Nonfinancial reporting regulation and challenges in sustainability disclosure and corporate governance practices

Abstract

This paper aims to investigate how the shift from voluntary to mandatory nonfinancial information started by the European Union (EU) Directive 95/2014 may influence corporate practices. In particular, this research presents a paradigmatic case study to highlight relevant changes in reporting strategy and corporate governance adopted by an Italian listed company that never disclosed sustainability information before the transposition of the EU Directive into the Legislative Decree 254/2016. In this scenario, new obligations on nonfinancial reporting were not perceived as mere additional administrative duties and the nonfinancial statement became an opportunity to communicate company's paths towards sustainability, guaranteeing transparency and greater stakeholders' engagement. Our findings go beyond prior studies pointing out how organisations adopt strategic and tactical responses to the pressure stemming from the external environment. Additionally, it highlights the pivotal function played by the internal audit in setting up the direction of change. This research has theoretical and practical contributions for academic communities, policymakers and practitioners.

The effects of environmental, social and governance disclosure on the cost of capital in small and medium enterprises: The role of family business status

“…This pattern aligns with the view that family firms are more sensitive to environmental strategies (Campopiano & De Massis, 2015), which in turn reduces the probability of being perceived as irresponsible corporate citizens, and avoid potential, devastating, public scandals (Dyer & Whetten, 2006). The desire of family firms to project a good public image (Aureli, Del Baldo, Lombardi, & Nappo, 2020) and meet family's affective needs in protecting SEW leads them, more than other firms, to actively engage with their stakeholders (Cennamo, Berrone, & Cruz, 2012) by consolidating their social status through a better environmental behavior (Berrone, Cruz, Gómez‐Mejía, & Larraza‐Kintana, 2010; Seroka‐Stolka & Fijorek, 2020). Several theoretical and practical implications stem from these results.…”

Does the EU Directive on non‐financial information influence the value relevance of ESG disclosure? Italian evidence

“…It forces the Member States of the EU to issue regulation obliging some categories of firms to disclose non‐financial information. Early evidence on the adoption of the Directive shows that it is associated to changes in corporate disclosure that go beyond mere conformity to what laws prescribe (Aureli, Del Baldo, Lombardi, & Nappo, 2020). To our knowledge, the effects of such adoption on the value relevance of non‐financial disclosure have not been investigated yet, with the exception of Veltri, De Luca and Phan (2020) that focuses on the value relevance of risk disclosure in the post‐adoption period.…”

The Dimension of Sustainability: A Comparative Analysis of Broadness of Information in Italian Companies

“…The international literature defines corporate social responsibility as 'doing the right thing' towards others i.e., accountability to the stakeholders with whom the company interacts and to whom it must report the results of its activities [3,27]. In this sense, positive results in terms of profits and reputation are directly dependent on the moral principles that define company behavior [28].…”