Activist Pressure and Compliance with Sustainability Disclosure Policy: Experimental Evidence from the U.K. Modern Slavery Act

Abstract

Corporate sustainability disclosure regulations often rely on activist pressure to promote compliance, but the effectiveness of such pressure is unclear. We present results from a field experiment testing the effect of activist pressure from a leading human rights NGO on corporate compliance with the U.K. Modern Slavery Act 2015, which required firms to disclose their actions to address human rights issues. Contrary to expectations, firms sent a letter describing their legal sustainability disclosure obligations were less likely to subsequently comply. However, this negative effect was partially mitigated when the letter included an additional list of already compliant peer firms. The strongest mitigating effect was observed when listed peers were drawn from the same geographic location as the firm receiving the letter.

Keywords: Sustainability Disclosure, Modern Slavery, Human Rights, ESG, Corporate Social Responsibility, Peer Effects, Behavioral Economics