Mining a circularity index from non-financial reporting: the Italian case

Pernagallo Giuseppe (), Francesco Quatraro and Eleonora Rubichi ()
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Pernagallo Giuseppe: Department of Economics and Statistics Cognetti de Martiis, University of Turin, Italy, https://www.est.unito.it
Eleonora Rubichi: Department of Economics and Statistics Cognetti de Martiis, University of Turin, Italy, https://www.est.unito.it

Department of Economics and Statistics Cognetti de Martiis. Working Papers from University of Turin

Abstract: With the 2014 Directive 95, the so-called Non-Financial Reporting Directive, the European Union expanded the reporting requirement on social and environmental issues for large companies, demonstrating its commitment to more sustainable corporate governance. This directive introduced the obligation to publish the individual (or consolidated) non-financial statement in the case of companies of significant public interest. This document includes relevant alternative information to mere financial aspects, such as sustainability, or circularity practices. We propose a new circularity index extracted from these reports to assess how well companies are adopting a circular philosophy. In this article we present an application of this index to Italian companies. The index is constructed as the cosine similarity between the term frequency of bigrams from a vocabulary constructed using 135 authoritative documents on circularity and the term frequency of bigrams from the non-financial annual reports of FTSE MIB companies. Regression results suggest that there is a positive relationship between regional recycling performance and the adoption of circular principles.

Pages: 19 pages
Date: 2025-05
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Working Paper: Mining a circularity index from non-financial reporting: the Italian case (2025)
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