Business at risk: The governance and disclosure of sustainability risks

Research output: ThesisDoctoral Thesis

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The immense issue of sustainability and the discussion about the role that companies should play is more pressing than ever. While large multinationals have major impacts on society, conversely, the social and environmental developments can have an impact on these companies as well. The risk landscape for businesses has shifted significantly over the last decade and sustainability risks are nowadays of utmost importance for large companies. There is more awareness among stakeholders and regulators of the crucial role that companies play in the sustainability transition. This changing business landscape emphasizes the importance of risk governance, which refers to the rules, processes and mechanisms that companies have in place to ensure that various types of risk are understood, managed and communicated in an appropriate manner.
Currently, there is a gap in academic research regarding the links between risk governance and corporate sustainability. While much has been written about ‘why’ companies are integrating sustainability within their risk governance, relatively little research has addressed the related ‘how’ question. Given the growing importance of sustainability issues, a fundamental question arises as to how large companies are responding to these issues and whether any legal reforms should be implemented to guide and foster sustainable development. The main research question is therefore as follows: How and to what extent do listed companies in Europe integrate sustainability risks into their risk governance, and what is the role of regulation in improving the governance and disclosure of sustainability risks? This research addresses an issue that is high on the agenda of European and national policymakers and is extremely important for the public transparency and trust in large corporations as well as the awareness among large companies about the impact of their activities.
This research is at its core multidisciplinary and combines different research methods. We provide a conceptual framework for integrating sustainability into risk governance that is based on a legal study of the existing literature and guidelines, statutory rules and case law, with a particular focus on the Netherlands, Germany, France and the UK. In addition, we conduct an empirical study by hand-collecting data from the public reports of 58 listed companies in Europe over a six-year period (2014-2019). We score the individual companies on a yearly basis by looking at whether or not they disclose particular information that reflects the actual measures that are implemented to adequately respond to sustainability issues. On the basis of this content analysis and economic modeling, we show how and to what extent this integration takes place among listed companies in Europe over the years and we evaluate the role of regulation in stimulating this integration of sustainability into risk governance.
Our main conclusion is that the integration of sustainability into risk governance and disclosure requires a holistic approach that ensures a long-term perspective along with the internalization of so-called externalities, such as pollution or health and safety issues. We therefore recommend the use of the concept of ‘sustainable value creation’ instead of ‘long-term value creation’. Moreover, the empirical results provide the input to evaluate the role of regulation in safeguarding (a minimum level of) the governance and disclosure of sustainability risks by listed companies in Europe. While these listed companies are increasingly integrating sustainability into their risk governance processes, there is still room for improvement in terms of meaningful disclosure that is based on concrete and company-specific information in order to avoid a ‘ticking the box’-exercise. This justifies legal interventions in disclosure by targeting both the form and content of public reporting. Amidst the discussion on director duties and statutory purpose, our results point at less controversial measures that can guide and foster sustainable development. These measures relate to reporting obligations but also to the right combination of hard law and soft law, where in particular the Corporate Governance Codes can have an important ‘nudging’ function.
Original languageEnglish
Awarding Institution
  • Tilburg University
  • van der Elst, Christoph, Promotor
  • Lafarre, Anne, Co-promotor
Award date31 Aug 2022
Publication statusPublished - Aug 2022


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