A broader range of key stakeholder interests reduces the risk of excessive risk-taking due to profit maximization and leads to more comprehensive corporate governance, which foster CSR practice and considers the right of its key stakeholders (such as human rights) in their operations. To ensure that companies in their corporate governance take into account a broader range of rights and interests, including factors related to the environment, society, and governance, and to ensure socially responsible management, the EU has adopted legislations such as NFRD and CSRD. With such legislation, companies in their corporate governance are obligated to consider a wider circle of stakeholders (individuals or groups), their rights and their needs. In this chapter, the NFRD and CSRD legislation will be examined, and through practical examples using the content analysis method, it will be checked to what extent companies include the interests of key stakeholders in their non-financial information reporting and how they report on their risks and opportunities.
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In the global economy, companies have several methods available to increase their equity. Among other, companies can organically increase their equity share through good business operations and retaining profits. However, there are also other ways which, for example, involve investors who invest capital in the company (usually based on its good performance or the value of the share). Such investors can enter the company in various ways (by purchasing a share, providing a loan, etc.). Regardless of the path which the company uses for the increase of their equity, each path involves in its process numerous of key stakeholders and their interests. In the case of organic business growth, key stakeholders are, for example, suppliers, end consumers, the state, employees, investors, etc. These are individuals or legal entities. All these stakeholders have a common interest in connection with the company, as they have interests that the company can satisfy. Suppliers want to generate income and establish a stable partnership, customers want a good product, the state establishes legislation that companies must comply with, and investors want to increase their profit. All interests of key stakeholders together must be considered by the company for successful business operations. Based on previous research it has become evident that the mindset and interests of key stakeholders played a crucial role in the governance of corporations. In particular, investors influenced the management of companies to take excessive risks in order to gain more short-term profits. This mindset led to the acceptance of too much risk by the managers and to the pursuit of practices that were not sustainable for the company (including exploitation of labour and harm to human rights). Such management has, in many cases, contributed to the collapse of companies and has led to numerous harmed stakeholders. Based on past events, it has become evident that investors and other key stakeholders play an important role in influencing and operating a company's governance. The interests of investors, in particular, are of special importance to the management (executive) and supervisory board members of the company. To maintain their position in the company, management members and supervisory board members often subordinate to the interests of investors, even if sometimes these interests do not consider the best objectives for the company and its surroundings. To mitigate such risks and ensure that corporations are built on sustainable and CSR management, legislation such as the Non-Financial Reporting Directive (NFRD) and Corporate Sustainability Reporting Directive (CSRD) have been adopted at the EU level. These legislations have encouraged a shift in the economy from voluntary compliance with sustainable practices and reporting of non-financial information to a mandatory and standardized approach that is binding for corporations. Such legal acts promote transparency and comparability of CSR information and comprehensive communication with the key stakeholders of the corporation. With this kind of management, corporations are expected to consider the interests of key stakeholders, consider their rights (especially with the preservation of human rights) and appropriately integrate them into their operations, focusing on long-term sustainable governance and CSR (Čufar & Primec; 2022; Björklund, 2021; Cuomo et al., 2022).