The expansion of non-financial reporting: an exploratory study

TLDR

The study investigates how non‑financial reporting is defined, how its scope and content have evolved from 2006 to 2016, and how reporting practices differ between S&P 500 and EuroStoxx 600 constituents. The authors analyze NFR by surveying definitions and practices, tracking changes in reporting volume and content from 2006 to 2016, and comparing CSR disclosures between S&P 500 and EuroStoxx 600 firms. The study finds that regulators, standard‑setters, and leading sustainable firms lack convergence; NFR volume rose sharply—especially 2006‑2011—driven by environmental, human‑capital, performance, and strategic disclosures, while the weight of financial information fell; CSR reporting grew dramatically from 2002 to 2015, with U.S.

Abstract

We investigate how non-financial reporting (NFR) is defined and has expanded in recent years. First, we explore the heterogeneity in definitions and current NFR practices. We find a lack of convergence between regulators and standard-setters, as well as leading sustainable firms. Second, we examine the changes in the extent and type of NFR reported by firms over the period 2006–2016. Based on a sample of firms in South Africa, we document a significant increase in the amount of NFR, particularly between 2006 and 2011. This change appears to be driven by new environmental, human capital, performance and strategic disclosures. The relative importance of financial information in corporate reporting decreased substantially over the same period. Third, we compare reporting practices for corporate social responsibility (CSR)/sustainability information between constituents of the S&P 500 index and the EuroStoxx 600 index. We find that overall, the percentage of firms issuing CSR/sustainability reports increased dramatically between 2002 and 2015. Constituents of the U.S. stock index and growth firms are less likely to report CSR/sustainability information, whereas firms in the European stock index in environmentally sensitive industries, with high capital intensity and good CSR performance, larger and with better financial performance, are more likely to report CSR/sustainability information.