Linking sustainability and non-financial reporting directive 2014/95/EU through isomorphism lens

Purpose - This study aims to explore the connection between sustainability and non-financial reporting (NFR) settled by the Directive 2014/95/EU, aiming to shed light on how institutional isomorphic pressures (mimetic, coercive and normative) are expressed in terms of sustainability issues influenced its enactment at the European Union (EU) level. Design/methodology/approach - Empirically, the contribution of this study relied on the complexity of the research design that uses the same statistical methods and techniques (e.g. principal component analysis, correlation and regression analysis) within two stages of analysis (main and robustness) to increase the trustworthy of the results reached. Findings - The results reveal that countries with sound sustainable management pillars (economic, environmental and social) and development goals promoting economic prosperity, environmental protection and societal well-being (prosperity, planet and people) are more likely to bring active support in enhancing NFR by regulating its framework. Research limitations/implications - The empirical nature of the research left space for some limitations, as long as it relied on country-level data, thus being quite challenging to gauge the commitment to harmonization with the new Directive. Moreover, the model’s explanatory power remains questionable, as the explanatory variables might be measured differently in the model specifications. Practical implications - The study addresses academia/regulators/practitioners by ascertaining their potential to better understand/promote/apply the new Directive. Thus, each could support the steps toward standardized sustainability reporting by keeping up to date with the latest improvements/addressing cross-country inconsistencies in the transposition/managing future implementation in a more effective and accountable way. Originality/value - This paper approaches the harmonization process of NFR across Europe in connection with sustainability issues, grounding on institutional isomorphism. Thus, it fills an existing literature gap, as research studies approaching the new Directive from the institutional theory’s perspective are still scarce and focused on particular countries.