The Evolution of Environmental Reporting in Europe: The Role of Financial and Non-Financial Regulation
Authors: Barbu Elena M. , Ionescu-Feleagă Liliana , Ferrat Yann 
Published: May 2022

The research problem

We observed the impact of European, international, and national mandatory financial and non-financial regulations on the corporate environmental disclosure of listed companies in the Euronext 100 between 2002 and 2017.

Motivation

Our study was motivated by the perfect European context created by the implementation of the IASs/IFRSs, mandatory since 2005, to enhance financial statement comparability across European companies, and by the national transposition of the 2014/95/EU Non-Financial Reporting Directive requiring European listed and large corporations to disclose information relative to their environmental footprint starting January 1, 2017.

The test hypotheses

H1: Financial legislation through the IASs/IFRSs implementation improves the level of environmental disclosure in Europe.

H2: Non-financial legislation through the Non-Financial Reporting Directive improves the level of environmental disclosure in Europe.

Target population

The paper is useful for: (1) researchers wanting to observe the evolution of environmental disclosure in Europe and the main factors influencing it; (2) CEOs and managers who seek to improve their own financial and non-financial reporting; (3) policymakers to know the impact of national and international regulations on environmental disclosure and practices; and (4) users of annual financial statements.

Adopted methodology

We hand collected data using the financial environmental grid proposed by Barbu et al. [( 2014a ). Mandatory environmental disclosures by companies complying with IAS/IFRS: The case of France, Germany and UK. The International Journal of Accounting, 49(2), 231–247] for both descriptive and monetary items from the annual financial statements of all French, Dutch, Belgian, and Portuguese companies included in the Euronext 100 index. We used descriptive statistics and regression models to analyze this data.

Analyses

The results are interpreted through the lenses of neo-institutional theory, legitimacy theory, and homogeneity theory.

Findings

The results show that mandatory financial and non-financial regulations improved the level of environmental disclosure of European companies from different countries over time, but the level of reporting was still very low. The force of coercive isomorphism is not strong enough to cause companies to be more environmentally responsible and to report more, but normative and mimetic isomorphism, and gaining legitimacy, could have a positive influence on the environmental reporting practices of European companies. Taken as a whole, the policy of “one size fits all” is not appropriate for environmental regulation in Europe and needs to be adapted because each country has a specific culture, tradition, and education regarding environmental values. These values should be improved to promote a better environmental conscience, better individual responsibility, and a tangible feeling of truth and transparency in disclosures, with all these generating real environmental practices and reliable reporting without any trace of greenwashing.