Abstract
European companies of public interest requested to comply with the Directive 2014/95/EU on Non-Financial Information (NFI) are allowed to fulfil the regulatory obligation following the Global Reporting Initiative (GRI) guidelines, which constitute at present the most widely spread framework for sustainability reporting. Given such prevalence, this paper examines the level of disclosure on Key Performance Indicators (KPIs) and its relationship with financial performance over the period 2016–2018 for Italian-listed companies adopting GRI guidelines to convey NFI under the Decree 254/2016. The research applies content analysis of the annual and sustainability reports to measure the disclosure index on KPIs, and Data Envelopment Analysis (DEA) to estimate the financial performance. A Tobit-regression model explores the nexus between financial performance and companies’ disclosure. Findings show a decrease in the disclosure levels in the early adoption of mandatory NFI and a significant association with the financial performance of the sampled companies. The study, assuming a comprehensive view of the financial indicators, improves our knowledge of the relationship between sustainability disclosure and financial performance and adds to the literature on the evolution of NFI in the transition from voluntary to mandatory regime.
Highlights
This study investigates the use of Key Performance Indicators (KPIs) in communicating companies’ commitment to sustainable development and the relationship between the disclosure level and financial performance in the Italian case
We aim to analyze the Global Reporting Initiative (GRI) indicators adopted in Non-Financial Reporting (NFR) following the 254/2016 Legislative Decree, issued to implement the EU Directive (2014/95/EU) on Non-Financial Information (NFI) and verify if there is a significant association between the level of disclosure and the financial performance of companies listed on the Italian Stock Exchange
It is unlikely that companies which continue to carry out the same activity from year to year, and that use the same framework for sustainability reporting (GRI) over time, show a significant reduction in the number of indicators deemed “material” in the specific phase of transition to the mandatory regime
Summary
This study investigates the use of Key Performance Indicators (KPIs) in communicating companies’ commitment to sustainable development and the relationship between the disclosure level and financial performance in the Italian case. Over the last few decades, the general principles on CSR have gradually been assuming concrete shape in the definition of mission, policies and processes by companies [4], there is a certain resistance from those who claimed the primacy of profit on all social objectives and the existence of an unavoidable trade-off between the two impacts of economic action [5,6] In this process, a key role is attributable to the theme of sustainable development [7,8,9], a revolutionary concept able to shift the focus from economic to ethical issues, contrasting traditional models of growth, given the limited capacity of natural resources to bear the consequences of anthropic activities in the long run, and the introduction of the “triple bottom line” principle in business strategy [10,11,12]. They tested the direction and strength of this relationship, producing contradictory results and different interpretative perspectives, which do not allow us to reach unequivocal conclusions
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.
