This study intends to provide additional evidence regarding practices of reporting based on the recommendations of the Task Force on Climate-Related Financial Disclosures, and to relate it with performance scores of reporting based on corporate social responsibility indicators. Despite the announcements of the adoption of those recommendations, the level of compliance is relatively low. Additionally, the relation with corporate social responsibility exists, but only when the comparison is with environmental disclosures. The contribution of this study is to provide evidence that the adoption of the recommendations of the Task Force on Climate-Related Financial Disclosures is challenging because there are two perspectives for corporate reporting as the disclosure performance based on indicators of corporate social responsibility (inside-out) differs from the recommendations of the Task Force on Climate-Related Financial Disclosures (outside-in). The results may support understanding the companies' challenges in the practical implementation of the existing guidelines.
TopIntroduction
As corporate reporting is a concept in development that is transforming the economic paradigm with the influence of the concept of social responsibility (Bychkova, Karelskaia, Abdalova & Zhidkova, 2021; Christensen, Floyd, Liu & Maffett,2017; Wang, Cao & Ye, 2018), the concern about reporting both financial and non-financial information on Environmental, Social, and Governance (ESG) has increased (Chouaibi, Rossi, Siggia & Chouaibi, 2022; Kinderman, 2020; Xu & Liu, 2018).
Climate-related information is commonly presented by companies as part of corporate non-financial reporting (Lombardi, Schimperna, Paoloni & Galeotti, 2022; Santos & Rodrigues, 2021). The expression “non-financial reporting” frequently includes notions such as ESG information, climate risks, and opportunities, or key performance indicators of climate-related matters, depending on the stakeholders and the specific business characteristics (Haller, Link & Grob, 2017; Kashyap, Menisy, Caiazzo & Samuel, 2020).
As the awareness of non-financial reporting grows, more attention is being paid to corporate social responsibility (CSR) activities, affecting the interests of investors (Xu & Liu, 2018). Traditionally, in CSR, producing a non-financial statement is an orientation to provide information to all types of stakeholders (Breijer & Orij, 2022) and not mainly investors and creditors like financial information. Cox and Wicks (2011) argued that investors concerned with long-term profits consider CSR disclosure an effective way to obtain CSR information and an important decision-making factor in evaluating the value of a company. A more contemporary view on CSR is given by Wang and Juslin (2012) that present the concept associated with the notion of business ethics, i.e., the importance of social and ethical dimensions conversely to the focus on a CSR economic-based perspective that prevailed during the XX century. Giannarakis (2014) also stated that CSR should be understood as a key issue in modern management with a broader scope. Hence, non-financial reporting has become more popular and has been used by companies similarly to financial reporting sometimes reported alongside financial reports (Cawkwell, 2021). The link between financial reports and non-financial reporting was generically understood as non-financial reporting depends on context (Erkens, Paugam & Stolowy, 2015; Haller, Link & Grob, 2017).
In what concerns the development of non-financial reporting, in the European Union the recent Corporate Sustainability Reporting Directive (CSRD) 2022/2464, requires undertakings to report both on the impacts of the activities on people and the environment, a so-called inside-out perspective, and on how sustainability matters affect the undertakings, an outside-in perspective. This was the clarification of the concept of “double materiality” and a requirement for corporate reporting to incorporate those two perspectives.
The generalized growing interest in non-financial reporting, much due to the pressure related to climate change to create low-carbon economies (UNCTAD, 2021), created a propitious scenario where organizations that were, until now, dedicated to the harmonization of financial reporting, have extended their scope of action to another type of reporting, nowadays commonly known as sustainability reporting.