Sustainability reporting and corporate environmentally sustainable investment

We investigate whether non-financial reporting (NFR) increases corporate environmental responsibility by exploiting the exogenous introduction of mandatory NFR for companies above a given size threshold (European Union Directive 2014/95). We use a unique and restricted-access dataset released by the Italian Statistical Institute allowing us to observe the universe of Italian firms above 250 employees. In particular, we show with a discontinuity design approach that the introduction of mandatory NFR is associated with significant positive effects in the following environmental domains: (1) waste management, (2) recycled/reused material in inputs, (3) pollution control, (4) emission reduction. Our paper provides relevant predictions and implications for introducing similar (or more extended) rules in the EU and other countries, such as the recent introduction in the European Union (Corporate Sustainability Reporting Directive, December 2022) of more stringent conditions for sustainable reporting requirements.