Organizational responses to non-financial reporting legislation in Germany and Poland—Qualitative study and explanatory framework

Abstract

Although the European Non-financial Reporting Directive (Directive 2014/95/EU) aims primarily to increase the transparency of non-financial reports, it is also suggested that it will impact organizational practices, especially with regard to corporate governance and human resource management (HRM), in European Union (EU) member state companies. Considering the scarcity of research on the effects of non-financial reporting (NFR), especially taking into account potential influences of country-context factors, our qualitative comparative study aims at explaining the similarities and differences of the impact of mandatory NFR on organizational practices in two EU member states, Germany and Poland.

While we find many similarities, country-specific factors account for differences in the way NFR is carried out, highlighting the need for contextualization. In particular, the countries’ individual reporting histories, as well as the varying levels of intensity relating to talent scarcity and societal debates about sustainability issues, greatly influence organizational responses to mandatory NFR. We suggest an explanatory framework that will contribute to better understanding of organizational responses to NFR-related EU directives while considering country context. We further propose that the institutional mechanisms illustrated in our framework may restrict means–ends decoupling, that is, NFR serving as an end in itself and not as a means of enhancing sustainability performance. Finally, future avenues for investigating the effects of mandatory NFR on both organizations and their environments are proposed.