The management process underpinning the non-financial reporting: a case-study of a Listed Italian Company

In the current economy, several institutions, organizations, stakeholders, and societies are promoting a new idea of business, based on more ethical, social, and environmental-oriented (Cantino and Cortese 2017; Epstein 2018). Hence, community pressures and stakeholders’ expectations have led to a rise in sustainability reporting and standards and guidelines regarding the disclosure of environmental, social, and governance information mainly provided on a voluntary basis (Salvioni and Bosetti 2014). The preparation of stand-alone corporate non-financial reporting provided by large companies is increased from 70% in 2013 to 73% in 2015, and by the year 2017, about 77% of the companies produced reports regarding environmental, social, and governance (ESG) matters (KPMG 2017). More recently, regulation has begun to be deemed necessary to address matters regarding the firm’s legitimacy, transparency, comparability, and credibility of nonfinancial reporting procedures (Eccles and Serafeim 2015; Vitolla and Ramio 2018). The European Union has introduced the Directive 2014/95/EU to oblige companies in reporting non-financial information. This Directive has aimed to achieve similar levels of transparency across the EU states by allowing high levels of flexibility in taking into account the ESG dimensions and the diversity policies implemented by each company. In Italy, the corresponding Legislative Decree regarding the disclosure of nonfinancial and diversity information has been implemented in 2016, and it operates from 1 January 2017. Despite the growing interest in non-financial information disclosure, studies, examining the reasons for and the activities and managers-related disclosure choices, are still lacking (Bebbington and Larrinaga 2014; Gray 2010; Adams and Larrinaga 2007; Hopwood 2009; Moser and Martin 2012). In fact, to date, most of the studies mainly focus on analyzing the content and structure of the non-financial reports by neglecting research topics such as the process underlying the realization and the development of non-financial disclosure (NFD). Therefore, this study aims to fill that gap by exploring the process steps that lead to the non-financial information disclosure. Due to the explorative nature of this research, a qualitative approach, based on a case study (Eisenhardt and Graebner 2007; Miles et al. 2014), is adopted. The research focus is on a listed Italian company operating in the manufacturing sector. Semi-structured interviews (Qu and Dumay 2011) are used to highlight the activities and the stages characterizing the management processes and valorization practices of non-financial information. Therefore, the research questions are the following: (RQ1) Which actors are involved in the process underpinning the non-financial information disclosure? (RQ2) Which are the phases characterizing the non-financial information disclosure process? And finally, (RQ3) what are the main critical areas meet during the development and the implementation of the non-financial disclosure process? It is the first step of preliminary research of a more extensive project aiming to investigate the implementation practices of non-financial reporting. Therefore, this paper contributes to extending the literature regarding the non-financial reporting by providing a deeper description of the process characterizing the NFD implementation and the critical areas and the opportunities associated with the developing process of this report, after the European regulations, with a focus on the Italian context. The paper is structured as follows. In section two, a brief literature review regarding studies on non-financial information reporting is shown. In section three, an overview of the Italian Legislative Decree n. 254/2016, adopted by the Italian Parliament, regarding the disclosure of non-financial and diversity information, is provided. Finally, the research methodology, findings, and conclusion sections are illustrated.