The Forces that Shape Mandatory ESG Reporting
33 Pages Posted: 3 Aug 2022 Last revised: 6 Sep 2022
Date Written: July 30, 2022
Having been sidelined for decades, environmental, social and governance (ESG) reporting by business en-tities has now firmly entered the mainstream in corporate reporting. In this chapter, we outline the economic forces and social institutions that shape mandatory ESG reporting. We start by introducing the term, devel-opment and significance of the ESG concept and related approaches that describe corporate actions beyond shareholder value maximization as well as corporate social and environmental exposures and impacts. ESG reporting is then characterized as an emerging complementary element of the broader phenomenon of cor-porate reporting. We continue by discussing the economic forces shaping ESG reporting as reactions to a growing collective awareness that a neoliberalist economic order, with companies focused solely on profit maximization, is causing serious ecological and social problems since externalities are not sufficiently in-ternalized. Corporate reporting and transparency about firms’ ESG-related matters are then presented as a potential remedy that, however, faces its own challenges and limitations. We then describe the evolving regulatory landscape of mandatory ESG reporting along with its key players and initiatives.
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