Consequences of the Introduction of Mandatory Sustainability Reporting: A Critical Review of International Practice

Today, more and more countries are considering introducing mandatory sustainability reporting as a tool to meet the growing information needs of a wide range of stakeholders and to increase business transparency. Strengthening regulation on mandatory reporting has significant economic, social, and managerial consequences for companies, investors, and society as a whole. The article aims to examine the socio-economic consequences of the introduction of mandatory sustainability reporting across different countries worldwide, systematize the identified effects, and assess pan-European trends in the development of sustainability reporting. The key method of this study is the content analysis of previous studies on the broad socio-economic consequences of the introduction of mandatory sustainability reporting across different countries worldwide, with emphasis on specific effects for companies. The main information base of the study is previous research over the past 5 years, based on a wide range of collected empirical data. Although previous researchers have already analyzed the collected data, their broader comparisons allow the formation of new scientific conclusions. The results of the study indicate that the consequences of introducing mandatory sustainability reporting across different countries worldwide are mostly positive. However, in the short term, companies may incur additional costs from disclosing information in ESG reports. In addition, in some countries, implementing international norms and effective mechanisms to monitor companies' compliance can be difficult. The article reveals and systematizes the positive effects of mandatory sustainability reporting, which ultimately improve companies' perceptions among investors, increase the quality and transparency of the data disclosed in reports, and make companies more responsible to society. The attitude of EU countries towards the introduction of mandatory sustainability reporting, in line with the requirements of the EU Corporate Sustainability Reporting Directive (CSRD), shows that companies across different countries and sectors of the EU economy are wary of mandatory disclosure of ESG aspects, given competition in international markets.