Global corporate social responsibility reporting regulation

Abstract

Corporate social responsibility (CSR) has steadily grown in importance. We show government regulation on corporate reporting of CSR, aimed to spur its growth and increase transparency, has grown in tandem. Such reporting regulation is more readily observable than CSR itself and can be used as a proxy for the latter. We show that larger economies with higher institutional capacity find it easier to develop reporting regulations, and that international influences and local pollution increase concerns are important contributing factors. We show that such regulation also increases CSR, even after accounting for common unobserved factors that may affect both.

The impact of the UK's Modern Slavery Act (2015) on the disclosure of FTSE 100 companies

“…Firstly, a global trend has appeared in corporations releasing sustainability reports (SR) (Noronha et al, 2013), which can be named in many different names (e.g., sustainability reports, CSR reports, social reports, corporate responsibility reports). Along with the prevalence of the concept of sustainability, sustainability disclosures have become mainstream practice, with an increase in the extent of disclosures on this topic (KPMG, 2020;Wen & Deltas, 2022). It is estimated that amongst the 250 largest revenue-generating companies across the world, the number of companies that have published SRs has risen from 35% in 1999, to 96% in 2020 (KPMG, 2020).…”

“…Early CSR reporting regulations can be found in the period from 1960s to 1970s. Here, some forms of environmental reporting legislation, or labor protection reporting requirements, were introduced in France, the US, Japan and Malaysia (Wen & Deltas, 2022).…”

“…After 2000, a rapid increase in CSR regulations have taken plan, which is the result of promotion from international organisations, increased attention in preventing financial risk after the global financial crisis, the development of economic globalization, and increasing expectation from stakeholders and the public on governments to regulate firm behaviours (Wen & Deltas, 2022). Meanwhile, investors and information intermediaries began considering the impacts of CSR information on firms' value, creating a demand for CSR reporting (Ioannou & Serafeim, 2015).…”

“…Meanwhile, investors and information intermediaries began considering the impacts of CSR information on firms' value, creating a demand for CSR reporting (Ioannou & Serafeim, 2015). As a result, there has been a growth in the number of CSR regulation instruments (Ioannou & Serafeim, 2017;KPMG et al, 2016;Wen & Deltas, 2022). The European Union (EU) Directive 2014/95/EU is one of the most prominent regulations, requiring companies to disclose nonfinancial and diversity information (Hummel & Rötzel, 2019).…”