Mandatory Non-financial Disclosure and Its Influence on CSR: An International Comparison

Abstract

The article examines the effects of non-financial disclosure (NFD) on corporate social responsibility (CSR). We conceptualise trade-offs between two ideal types (government regulation and business self-regulation) in relation to CSR. Whereas self-regulation is associated with greater flexibility for businesses to develop best practices, it can also lead to complacency if firms feel no external pressure to engage with CSR. In contrast, government regulation is associated with greater stringency around minimum standards, but can also result in rigidity owing to a 'one size fits all' approach. Given these potential trade-offs, we ask how mandatory non-financial disclosure has been shaping CSR practices and examine its potential effectiveness as a regulatory instrument. Our analysis of 24 OECD countries using the Asset4 database shows that firms in countries that require non-financial disclosure adopt significantly more CSR activities. However, we also find that NFD regulation does not lead to lower levels of corporate irresponsibility. Furthermore, our analysis demonstrates that, over time, the variation in CSR activities declines as firms adopt increasingly similar practices. Our study thereby contributes to understanding the impact of government regulation on CSR at firm level. We also discuss the limits of mandatory NFD in addressing regulatory trade-offs between stringency and flexibility in the field of corporate social responsibility.

How Do Companies Respond to Environmental, Social and Governance (ESG) ratings? Evidence from Italy

“…This does not mean that ESG ratings are inherently antithetical to ethical business. A case in point: ratings are a potentially important tool which investors can use to shape the behaviour of firms in ways more closely aligned with their own ethical principles (Jackson et al 2019). Ratings can also reveal ethical practice, as evidenced by certain corporations' principled stance not to cynically "play the ratings game", resisting them where they were felt not to positively contribute to addressing important firm-specific sustainability issues.…”

“…Rating agencies typically make their evaluations based on publicly available information (e.g. from mandatory non-financial disclosures), third-party research, firms' sustainability/integrated reports and information on corporate websites (Jackson et al 2019). Some agencies, such as RobecoSAM, send questionnaires to firms, while others provide companies the opportunity to review and comment on profiles before finalising them.…”

Emerging Paradigms of Corporate Social Responsibility, Regulation, and Governance: Introduction to the Thematic Symposium

“…Given only limited exchange and collaboration among academic disciplines and sub-disciplines, and the multidisciplinary nature and the use of CSR as forms of regulation and governance (Wouters et al 2013), forging cross-and multidisciplinary research collaborations can advance the conceptual and theoretical understanding of business ethics and CSR, and contribute to effective conduct, regulation, and governance of corporate and organizational behavior. Graz et al (2019) and Jackson et al (2019) offer useful starting points in understanding how outcomes are linked to institutionally embedded actors and their interactions. Research and theorization on outcomes may require moving beyond CSR as a mode of governance and/or regulation and gaining expertise and inspiration from other fields such as international relations, law, political science, and sociology (Ciepley 2013;Kourula et al 2019).…”

“…This, they argue, depends on the institutionalization of capitallabor relations between the transnational and national levels. Jackson et al (2019) examine the effects of non-financial disclosure on CSR. They conceptualize trade-offs between two ideal types of regulation in relation to CSR.…”

Mandatory Nonfinancial Disclosure and Its Consequences on the Sustainability Reporting Quality of Italian and German Companies

“…Along with the evolution of markets and stakeholders' expectations of companies' performance, some countries have introduced laws to make NFD mandatory, and the debate on SRQ has expanded because of the unavoidable differences between voluntary and mandatory disclosure. Different experiences with legislation worldwide have not clarified whether mandatory NFD improves the quality of nonfinancial statements [5][6][7][8][9]. In addition, the introduction of mandatory reporting has further stimulated the debate on the measurement and metrics of SRQ.…”