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The Consequences of Mandatory Corporate Sustainability Reporting

Author

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  • Ioannis Ioannou

    (London Business School)

  • George Serafeim

    (Harvard Business School, Accounting and Management Unit)

Abstract

We examine the effect of mandatory corporate sustainability reporting (MCSR) on several measures of social responsibility using both country and firm-level data. Using data for 58 countries, we show that after the adoption of MCSR laws and regulations, the social responsibility of business leaders increases and both sustainable development and employee training become a higher priority for companies. Moreover, for companies in countries with MCSR, corporate governance improves and on average, companies implement more ethical practices, bribery and corruption decrease, and managerial credibility increases. These effects are larger for countries with stronger law enforcement and more widespread assurance of sustainability reports. We complement the country-level analysis using environmental, social and governance metrics at the firm-level in conjunction with a differences-in-differences research design and we find that for the treatment group, energy as well as waste and water consumption significantly decline, while investments in employee training significantly increase after the adoption of MCSR laws and regulations.

Suggested Citation

  • Ioannis Ioannou & George Serafeim, 2011. "The Consequences of Mandatory Corporate Sustainability Reporting," Harvard Business School Working Papers 11-100, Harvard Business School, revised Oct 2012.
    • Handle: RePEc:hbs:wpaper:11-100
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    File URL: http://www.hbs.edu/research/pdf/11-100.pdf
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    References listed on IDEAS

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    1. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 2006. "What Works in Securities Laws?," Journal of Finance, American Finance Association, vol. 61(1), pages 1-32, February.
    2. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    3. Di Tella, Rafael & MacCulloch, Robert, 2005. "The consequences of labor market flexibility: Panel evidence based on survey data," European Economic Review, Elsevier, vol. 49(5), pages 1225-1259, July.
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    Cited by:

    1. Maria RYBALKO, 2016. "International Experience of the Development of Corporate Social Responsibility: Comparative Analysis of the Influence of the State," Management Dynamics in the Knowledge Economy, College of Management, National University of Political Studies and Public Administration, vol. 4(3), pages 427-447, September.
    2. Peter Seele & Irina Lock, 2015. "Instrumental and/or Deliberative? A Typology of CSR Communication Tools," Journal of Business Ethics, Springer, vol. 131(2), pages 401-414, October.
    3. Nadia Albu & Catalin Nicolae Albu & Madalina Dumitru & Valentin Florentin Dumitru, 2013. "Plurality or convergence in sustainability reporting standards?," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 15(Special 7), pages 729-742, November.
    4. Karin Buhmann, 2016. "Public Regulators and CSR: The ‘Social Licence to Operate’ in Recent United Nations Instruments on Business and Human Rights and the Juridification of CSR," Journal of Business Ethics, Springer, vol. 136(4), pages 699-714, July.
    5. María Inmaculada Alonso Carrillo & Alba María Priego De La Cruz & Montserrat Nuñez Chicharro, 2019. "The Impact of Corporate Governance on Corruption Disclosure in European Listed Firms through the Implementation of Directive 2014/95/EU," Sustainability, MDPI, vol. 11(22), pages 1-21, November.
    6. Salsiah Mohd Ali & Syeliya Md Zaini & Mazurina Mohd Ali & Siti Syaqilah Binti Hambali, 2023. "Institutional Ownership and Integrated Reporting in the Digital Age: A Conceptual Exploration of Firm Performance in Malaysia," Information Management and Business Review, AMH International, vol. 15(4), pages 67-76.
    7. María del Mar Alonso‐Almeida & Josep Llach & Frederic Marimon, 2014. "A Closer Look at the ‘Global Reporting Initiative’ Sustainability Reporting as a Tool to Implement Environmental and Social Policies: A Worldwide Sector Analysis," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 21(6), pages 318-335, November.
    8. Krishnamurti, Chandrasekhar & Velayutham, Eswaran, 2018. "The influence of board committee structures on voluntary disclosure of greenhouse gas emissions: Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 65-81.
    9. Salvatore Loprevite & Bruno Ricca & Daniela Rupo, 2018. "Performance Sustainability and Integrated Reporting: Empirical Evidence from Mandatory and Voluntary Adoption Contexts," Sustainability, MDPI, vol. 10(5), pages 1-15, April.
    10. Ioannis Ioannou & George Serafeim, 2015. "The impact of corporate social responsibility on investment recommendations: Analysts' perceptions and shifting institutional logics," Strategic Management Journal, Wiley Blackwell, vol. 36(7), pages 1053-1081, July.

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    Keywords

    sustainability reporting; mandatory reporting; corporate sustainability; corporate social responsibility;
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