Abstract
This study collates potential economic effects of mandated disclosure and reporting standards for corporate social responsibility (CSR) and sustainability topics. We first outline key features of CSR reporting. Next, we draw on relevant academic literatures in accounting, finance, economics, and management to discuss and evaluate the potential economic consequences of a requirement for CSR and sustainability reporting for U.S. firms, including effects in capital markets, on stakeholders other than investors, and on firm behavior. We also discuss issues related to the implementation and enforcement of CSR and sustainability reporting standards as well as two approaches to sustainability reporting that differ in their overarching goals and materiality standards. Our analysis yields a number of insights that are relevant for the current debate on mandatory CSR and sustainability reporting. It also points scholars to avenues for future research.
Highlights
Introduction and outline of analysisIn 2019, the Business Roundtable issued a new statement of purpose for corporations and with a few words made a radical shift
We discuss what we know about the potential firm-level consequences of forcing firms to provide corporate social responsibility (CSR) information, and we review extant literature on the real effects of CSR and sustainability reporting (Section 5.2)
We conclude with a brief discussion of relevant insights from the academic literature in accounting, finance, management, and economics pertaining to mandatory disclosure, reporting standards, and international accounting (Section 2.4), which we later apply to CSR reporting
Summary
In 2019, the Business Roundtable issued a new statement of purpose for corporations and with a few words made a radical shift. We provide definitions for the key terms (Section 2.1) and delineate the primary scenario for our analysis, that is, the mandatory adoption of CSR reporting standards for U.S public firms (Section 2.2) We contrast this scenario to the status quo of voluntary CSR reporting, which allows us to highlight the potential economic effects of a CSR and sustainability reporting mandate. Such consequences likely arise irrespective of whether the mandate aims to inform investors or explicitly intends to drive change with respect to sustainability. We discuss what we know about the potential firm-level consequences of forcing firms to provide CSR information, and we review extant literature on the real effects of CSR and sustainability reporting (Section 5.2). We consider our analysis—in parts—as speculative (see Section 2.2 for additional caveats and limitations)
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