Mandatory Corporate Social Responsibility Reporting in the EU: Comprehensive Analysis of Various Corporate Reporting Instruments' Current Capacity and Future Potential to Convey Non-Financial Information

Mandatory Corporate Social Responsibility Reporting in the EU: Comprehensive Analysis of Various Corporate Reporting Instruments' Current Capacity and Future Potential to Convey Non-Financial Information

by Daniel Gergely Szabo


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Product Details

ISBN-13: 9789462366909
Publisher: Eleven International Publishing
Publication date: 10/06/2016
Series: Dovenschmidt Monographs Series , #4
Pages: 358
Product dimensions: 6.70(w) x 9.70(h) x 1.00(d)

Table of Contents

1 Introduction 1

1.1 The Importance of CSR and CSR Reporting 1

1.1.1 The Increasing Focus on CSR or Sustainability 1

1.1.2 CSR Reporting as an Increasingly Important Area from a Legal Perspective 3

1.2 Defining CSR 6

1.2.1 What Is CSR? 7

1.2.2 What Is CSR Information? 9

1.3 Research Questions 10

1.4 The Structure of This Book 11

1.5 Limitations 12

1.6 Methodology 14

1.6.1 The Choice of Investigated Jurisdictions 14

1.6.2 Research Methodologies 15

2 The Theoretical Framework of Mandatory (CSR) Reporting 19

2.1 The Importance of Corporate Disclosure Regulation in the Company and Financial Markets Law Regime 20

2.2 The Relationship between CSR and Capital Markets 23

2.2.1 The Theoretical Underpinnings of the Relationship between CSR and Financial Performance 24

2.2.2 Some Empirical Evidence 27

2.3 The Users of Corporate Reports 29

2.4 The Reasons for Regulating Disclosure 31

2.4.1 Reasons for Regulating Disclosure for the Promotion of Efficiency 33 Achieving the Optimal Quantity of Information Disclosed 36 Achieving Reliability and High Quality of Information Disclosed 39 Standardization of Information and the Promotion of Comparability 40

2.4.2 Other Objectives of the Corporate Disclosure System 43 Promoting Active Corporate Governance 43 Fairness 45 Increasing Public Confidence in Markets 45 Protecting Unsophisticated Investors 46 Disclosure to Other Parties in Protection of These Parties 47 Paternalistic Approach to Disclosure 49

2.5 Regulatory Strategies and Methods of Disclosure Regulation 49

2.6 Summary 51

3 Mandatory CSR Reporting under the Current Framework of Corporate Disclosure for Listed Companies 53

3.1 The Division of Corporate Disclosure Types in the EU for Listed Companies, Terminology and the General Division of This Chapter 54

3.2 Periodic Financial Information Disclosure 59

3.2.1 Disclosure Requirements for Listed Companies 60 The US Periodic Disclosure Requirements 60 Annual Financial Reporting in the EU 62 The Accounting Directive and National Law 63 The IAS and IFRS 68 Half-Yearly Reporting in the EU 72 Quarterly Reporting in the EU 75

3.2.2 The Concept of Materiality 76 The Concept of Materiality in US Law with a Focus on CSR Information 77 The Theory of Materiality 77 The Reasonable Investor and CSR Information 79 The Interpretation of the 'Might Be Important' Condition and CSR Information 83 Total Mix of Information and CSR Information 84 Circumstances Rendering the Information Immaterial 85 Materiality in the EU 86 Materiality in the IAS and IFRS 87 Materiality in the National Law of the Member States 90

3.2.3 Accountability Mechanisms for Periodic Information Disclosure 92 Accountability Mechanisms in the US 93 Accountability Mechanisms in the EU 94

3.2.4 Discussion and Summary 103

3.3 Ad-Hoc Information Disclosure 105

3.3.1 Ad-Hoc Information Disclosure and CSR in the US 106

3.3.2 Ad-Hoc Information Disclosure and CSR in the EU 108

3.3.3 Accountability Mechanisms for Ad-Hoc Reporting 114

3.3.4 Summary 121

3.4 CSR Disclosure in the Management Report in the EU 122

3.4.1 Disclosure Requirements Relating to the Management Report at the EU Level 124 Disclosure Requirements Currently in Force at the EU Level 124 Interpretation of the Provisions of the Accounts Modernisation Directive 126 Interpretation of the Materiality Threshold of the Accounts Modernisation Directive 130 The New Disclosure Requirements at the EU Level 134 The Basic Structure of the New Requirements 135 The Scope of Application of the New Requirements 136 The Disclosure Obligation under the New Requirements 138 The Threshold of the Disclosure Obligation under the New Requirements 142 Format Requirements of the New Non-Financial Disclosure Rule 144 Duty to Explain If No Policies Are Pursued 145 Exceptions to the Duty to Disclose a Non-Financial Statement 147 Accountability for the Non-Financial Report 149 Commission Mandate to Adopt Non-Financial Reporting Guidelines 152 Conclusion to the New Requirements 153

3.4.2 Disclosure Requirements Relating to the Management Report on the Member States' Level 154

3.4.3 Accountability for the Management Report 160

3.4.4 Summary 163

3.5 The Corporate Governance Statement as a Vessel for CSR Disclosure 164

3.5.1 The Legal Basis and Structure of Corporate Governance Reporting in the EU 168

3.5.2 CSR in Corporate Governance Codes 172 Stakeholders in the Corporate Governance Codes 173 Stakeholder Definitions 173 Stakeholder-Related Transparency Recommendations 176 Recommendations for Integrating Stakeholder Interests 179 Recommendations for Stakeholder Involvement 181 Stakeholder Policy Recommendations 183 Other Stakeholder-Related Recommendations 184 CSR in Corporate Governance Codes 185 CSR Definitions in the Corporate Governance Codes 186 CSR-Related Transparency Recommendations 189 Recommendations for Integrating CSR into Business Decisions 192 Recommendations on a CSR Policy 194 Other CSR-Related Recommendations 197

3.5.3 Accountability Mechanisms Relating to CSR Disclosures in the Corporate Governance Statements 198

3.5.4 Discussion and Summary 201

3.6 Mandatory CSR Reporting in Denmark 203

3.6.1 The Legal Framework of CSR Reporting under Danish Law 205 Companies Covered by the Reporting Law 206 The Publication of the Report 207 The Core Disclosure Obligation of the Danish CSR Reporting Law 208

3.6.2 Accountability for the Mandatory CSR Reports 211

3.6.3 Discussion of the Results of the Danish Mandatory CSR Reporting Regime and the Future of the Regime 213

3.6.4 Summary 217

3.7 International Initiatives on CSR and Their Possible Link to Hard-Law Regulation 218

3.7.1 The United Nations Global Compact 220

3.7.2 The Global Reporting Initiative 223

3.7.3 Summary 227

3.8 Conclusion 228

4 The Future of Mandatory CSR Reporting 233

4.1 Should CSR Reporting Be Mandatory? 235

4.1.1 Is Mandatory CSR Reporting Contrary to the Concept of CSR? 235

4.1.2 Is Voluntary CSR Reporting Not Enough? 237

4.1.3 Are Investors and Other Stakeholders Interested in CSR Information? 241

4.1.4 Are There Alternatives to Mandatory CSR Reporting? 242 CSR Ratings and Indices 242 CSR or Sustain ability Awards 245 Membership of National or International CSR Initiatives 246 Other Forms of Regulation 248

4.1.5 Should CSR Reporting Be Mandatory? 250

4.2 How Should CSR Reporting Be Mandated Efficiently? 251

4.2.1 The Types of CSR Information That Should Be Mandatorily Disclosed 252 The Users of CSR Reports and Their Informational Needs 253 Different Types of CSR Information That Should Be Mandated 257 Basic Issues in Respect of CSR Information Disclosure 257 Information Provided for Binary Yes/No Questions 258 Objectively Non-Measurable Qualitative Information 259 Objectively Measurable, Quantitative CSR Information 262 Other CSR Information 263

4.2.2 Through Which Reporting Instrument Should CSR Reporting Be Mandated, and What Kind of Regulatory Technique Should Be Used? 265 Integrated Reporting 265 Regulatory Technique 268

4.2.3 What Kind of Accountability Should Companies Bear in Respect of CSR Reporting? 272

4.3 Final Discussion and Summary 274

5 Summary and Concluding Remarks 277

6 Appendix 285

7 Executive Summary 291

Bibliography 293

Index 345

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