The expansion of non-financial reporting: An exploratory study
The objective of this study is to investigate how non-financial reporting (NFR) is defined and has emerged over the recent period.
Authors
- Hervé Stolowy, HEC Paris
- Luc Paugam, HEC Paris
Abstract
The objective of this study is to investigate how non-financial reporting (NFR) is defined and has emerged over the recent period.
First, we explore the heterogeneity in definitions and in NFR practices currently existing. We find a lack of convergence from regulators and standard setters as well as from leading sustainable firms.
Second, we examine the changes in the extent and type of non-financial information produced by firms over the last 10 years. Using an in depth analysis of a sample of firms in South Africa, a leading country with regard to NFR, we document a significant growth in the amount of non-financial information produced, specifically between 2006 and 2011 when the total number of pages in corporate reports has gained approximately 120 pages. This change appears to be primarily driven by new environmental, human capital, performance and strategic disclosures. The relative importance of financial information in all reported information has decreased over the period by approximately 14%.
Third, we compare reporting practices with regard to corporate social responsibility (CSR)/sustainability information, an important category of NFR, between constituents of the S&P 500 index and of the EuroStoxx 600 index. We find that globally the percentage of firms issuing CSR/sustainability reports has dramatically increased from 2002 to 2015 in Europe and in the U.S. (from about 5% in 2002 to 77% in 2015). U.S. firms and growth firms are less likely to report CSR/sustainability information, whereas firms in Europe, from environmentally sensitive industries, with high capital intensity, good CSR performance, that are larger and exhibit better financial performance are more likely to produce CSR/sustainability information.
Keywords: Non-financial reporting (NFR), Non-financial information (NFI), integrated reporting, corporate social responsibility (CSR) reporting, sustainability reporting, environmental reporting, social reporting
The full paper has been published in the annual International Accounting Policy Forum special issue of Accounting and Business Research (volume 48, 2018 – issue 5). The paper can be downloaded from the Taylor and Francis website. The transcript of the practitioner’s response to the paper is also available.