A Systematic Review of the Effects of Mandatory Corporate Sustainability Reporting

An increasing number of countries are introducing regulations on mandatory sustainability reporting, while researchers from various disciplines are trying to evaluate the effects of rendering sustainability reports mandatory. We conducted a review of 171 articles in Scopus-indexed journals, aiming to identify the most prominent topics and key research outputs. Our findings are categorized into four broad themes: the effects of legislation on the quality and quantity of the reports, the effects of financial performance on firms, the effects of ESG performance on firms and other effects. This is the first review to include a large number of empirical and non-empirical studies from various disciplines, including law. The positive effect of legislation on the quality, credibility and comparability of reports is more pronounced for countries outside Europe. The effects related to the financial performance of firms are positive in the long run. At the same time, regulation induces companies to adopt more CSR initiatives and may therefore be seen as an effective tool in rendering businesses more sustainable. Other perceived effects of increasing regulation are the fragmentation, complexity and rapid evolvement of the legislative framework on sustainability reporting, as well as the role of the institutional environment.