In the last decade, reporting of non-financial information has become widespread. According to theGlobal Reporting Initiative (GRI), only 44 firms followed GRI guidelines to report sustainabilityinformation
in 2000. By 2010, the number of organizations releasing sustainability reports, mostlyon a voluntary basis, grew to 1,973.
Concurrently, national governments and stock exchangeauthorities have promoted sustainability reporting further by adopting laws and regulations thatmandate sustainability reporting. In this paper, we investigate whether mandatory disclosure of sustainability information has significant consequences on managerial practices. For the purposes of this study we term a “sustainability report” as a firm-issued general purpose non-financial report,providing information to investors, stakeholders (e.g., employees, customers and NGOs), and thegeneral public about the firm’s activities around social, environmental and governance issues, eitheras a stand-alone report or as part of an integrated
(e.g. financial and sustainability) report.The case against short-term biases and in favor of promoting a culture of long-term corporatemanagement has been frequently advocated (Eccles et al., 2001; Jensen and Fuller, 2002). In the lastdecade, a wave of corporate scandals has fueled criticisms of the way corporations conduct business.Moreover, many commentators have argued that one of the fundamental causes of the recent financialcrisis has been the incentive structure of the markets that led a large number of market participants tofocus excessively on short-term profits (UNPRI, 2009), instead of concentrating on long-term valuecreation. A compounding problem was that much of the public information on executive pay, theenvironmental and social impact of a company, on financial structuring and on management practiceswas itself short-term focused and inadequate (UNPRI, 2009).
The terms “sustainability”, “environmental, social and governance” (ESG), “non-financial” or “corporate socialresponsibility” (CSR) reporting have been used interchangeably in the past, to describe reports with differentdegrees of focus on environmental, social or governance issues.
For a complete listing of these organizations
An integrated report is a single document that presents and explains a company’s financial and non-financial—environmental, social, and governance—performance (Eccles and Krzus, 2010).