The “comply-or-explain” principle in directive 95/2014/EU. A rhetorical analysis of Italian PIEs

Abstract

Purpose The purpose of this paper is to evaluate the effectiveness of the comply-or-explain principle in the Italian context. In particular, the analysis will evaluate, which factor impact on firms' voluntary adoption of this tool to adequate their non-financial reports to the legal requirements of Directive 95/2014/EU. Design/methodology/approach The methodology consists of two different levels of analysis. The first part is statistical descriptive, and it consists of a rhetorical analysis on the justifications provided by the firms about their omissions to comply with Directive 95/2014/EU. The second part is inferential and its aim is to evaluate, which factors impact on comply-or-explains adoption. Findings The findings reveal how the comply-or-explain application in Italy has been characterized by several criticisms. The result highlight how the justifications adopted by the firms is influenced by their sector of activity and omission's type. Moreover, the analysis suggests how the sector of activity and the level of adherence to global reporting initiative influenced the average number of omissions. Research limitations/implications The limitations of the research are represented by the focuses on a single country and by the short period of analysis. In this sense, future research could be addressed to the analysis of countries different from Italy. Moreover, accounting scholars could provide further contributions to the political debate through the evolution of the “comply-or-explain” principle’s strategies over the years. Practical implications The practical implications connected to the present research are twofold. The first one is represented by the possibility for policymakers to increase the degree of attention about the use of comply-or-explain as legitimization's tool. The second one is represented by the possibility for practitioners to identify a new reporting framework. Social implications The social implications are represented by the possibility for stakeholders to evaluate the reliability's degree of the disclosure produced by Italian public interest entities after the implementation of Directive 95/2014/EU. Originality/value Despite the growing attention paid by academics regard Directive 95/2014/EU, this is the first attempt to analyze the comply-or-explain from a rhetorical perspective.

The revision of nonfinancial reporting directive: A critical lens on the comparability principle

“…Nevertheless, some of the provisions of Directive 95/2014/EU have made comparability more difficult. An example is represented by the provision of the comply-or-explain that represents legal tools useful to exclude certain information from the NFDs (Pizzi et al, 2020).…”

“…On the other hand, NFDs prepared in a Comprehensive way are more transparent than the others. Thus, the difference could be related to the possibility for preparers to be compliant with the law through less transparent standards or omissions (Pizzi et al, 2020).…”

“…In particular, prior studies have highlighted that the first 5 years after the transposition of Directive 95/2014/EU have been characterized by different approach to nonfinancial reporting practices by business enterprises. Thus, despite the existence of common rules, the NFDs' transparency is influenced by the adoption of different reporting strategies driven by the exigence to be compliant with the law through a tick-box approach (Di Tullio, Valentinetti, Nielsen, & Rea, 2019;Doni et al, 2019;Pizzi, Venturelli, & Caputo, 2020). The nonfinancial restatements represent one of the main items that impact negatively on NFDs' comparability.…”

Sustainable Development and European Banks: A Non-Financial Disclosure Analysis

“…However, previous studies have highlighted the existence of complexities that negatively impact on the systematization of firms' contribution to the SDGs within a theoretical framework. In detail, a study conducted by Schaltegger [24] suggests that the interlinkage between the 17 SDGs and the difficulty to identify a direct clear connection between firms and some goals negatively impact on the development of a theoretical framework [25]. In this sense, the first five years after the launch of 2030 Agenda has been characterized by the development of studies based on prior theoretical framework used in non-financial reporting research.…”

“…2030 Agenda explicitly calls into action the private sector [26] with the role of enabling toward the transition to a more sustainable society. Despite the proliferation of new forms of regulation on non-financial reporting, the approach toward SDG reporting is voluntary [25] and the current debate is characterized by the absence of a set of specific standards on SDG reporting. Thus, the integration of the SDGs within the non-financial reports is driven by the need to engage with stakeholders and not by an institutional pressure made by regulators.…”