The “Walk” towards the UN Sustainable Development Goals: Does Mandated “Talk” through NonFinancial Disclosure Affect Companies’ Financial Performance?

Ho-Tan-Phat Phan,Francesco De Luca,Lea Iaia

doi:10.3390/su12062324

Abstract

With its Global Compact, the United Nations (UN) called companies to align strategies and operations with universal principles on human rights, labor, environment, and anti-corruption, while settling and pursuing the seventeen UN Sustainable Development Goals (SDGs). Achieving SDGs in business reporting is part of the lively debate in the literature about the ability of nonfinancial reporting in providing stakeholders with useful and value-relevant information about companies’ behaviors. This paper intends to address this issue in the aftermath of the recent European Union EU policy (Directive 95/2014/EU) of mandating companies to disclose nonfinancial information (NFI) according to some of the SDGs matters. To this end, the Italian context was analyzed, and main findings provide some early evidence of the absence of association between NFI and financial/market performance. At the same time, the positive association between companies’ Beta factor and size and NFI is supported. This implies that stakeholders still do not appreciate NFI reported according to the new rules and probably that more time is needed to assess the possible advantages of an improved regulation about NFI. However, results show that larger companies and/or companies with higher risk profiles (Beta) have already started to improve their NFI.

Highlights

The decrease of trust is something that is widespread across present society
Siena, we found a total population of 152 listed companies that published their nonfinancial declaration (NFD) with reference to the 2017 fiscal year
The results indicated that the models were a significant predictor of financial performance, except for Return on Assets using Net income post reporting

Summary

Introduction

The decrease of trust is something that is widespread across present society. Generally, people progressively ask for more information to better assess if companies and institutions are acting consistently with the interest of the community. Several are the cases of high-profit companies that attracted the attention of the public opinion for their questionable behaviors in the exercise of their activity (among others: Volkswagen, Huawei, Cambridge Analytica, and Foxconn). Investors, and the general community realize that a company assumed a questionable behavior, they stop placing trust in that company. As a consequence, this fall of trust could weaken companies and lead them first to a decrease of performance and to further serious consequences, such as even their final dissolution

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Conclusion