The challenges of upward regulatory harmonization: The case of sustainability reporting in the European Union

Daniel Kinderman

Regulation & Governance, 2020, vol. 14, issue 4, 674-697

Abstract: What are the prospects for the upward harmonization of regulatory standards, and why do governments support or oppose more stringent supranational regulation? To answer these questions, this paper examines an important case of upward regulatory harmonization, the European Union's non‐financial disclosure Directive 2014/95/EU, which requires large firms to report on their social, environmental, and human rights impacts. In spite of favorable circumstances, the Directive's opponents watered down the Commission's proposal during the course of the negotiations. Upward regulatory harmonization is difficult because of the adjustment costs it imposes on the private sector. The paper provides an in‐depth analysis of countries’ positions in the negotiations: Germany was the most hardline opponent, France the strongest supporter, and the United Kingdom was somewhere in‐between. For most countries, private sector adjustment costs determine government support and opposition for upward harmonization at the supranational level, but the analysis shows that partisan politics and varieties of capitalism also matter.

Date: 2020
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https://doi.org/10.1111/rego.12240

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Persistent link: https://EconPapers.repec.org/RePEc:wly:reggov:v:14:y:2020:i:4:p:674-697

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