Does mandating ESG reporting reduce ESG decoupling? Evidence from the European Union's Directive 2014/95

Ahmed Aboud*, Ahmed Saleh, Yasser Eliwa

*Corresponding author for this work

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This paper investigates the impact of Directive 2014/95 (hereafter, ‘the Directive’) issued by the European Union (EU) that mandates the disclosure of ESG information on ESG decoupling behaviour by EU-listed firms and whether the strength of national enforcement systems of member states plays a moderating role in this relationship. Using a difference-in-differences design and employing a propensity score matched sample of 3020 firm-year observations from the EU and the United States, we find that both the passage of the Directive in 2014 and the implementation of the Directive in 2017 have a mitigating effect on ESG decoupling. We also find that the strength of national enforcement systems has no impact on the relationship between the Directive and ESG decoupling. Furthermore, our additional analysis indicates that the effect of the Directive is less pronounced for firms that have their ESG information independently audited. Additionally, we find that the impact of the Directive is more pronounced for firms operating in non-controversial industry sectors. While the Directive is under ongoing revision by the EU Parliament and Commission to be replaced by the new Corporate Sustainability Reporting Directive (CSRD), our study provides timely insights into the effectiveness of the Directive and its impact on ESG information.

Original languageEnglish
Number of pages16
JournalBusiness Strategy and the Environment
Early online date26 Aug 2023
Publication statusEarly online - 26 Aug 2023


  • enforcement
  • ESG audit
  • ESG decoupling
  • ESG strategy
  • European Union's Directive 2014/95

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