Why “Less is More” in Non-Financial Reporting Initiatives: Concrete Steps Towards Supporting Sustainability

Abstract

Calls are repeatedly made on corporations to respond to the challenges facing the planet from a sustainable development perspective and governments take solace in the idea that corporations' transparency on their corporate activity in relation to sustainability through voluntary reporting is adequately addressing the problem. In practice, however, reporting is failing to deliver truly sustainable results. The article considers the following questions: how does the varied reporting landscape in the field of non-financial reporting impede the objectives of fostering corporations' sustainable practices and which initiative, among the options available, may best meet the sustainability objectives after a decluttering of the landscape takes place?The article argues that the varied corporate reporting landscape constitutes a key obstacle to fostering sustainable corporate behaviour, insofar as the flexible and please all approach followed in the context of corporate sustainability reporting offers little to no real incentive to companies to behave more sustainably and ultimately pleases none in the long run. The case made is that “less is more” in non-financial reporting initiatives and hence the article calls for a revision of key aspects of the European Non-Financial Reporting Directive, which, as is argued, is more likely to achieve the furtherance of sustainable corporate behaviour. Although the different reporting requirements offer the benefits of focussing on different corporate goals and activities, targeting different audiences and allowing for a level of flexibility that respects the individual risks to sustainability associated with each industry, the end result is a landscape that lacks overall consistency and comparability of measurements and accountabilities, making accountability more, rather than less, difficult to achieve.The article acknowledges the existence of several variances relating to the notion of sustainability per se, which continues to remain a contested concept and variances between companies and industries in relation to how each is operating sustainably or unsustainably respectively. Such variances have so far inhibited the legislator from easily outlining through tailored legislation the individual risks to global sustainability in an all-encompassing manner. The end product is a chaotic system of financial reporting, CSR reporting, non-financial reporting and integrated reporting and little progress to increase comparability and credibility in order for companies to be held accountable and to behave in ways that do not harm the planet. A “clean up” of the varied initiatives in the terrain of non-financial reporting is recommended.

The diffusion of the sustainable development goals (SDGs): an examination of preparer perceptions

“…As evidenced by our results, non-financial reporting agenda continues to lag behind its financial reporting counterpart given that despite the perceived importance of non-financial performance, it may not be measured and even where it is, non-financial information may not be used (Stivers et al , 1998). Financial reporting is mature, with assurance, verification and standardised rules that are more easily understood and consistently followed in contrast to non-financial reporting, which is less consistent and stringent (Tsagas and Villiers, 2020). This can lead to sustainability not being “vital to survival”, with manipulation or “greenwashing” in SR (Cho et al , 2015; Wang et al , 2018).…”

“…Again, our results indicate that sophisticated disclosure may emerge with greater maturity. SR hence lacks comparability of measurements and accountabilities, making accountability more difficult to achieve (Di Vaio and Varriale, 2020; Tsagas and Villiers, 2020).…”

Are materiality determination practices evolving in the wake of increasing legislation on sustainability reporting? Findings from EU pharmaceutical companies’ reports

“…The analysis of pharmaceutical companies’ reports in Subsection 4.2 shows a lack of comparability and inconsistencies in reported information. Tsagas and Villiers (2020) have highlighted that companies prioritize different stakeholders and do not necessarily provide the information that stakeholders need. They argued that a key justification for reporting – to encourage dialogue and provide information for users with the ability to influence, to make informed decisions, and if necessary, hold disclosers accountable – is not fulfilled and that this mismatch indicates the need for greater stakeholder involvement in reporting and sustainability processes in companies.…”

Mainstreaming Standardized Sustainability Reporting: Comparing Fortune 50 Corporations’ and U.S. News & World Report’s Top 50 Global Universities’ Sustainability Reports

“…The lack of comparability of reports due to the intrinsic differences between industries and how each is operating sustainably or not inhibited the effective legislation from easily outlining the individual risks to SR through tailored adoption approaches in an all-encompassing manner [51,55,56]. However, without mandates and regulations, how to ensure the level of transparency stakeholders expect from corporations remains a challenge.…”