Exploring the Influence of Non-Financial Reporting Practices and Double Materiality Adoption on ESG Ratings: Evidence from European Companies

Anis Shami ()
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Anis Shami: CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes

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Abstract: Purpose -This paper examines how the adoption of non-financial reporting (NFR) standards and the double materiality (DM) principle affects external performance assessments, measured by ESG ratings. The study argues that reporting practices shape disclosure quality, transparency, and accountability in firms' business models.Design/methodology/approach -A three-year (2020-2022) longitudinal analysis of 366 European listed companies' annual reports was conducted. Descriptive statistics and ordinary least squares regressions were employed to analyze the association between reporting practices, DM adoption, and ESG ratings from several rating agencies. Findings -The findings show that several factors influence ESG ratings, including the adoption of non-financial reporting frameworks and the inclusion of a greater number of sustainability topics. Furthermore, companies that display previous ratings in their reports receive better future ESG ratings. However, the adoption of double materiality had no significant impact. Research implications -The study contributes to the business model literature by demonstrating how reporting practices and regulatory development build external representations of firms' value creation, delivery, and capture. It highlights the role of disclosure frameworks and double materiality as institutional forces with the capacity to transform business models to meet stakeholder and regulatory pressures.Originality/value -This study is one of the first longitudinal tests that empirically analyzes the impact of non-financial reporting frameworks and DM on ESG ratings, shedding new light on how they impact the evaluation of sustainable business models.

Keywords: Ratings; External Sustainability Performance Assessment; Corporate Reporting; Double Materiality; Non-financial Reporting; Non-financial Reporting Double Materiality Corporate Reporting External Sustainability Performance Assessment Ratings; Corporate Reporting Non-financial Reporting Double Materiality ESG ratings. 1; ESG ratings. 1 (search for similar items in EconPapers)
Date: 2024-09-19
New Economics Papers: this item is included in nep-acc and nep-env
Note: View the original document on HAL open archive server: https://hal.science/hal-04704651v2
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Published in 19th EIASM Interdisciplinary Conference On “Intangibles, Sustainability, And Value Creation – Reporting, Management, And Governance", Sep 2024, Grenoble, France

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