Impact of supranational non-financial disclosure legislation on CSR reporting - the case of the EU Directive 2014/95/EU

Abstract

With regulation on corporate social responsibility (CSR) reporting becoming ever more prominent, it becomes increasingly important that legislators base their policy design on case-specific evidence and reliable measurement. In order to address this issue, this thesis aims to advance the methodology of CSR reporting measurement and the policy impact assessment of supranational CSR disclosure regulation. To this end, this thesis creates, tests, and validates a novel CSR reporting dictionary that can accurately measure CSR reporting in the context of Directive 2014/95/EU. This study further validates the newly developed assessment tool by using archived and quantitative communications data covering 549 French, German, Spanish and UK companies from 2014 to 2020. A difference-in-differences analysis is employed to determine the impact of Directive 2014/95/EU on CSR reporting in the sample countries, and the subsequent results are contextualised within Oliver's (1991) framework on strategic responses to institutional pressure. The findings show that the newly developed CSR reporting dictionary is highly valid and reliable across all four languages. Empirical results also reveal that Directive-affected companies significantly increased the scope and coverage of their overall and dimensional CSR reporting. However, in terms of reporting quality, the Directive appears to have no significant impact apart from an improvement in human rights disclosure and a deterioration in employee issues. Moreover, the inferences of this thesis indicate that, while companies from almost all countries comply, they exhibit unique strategic reporting responses to the regulatory shock depending on the country context. Finally, the evidence suggests that higher levels of institutional ownership decrease the effect of the Directive on CSR reporting quantity and coverage. Overall, this study contributes to the methodological and empirical knowledge on supranational non-financial disclosure regulation. It provides future researchers with a reliable multilanguage assessment tool for CSR reporting and highlights possible areas of improvement for policy design.