Beyond NFRD compliance: Is social tone associated with better corporate social performance?

Titolo Rivista FINANCIAL REPORTING
Autori/Curatori Eleonora Monaco, Luca Galati, Matteo Merlo
Anno di pubblicazione 2026 Fascicolo 2026/1
Lingua Inglese Numero pagine 28 P. 57-84 Dimensione file 203 KB
DOI 10.3280/fr202518147
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Purpose: This study investigates whether and to what extent the social disclosure tone used in sustainability reports (herein ‘social tone’) is associated with enhanced corporate social performance (CSP) before and after the entry into force of the EU Non-Financial Reporting Directive 2014/95/UE (NFRD). Design/methodology/approach: Using a sample of sustainability reports available for the constituent firms of the Italian FTSE Italia All-Share, we employ a textual analysis approach (i.e., Natural Language Processing [NLP]) to quantify the use of social tone in corporate sustainability reports and assess its relationship with CSP. Findings: Encompassing 329 firm-year observations from 2012 to 2021, we find that social tone is positively associated with CSP, thus demonstrating that the sustainability reporting narrative plays a strategic role in firms’ social performance. However, social tone is negatively associated with CSP in the period post-NFRD, suggesting a regulatory ceiling effect. Originality/value: This study underscores the dual importance of regulatory frameworks and narrative disclosure in shaping CSP. It offers significant implications for policymakers and firms aiming to effectively leverage corporate sustainability practices. Practical implications: These results imply that while regulatory mandates elevate baseline CSP, the distinct contribution of social tone becomes less impactful under mandatory regulatory conditions when there is a lack of specific disclosure requirements.

Parole chiave:mandatory disclosure, non-financial reporting, social performance, social tone

Jel codes:G38, M14, M41, M48, Q56

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Eleonora Monaco, Luca Galati, Matteo Merlo, Beyond NFRD compliance: Is social tone associated with better corporate social performance? in "FINANCIAL REPORTING" 1/2026, pp 57-84, DOI: 10.3280/fr202518147