered in the CSRD.
Scorecards can be completed for any product, whether produced in the EU or not. Moreover, they are openly accessible from anywhere in the world, hence providing direct access to sustainability performance at a global level. The data management architecture builds on the EU Digital Product Passport, though the recommendation goes further.
Product-level disclosure addresses competitiveness concerns directly. Since it applies uniformly to all products, it is free from regulatory asymmetries and provides a level playing field.
With an eye to the administrative challenges, the report recommends incorporating two smart features: distributed reporting and propagated transparency.
Distributed reporting. Each firm need only collect data on its own operations (e.g. its direct CO2 emissions); upstream values (e.g. embedded emissions) are drawn from the scorecards of supplied inputs. These sources are combined according to standardised, regulator-defined rules to generate the indicators on the firm’s product scorecards. This modular approach follows standard accounting logic and can be integrated into existing systems. Such automated integration provides Scope 3 information while containing reporting costs and firms' tracing responsibilities.
Propagated transparency. Missing data is addressed transparently: they are flagged and substituted with default best- and worst-in-class intervals. These ranges are propagated forward through the supply chain, alerting users to gaps. All products thus receive scorecards, completed with default intervals when firms do not participate. This keeps the initial reporting cost to a minimum.
Product scorecards can support policymaking by providing a foundation for the design and enforcement of regulations. They can inform consumers by supplying the raw material for recommendation systems or product labels, whilst avoiding the controversies that have surrounded the latter. They can guide investors with granular insights into firms’ environmental and social profiles, and how these evolve over time.
Through such channels, interval-based information design provides incentives for firms to disclose data and improve performance, even without additional regulation. Indeed, behavioural evidence shows how many of these users are sensitive to products' sustainability characteristics, and how they respond to uncertainty and missing data. It suggests that the smart product-level disclosure design will encourage firms to report and improve their sustainability performance. Not reporting comes at the risk of reputational loss to firms, as non-disclosure itself becomes a negative signal.
Importantly, this incentive mechanism extends beyond EU borders. EU firms can leverage their disclosure efforts in international markets, where transparent reporting and sustainability credentials may offer reputational and strategic advantages. It promotes EU sustainability values globally, providing stakeholders worldwide with the means to engage with and incorporate them.
This paper outlines and analyses the key features of smart product-level disclosure in relation to current regulatory debates, informed by relevant scientific research. While various approaches exist for blending such disclosure into existing regulatory frameworks or their revisions, this paper does not take a position on this issue.
Lead Author
Brian Hill, Research Director at the French National Centre for Scientific Research (CNRS) and Professor in the Economics & Decision Sciences Department at HEC Paris. He is also Academic Director of the S&O Inclusive Economy Center. His current projects examine rational responses to severe uncertainty, with applications to issues like environmental policy and science communication, and explore consumer pro-social attitudes — especially how information about products’ social credentials shapes purchasing decisions and can be leveraged to address social injustices.
Author Team
Rodolphe Durand, Professor in the Strategy & Business Policy department at HEC Paris, Founder of the Sustainability & Organizations Institute and Academic Director of the Purpose Center
Jinhong Eom, HEC Paris Student in the Master in Management
Marieke Huysentruyt, Associate Professor in the Strategy & Business Policy department at HEC Paris. Academic Director of the Sustainability & Organizations Institute and the Impact Company Lab
Stefano Lovo, Professor in the Finance department at HEC Paris and Academic Director of the Center for Impact Finance Research
Leandro Nardi, Assistant Professor in the Strategy & Business Policy department at HEC Paris
Crystal Shi, Assistant Professor in the Accounting and Management Control department at HEC Paris