The impact of the EU nonfinancial information directive on environmental disclosure: evidence from Italian environmentally sensitive industries

Abstract

Purpose To determine whether to entrust the European Union (EU) to create a new nonfinancial reporting framework or endorse the extant reporting framework developed by the Global Reporting Initiative (GRI), this study aims to explore whether the mandatory implementation of the EU Directive positively impacted the GRI-based environmental disclosure. Design/methodology/approach The authors compared the pre- and post-EU Directive environmental disclosure of 16 Italian environmentally sensitive companies. The authors used an extended coding scheme and developed a unique scoring system to compare the quantitative and qualitative changes in environmental disclosure. Findings The analysis showed that the quantity of environmental disclosure increased after the mandatory EU Directive adoption. The most significant change was observed regarding the disclosure topics explicitly required by the Italian legislature. Additionally, disclosure of soft information continued to prevail over that of hard information in the post-Directive period. While the Directive boosted the level of adherence to GRI standards, Italian companies disclosed information that could be easily mimicked (soft) instead of objective measures that could be verified (hard). In light of this evidence, the endorsement of extant GRI standards could be a valuable option for enhancing the comparability and transparency of environmental disclosure. Originality/value This study used an original extended coding system and proposed related environmental disclosure indexes that allow monitoring changes in environmental disclosure over time. To the authors’ best knowledge, this study is one of the few that justifies the significant impact of regulation (here the EU Directive) on the increase in environmental disclosure and that uses hard and soft information typology to examine the quality of environmental disclosure.

Corporate governance perspective on environmental reporting: Literature review and future research agenda

“…It shows that neither the threat of respective regulation (Stanny, 2013) nor actual regulation in place translate into a higher quantity and quality of ER. Vormedal and Ruud (2009) Furthermore, the evidence from Portugal, China and Italy shows that the introduction of ER requirements did not lead to any significant increase in corporate transparency (Ji et al, 2020;Lima Ribeiro & Aibar-Guzmán, 2010;Wang & Bernell, 2013), especially in the provision of hard, objective data (Papa et al, 2022). A similar conclusion may be drawn from the study by Ahmad and Mohamad (2014) i.e.…”

“…What is interesting is that the compliance rate after the implementation of the Sarbanes–Oxley Act (SOX) in 2002 is significantly lower than prior to the Act. Furthermore, the evidence from Portugal, China and Italy shows that the introduction of ER requirements did not lead to any significant increase in corporate transparency (Ji et al, 2020; Lima Ribeiro & Aibar‐Guzmán, 2010; Wang & Bernell, 2013), especially in the provision of hard, objective data (Papa et al, 2022). A similar conclusion may be drawn from the study by Ahmad and Mohamad (2014), who find that environmental disclosures of Malaysian public construction companies produced under the stock exchange mandatory reporting regime are incomplete and largely limited to a general narrative and non‐verifiable statements.…”

Peran Pengungkapan Lingkungan Dalam Meningkatkan Harga Saham

“…Pengungkapan lingkungan didefinisikan sebagai respons terhadap tekanan yang diberikan oleh stakeholder sebagai upaya perusahaan dalam mengelola kesan masyarakat terhadap dampak lingkungan hidup atas aktivitas yang dilakukan (Khan & Iqbal, 2022;Papa et al, 2022). Menurut Raimo et al, (2022), pengungkapan lingkungan merupakan sarana dialog perusahaan dengan stakeholder dengan memberikan informasi tentang dampak lingkungan akibat aktivitas perusahaan.…”

Environmental backgrounds of CEOs and corporate environmental management information disclosure: The mediating effects of financing constraints and media attention

“…Environmental management information is disclosed more frequently by American businesses with superior corporate social responsibility (CSR) records, and the quality of disclosure is outstanding (Koh et al, 2022). With the mandatory implementation of the Non‐Financial Information Directive in the EU, companies are increasingly complying with the Global Reporting Initiative standard, and the total amount of environmental management information disclosed has increased significantly (Papa et al, 2022). Through empirical studies of corporate data, researchers have identified many factors that influence the disclosure of environmental management information, such as a favorable correlation between corporation value and disclosure.…”