Ensuring More Sustainable Reporting in Europe Using Non-Financial Disclosure—De Facto and De Jure Evidence

Abstract

Non-financial disclosure has become increasingly popular, as it can satisfy the information needs of a growing range of stakeholders. Because traditional financial reports cannot provide comprehensive accountability, several frameworks and guidelines for facilitating non-financial information disclosure have been developed. Recently, the European Union issued Directive 2014/95/EU (EU Directive) and subsequent guidelines (EU Guidelines 2017/C215/01 [EUG]) to mandate European entities of public interest to convey non-financial information to improve such organizations' accountability toward their stakeholders. This paper studies the European stage of non-financial reporting from a regulatory and practical point of view. To this end, the first research objective is to analyze the elements that the EUG have in common with the IIRF and the GRI 4 guidelines. Second, the paper proposes a first analysis to assess the compliance to the EUG by performing a content analysis on a sample of annual reports and integrated reports (IR) drafted by the 50 biggest European companies. The results highlight that the content elements required by the Directive exceed the requirements of the two frameworks and that there is already a high level of compliance by European big companies with the EUG. More specifically, particular attention is devoted to Social, Employee and Environmental Matters. Accordingly, the companies demonstrated a common awareness of the necessity to provide an exhaustive amount of social and environmental disclosure in order to maintain legitimacy. Also the disclosure on Principal Risks and Their Management is widespread to meet investors' and stakeholders' requirements in recent years with respect to the general level of risk disclosure provided by companies.

Encompassing Non-Financial Reporting in A Coercive Framework for Enhancing Social Responsibility: Romanian Listed Companies’ Case

“…This type of analysis was often used in prior studies focused on similar topics as environmental and social reporting (Giannarakis, 2014;Ali et al, 2017). In this vein, we conducted the analysis according to the checklist proposed by Manes et al (2018) based on the requirements included in the European Union Guidelines 2017/C215/01 (hereafter EUG). Therefore, we used a dichotomous approach to quantify the information by attributing scores of "1" for the presence of the required element and "0" in case of absence (Venturelli et al, 2017;Gușe et al, 2016;Galant and Cerne, 2017).…”

“…Thus, most researchers conducted an ex-ante analysis of the non-financial reporting and its determinants (Carini et al, 2018;Szadziewska et al, 2018;Dumitru et al, 2017;Galant and Cerne, 2017), while there are few ex-post evidences (Sierra-Garcia et al, 2018;Venturelli et al, 2017;Matuszak and Rozanska, 2017). For example, the quality of CSR disclosure in Polish-listed Companies in the light of EUD requirements (Matuszak and Rozanska, 2017), the compliance to the EU Guidelines 2017/C215/01 with the IIRF and the GRI 4 guidelines on the European companies (Manes-Rossi et al, 2018), the level of non-financial and diversity disclosure and the transposition of the EUD into Italian law (Venturelli et al, 2017) or the level of completeness of NFI and the expected impact of the EUD in oil and gas sector (Carini et al, 2018) and the clarity of reports published by organizations (containing elements related to bioeconomy) in Europe (Avram et al, 2018).…”

“…In this sense, we found different reporting behaviours, revealing dissimilarities with other studies focused on the European level, as well as inconsistencies with other countries' behaviour concerning the non-financial reporting required by the EUD. Romanian companies disclosed in 2016 more information regarding Board Diversity Disclosure and Business Model in comparison with the European organizations, but disclosed on average less information for the rest of the analysed categories(Manes-Rossi et al, 2018). Moreover, Romanian companies reached higher disclosure level for Principal Risks and Their Management and Board Diversity Disclosure than the Italian ones, but lower results for the Key Performance Indicators and Policies and Due Diligence(Venturelli et al, 2017).…”

Is Sustainability Reporting a Business Strategy for Firm’s Growth? Empirical Study on the Romanian Capital Market

“…Reporting information regarding sustainable development became a means by which major companies could show their concern for increasing the transparency of the activities they conduct and for promoting corporate responsibility [3,4]. As part of a social contract promoted by legitimacy theory [5][6][7], companies respond to society pressures using sustainable reporting as a tool for confirming the socially responsible behavior mandated by the external environment in which they conduct their activity [8]. In accordance with the voluntary disclosure theory, companies also perceive the instrumental role of presenting social responsibility information in increasing economic performances [9][10][11][12] and submit such data to improve their image and reduce the negative effect of their own activities.…”

Does Structural Capital Affect SDGs Risk-Related Disclosure Quality? An Empirical Investigation of Italian Large Listed Companies

“…As for the relationship between the EU directive and GRI standards, it can be affirmed that both consider the disclosure of NFI separately from financial information, and both are stakeholder-oriented. Conversely, the GRI framework appears to be more demanding than the EU directive, containing a long list of requirements that preparers have to fulfil [22].…”