Can mandatory non-financial reporting foster a more sustainable business world?
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2024-07-08
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en
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ESG-reporting was historically voluntary until the adoption of the NFRD in the financial year 2017, which mandated ESG-reporting for large organizations. The forthcoming implementation of the CSRD, effective from the 2024 financial year, further expands mandatory reporting requirements, obliging an increasing number of companies to disclose their ESG-reports, a trend expected to continue over time. This research aims to understand the impact of transitioning from voluntary to mandatory non-financial reporting on companies' ESG-performance and activity patterns within the European Union context. Employing an explanatory sequential mixed methods approach, this research concentrates on publicly listed companies within the European Union. These companies voluntarily disclosed non-financial information before 2017, became subject to the NFRD in 2017, and will adhere to the CSRD. The study analyzes ESG-data from 2014 to 2019, supplemented by qualitative insights from interviews with six ESG-professionals from the "big four" accountancy firms. The findings reveal that mandatory non-financial reporting yields higher ESG-performance compared to voluntary reporting, driven by institutional pressures. Furthermore, distinct patterns emerge in ESG-activities during the transition, characterized by notable reductions in emissions, improvements in resource use, and enhancements in human rights, with CSR strategy emerging as crucial. Overall, mandatory non-financial reporting contributes to fostering a more sustainable business world by enhancing ESG-performance, transparency, and sustainability practices.
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Faculteit der Managementwetenschappen