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Mandatory Non-financial Disclosure and Its Influence on CSR: An International Comparison

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Abstract

The article examines the effects of non-financial disclosure (NFD) on corporate social responsibility (CSR). We conceptualise trade-offs between two ideal types (government regulation and business self-regulation) in relation to CSR. Whereas self-regulation is associated with greater flexibility for businesses to develop best practices, it can also lead to complacency if firms feel no external pressure to engage with CSR. In contrast, government regulation is associated with greater stringency around minimum standards, but can also result in rigidity owing to a ‘one-size-fits-all’ approach. Given these potential trade-offs, we ask how mandatory non-financial disclosure has been shaping CSR practices and examine its potential effectiveness as a regulatory instrument. Our analysis of 24 OECD countries using the Asset4 database shows that firms in countries that require non-financial disclosure adopt significantly more CSR activities. However, we also find that NFD regulation does not lead to lower levels of corporate irresponsibility. Furthermore, our analysis demonstrates that, over time, the variation in CSR activities declines as firms adopt increasingly similar practices. Our study thereby contributes to understanding the impact of government regulation on CSR at firm level. We also discuss the limits of mandatory NFD in addressing regulatory trade-offs between stringency and flexibility in the field of corporate social responsibility.

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Notes

  1. The term hybrid in this context indicates the intermediate character of NFD regulation—between public and private regulation—and is different from other terms in transaction cost theory (Ebers and Oerlemans 2016).

  2. Consider the difference between a legally mandated minimum wage and a principle stipulating that firms pay a ‘fair’ wage or ‘living’ wage.

  3. Codes or standard setting may also be based on multi-stakeholder initiatives, but here we focus on the ideal–typical case of pure business self-regulation.

  4. In France, the regulation was enforced during the entire observation period and was therefore excluded from the separate analysis.

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Funding

This study was supported through a grant awarded by the Bertelsmann Foundation in 2016 and has received funding from the European Union’s Horizon 2020 Research and Innovation Programme under the Marie Skłodowska-Curie Grant Agreement No. 645763.

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Authors and Affiliations

  1. Freie Universität Berlin, Berlin, Germany

    Gregory Jackson & Julia Bartosch

  2. Audencia Business School, Nantes, France

    Emma Avetisyan

  3. University of Delaware, Newark, USA

    Daniel Kinderman

  4. Tufts University, Medford, USA

    Jette Steen Knudsen

Authors
  1. Gregory Jackson
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  2. Julia Bartosch
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  3. Emma Avetisyan
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  4. Daniel Kinderman
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  5. Jette Steen Knudsen
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Correspondence to Gregory Jackson.

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The authors declare no conflict of interest.

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The research was conducted in compliance with research ethics policies at the university of the first author. Informed consent was obtained from all individual participants included in the study. This article does not contain any studies with animals performed by any of the authors.

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Appendix

Appendix

See Tables 8, 9, and 10.

Table 8 Overview of NFD regulation requirements in France
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Table 9 Overview of NFD regulation requirements in Denmark
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Table 10 Overview of NFD regulation requirements in the UK
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Jackson, G., Bartosch, J., Avetisyan, E. et al. Mandatory Non-financial Disclosure and Its Influence on CSR: An International Comparison. J Bus Ethics 162, 323–342 (2020). https://doi.org/10.1007/s10551-019-04200-0

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