Voluntary versus mandatory nonfinancial disclosure: the directive 2014/95/eu and sustainability reporting practices. empirical evidence from Italy

PURPOSE – Recently, an important milestone on nonfinancial disclosure has been achieved by the approval of the Directive EU/95/2014 (i.e. Disclosure of non-financial and diversity information by large companies and groups October 22, 2014). All EU member states have to implement these requirements within their domestic laws calling for large companies (exceeding 500 employees) to disclose nonfinancial information on environmental, social, employee related, diversity, human rights, bribery and anti-corruption matters, by the fiscal year 2017. In Italy, the transposition of the European Directive (i.e. the Legislative Decree no. 254/2016, 30th December 2016) will be effective by the fiscal year 2017. The Public Consultation of the Directive carried out by the Department of Treasury Ministry of Economy and Finance (MEF) highlighted the following critical issues: 1) the choice of reporting standard/guidelines and 2) the placement of nonfinancial information within corporate reporting. The introduction of the European Directive is stimulating academic research on its impact in Europe (Dumitru et al., 2017; Haller et al., 2017) but the novelty of this regulation is urgently claiming for an in-deep analysis on this field. Given these premises, the main objective of this paper is to assess whether the radical shift from voluntary to mandatory disclosure on non-financial information can influence sustainability (ESG) reporting practices adopted by the obliged Italian companies (Legislative Decree No. 254/2016). Our sample selection process applies the size criteria issued by the Legislative Decree No. 254/2016 (art. 2). We will analyze annual report, integrated report, stand-alone report, such as sustainability report and website pages on sustainability issues. We will gather data pertinent to ESG reporting, such as the ESG disclosure score (the overall score), the Environmental, the Social and the Corporate Governance scores from the database named Asset 4 and managed by Thomson Reuters. In addition, we will assess the format of reporting (art. 5 Legislative Decree. 254/2016) companies decided to adopt by identifying three categories: a) non-financial statement report, included in the annual report; b) non-financial statement report, included in the sustainability report; c) non-financial statement report, included in the integrated report.