An analysis of mandatory sustainability reporting and management practices across the world concludes that it does make a difference, leading to the elevation of sustainability to priority, additional board oversight, and a decrease in corruption.
What is the effect of mandatory sustainability reporting on management practices across the world?
That’s the question asked by Ioannis Ioannou (right), assistant professor of strategic and international management at London Business School, and George Serafeim, assistant professor of business administration at Harvard Business School:
We have analysed the impact of mandatory sustainability reporting on a number of measures reflecting socially responsible management practices in 58 countries around the world. Our research shows that mandatory sustainability reporting does make a significant difference.
- Business leaders embrace a greater sense of social responsibility.
- Firms have elevated sustainable development to a priority goal.
- Boards of directors are providing more effective managerial oversight.
- Incidents of corrupt practices, and bribery and corruption in particular, drop.
Ioannou and Serafeim say the real key is this: “Our research is important because socially responsible managerial practices can enhance the competitiveness of a country by generating higher levels of trust in business. . . We found it noteworthy that the European Union has consistently emphasised the importance of sustainable development and building trust between business and society to increase Europe’s competitiveness.”