Abstract
Non-financial disclosure has become increasingly popular, as it can satisfy the information needs of a growing range of stakeholders. Because traditional financial reports cannot provide comprehensive accountability, several frameworks and guidelines for facilitating non-financial information disclosure have been developed. Recently, the European Union issued Directive 2014/95/EU (EU Directive) and subsequent guidelines (EU Guidelines 2017/C215/01 [EUG]) to mandate European entities of public interest to convey non-financial information to improve such organizations’ accountability toward their stakeholders. This paper studies the European stage of non-financial reporting from a regulatory and practical point of view. To this end, the first research objective is to analyze the elements that the EUG have in common with the IIRF and the GRI 4 guidelines. Second, the paper proposes a first analysis to assess the compliance to the EUG by performing a content analysis on a sample of annual reports and integrated reports (IR) drafted by the 50 biggest European companies. The results highlight that the content elements required by the Directive exceed the requirements of the two frameworks and that there is already a high level of compliance by European big companies with the EUG. More specifically, particular attention is devoted to Social, Employee and Environmental Matters. Accordingly, the companies demonstrated a common awareness of the necessity to provide an exhaustive amount of social and environmental disclosure in order to maintain legitimacy. Also the disclosure on Principal Risks and Their Management is widespread to meet investors’ and stakeholders’ requirements in recent years with respect to the general level of risk disclosure provided by companies.
Highlights
IntroductionThe financial crises and growing concerns regarding the social and environmental consequences of companies’ activities have dramatically increased the external pressure on companies to be more accountable toward and more transparent with their investors and stakeholders [1,2,3,4,5,6].In this context, current accounting systems, which are mainly based on retrospective financial data, have been considered inadequate for satisfying the information needs of investors and other stakeholders and for providing an acceptable level of transparency and accountability [3,7,8,9].investors and stakeholders increasingly require more non-financial information about companies’ risk, governance and social and environmental issues in a more connected and comprehensive manner [10,11,12].In particular, after the Earth Summit in 1992 and the advent of the Kyoto protocol in 1997, which shed light on climate changes and other associated environmental risks, the theme of sustainability and sustainable development have acquired pivotal importance as the “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” [13] (p. 234).The relevance of Corporate Social Responsibility (CSR) emerged consistently, representing its logical extension to business’ responsibility to contribute in a positive way to society’s well-being, beyond a narrow focus on profit maximization [2,14,15].According to Guthrie and Parker [16] (p. 67), CSR disclosure is deemed as essential in reducing information asymmetries between stakeholders and management and reducing the market risk of capital investments
The following sections first present the results obtained by comparing the three documents and present the results of the compliance analyses on the reports published by the companies included in the sample
This section outlines the similarities as well as the differences related to the key principles and the content elements required by the EU Guidelines 2017/C215/01 (EUG), IIRF and Global Reporting Initiative (GRI) 4 guidelines
Summary
The financial crises and growing concerns regarding the social and environmental consequences of companies’ activities have dramatically increased the external pressure on companies to be more accountable toward and more transparent with their investors and stakeholders [1,2,3,4,5,6].In this context, current accounting systems, which are mainly based on retrospective financial data, have been considered inadequate for satisfying the information needs of investors and other stakeholders and for providing an acceptable level of transparency and accountability [3,7,8,9].investors and stakeholders increasingly require more non-financial information about companies’ risk, governance and social and environmental issues in a more connected and comprehensive manner [10,11,12].In particular, after the Earth Summit in 1992 and the advent of the Kyoto protocol in 1997, which shed light on climate changes and other associated environmental risks, the theme of sustainability and sustainable development have acquired pivotal importance as the “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” [13] (p. 234).The relevance of Corporate Social Responsibility (CSR) emerged consistently, representing its logical extension to business’ responsibility to contribute in a positive way to society’s well-being, beyond a narrow focus on profit maximization [2,14,15].According to Guthrie and Parker [16] (p. 67), CSR disclosure is deemed as essential in reducing information asymmetries between stakeholders and management and reducing the market risk of capital investments. The financial crises and growing concerns regarding the social and environmental consequences of companies’ activities have dramatically increased the external pressure on companies to be more accountable toward and more transparent with their investors and stakeholders [1,2,3,4,5,6]. In this context, current accounting systems, which are mainly based on retrospective financial data, have been considered inadequate for satisfying the information needs of investors and other stakeholders and for providing an acceptable level of transparency and accountability [3,7,8,9].
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
