The impact of mandatory non-financial reporting on corporate governance mechanisms: insight from an Italian global player

Carungu, Jonida, Molinari, Matteo, Nicolò, Giuseppe, Pigatto, Giacomo and Sottoriva, Claudio (2022) The impact of mandatory non-financial reporting on corporate governance mechanisms: insight from an Italian global player. In: Non-financial Disclosure and Integrated Reporting. SIDREA Series in Accounting and Business Administration . Springer International Publishing, Cham, pp. 61-84. ISBN 978-3-030-90355-8


This research explores how corporate governance mechanisms deal with mandatory non-Financial reporting adoption. The aim of this chapter is to investigate how Non-financial reporting required by Directive No. 2014/95/EU is internalised by a multinational global player, focusing on material changes produced on corporate governance and internal control mechanisms. Rather than examining the impact of corporate governance on non-financial disclosure practices, this study intends to shedding lights on the effects that compulsory non-financial reporting provokes on members charged with governance and internal control systems. Accordingly, the following research questions are posited:

- which are the organisational changes and strategies implemented at a corporate governance level, as a consequence of a mandatory Non-financial disclosure?
- to what extent reporting rules and routines change as a consequence of the introduction of mandatory Non-financial disclosure?

To answer our research questions, a case study is performed on a selected company: Enel. Enel is a multinational Italian company and one of the world’s leading integrated electricity and gas operators. Enel is selected as it operates in an environmentally sensitive sector which makes much scope to non-financial issues. Accordingly, in recent years Enel stood out for its active engagement in non-financial reporting practices which allows to consider it a “best practice”. The case study approach including in-depth interviews and non-financial reports analysis enabled the data to be collected for this research. In particular, the case study unfolds as follows: First, a content analysis on the different type of non-financial reports prepared by Enel (e.g. Sustainability reports, sustainability plan and so on) is performed. Second, semi-structured interviews with members of Board of Directors, Management Committee and Sustainability Committee are conducted to provide in-depth insights into governance mechanisms changes following mandatory non-financial reporting adoption.

Results highlights that the process of non-financial reporting implementation is strictly linked with management and governance mechanisms as relevant changes in reporting practices necessarily require proper governance systems.
Accordingly, results highlight corporate governance structural changes attuned with strategies implemented, as well as internal practices and routines put in place to cope with the new mandatory requirements. We investigate also specific tools and pragmatic solutions implemented, in order to comply with the requirements of the regulation.

This research contributes to the academic debate in three ways. Firstly, it adds value to existing academic debate on the ways to which the SDGs are being integrated in corporate strategies and practices in the context of Sustainability Report preparers. Secondly, it contributes to fill the gap in the academic literature on the impact of mandatory corporate reporting requirements on organisational governance mechanisms and management processes. Thirdly, it makes lessons for practitioners and regulators about the material changes the Directive No. 2014/95/EU produced on corporate governance and internal control mechanisms.

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