Corporate environmental performance under the NFRD: An empirical legal analysis of EU Non-Financial reporting requirements
DOI:
https://doi.org/10.62355/ejels.54245Keywords:
NFRD, EU regulation, corporate social responsibility, difference-in-differences, new governance theoryAbstract
This study presents an empirical legal analysis of the EU’s Non-Financial Reporting Directive (NFRD), assessing its impact on corporate environmental performance. While prior research on non-financial disclosure has predominantly emerged from business and finance disciplines, this study contributes to the growing field of empirical legal studies by evaluating the effectiveness of non-financial reporting legal mandates in shaping corporate behaviour. Grounded in New Governance theory and the EU’s legislative rationale, the NFRD is presented as a regulatory instrument designed to enhance transparency and reduce information asymmetries. To empirically assess its impact, the study employs a quantitative research design using environmental performance data from the S&P Global’s Trucost database. The research employs a difference-in-differences design combined with counterfactual estimators to estimate the causal effects of the NFRD on key environmental indicators (greenhouse gas emissions, water consumption, and waste generation) among EU firms. Our findings indicate that the NFRD has a positive, though heterogeneous, effect on environmental performance across industry sectors, with no effect observed in the most polluting sectors (Energy, Materials, Utilities), and provide evidence of the Brussels Effect, with regulatory influence extending beyond EU borders.References
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