Do internationally operating companies act in a socially sustainable manner? An empirical comparison of disclosure regarding employee matters and human rights matters

The adoption of the NFRD by the European legislator in 2014 led to normative and institutional changes in sustainability reporting (Hummel and Jobst 2024; Johansen 2016), resulting in an intensification of regulatory requirements and practices in this area (Ottenstein et al. 2022). While sustainability reporting was voluntary in the majority of EU member states until 2016 (Aureli et al. 2019; Camilleri 2015) and was based, in particular, on the internationally established but voluntary GRI standards (Adams et al. 2022; Dinh et al. 2023), due to the NFRD, certain large EU-based undertakings have had to publish a non-financial statement/report from 2017 onward (Costa and Agostini 2016; Luque-Vílchez and Larrinaga 2016). These non-financial statements/reports refer, among other things, to the disclosure of employee matters and human rights matters (EU Directive 2014). After presenting a draft of the CSRD in April 2021 (EU Commission 2021a) for the further development of non-financial reporting, the European legislator finalized the trilogue negotiations in June 2022 (EU Council 2022a) and adopted the CSRD in December 2022 (EU Council 2022b; EU Directive 2022; EU Parliament 2022). In November 2022, and thus in the run-up to adoption, the European Financial Reporting Advisory Group (EFRAG) submitted the first draft of the ESRS to the European Commission (EU Commission, 2021b; EFRAG 2022). The draft regulates sustainability reporting matters to be disclosed, with the social standards ESRS S1 relating to a company’s own workforce and ESRS S2 relating to employees in the value chain (ESRS S1 2022; ESRS S2 2022). In 2023, the European Commission subsequently adopted the Delegated Act on the first set of ESRS (European Commission 2023a; European Commission 2023c).

In 2020, the EU initiated a consultation regarding the revision of the NFRD to gain further insights and enhance the quality of non-financial reporting (EU Commission 2020a). The evaluation of the NFRD revealed, among other things, that non-financial information is not sufficiently comparable and reliable (EU Commission 2020b), which, according to Korca et al. (2023), is due, in particular, to the divergence of the various purposes that reporting can serve and which is triggered by the application of different frameworks and standards. In addition, according to Baumüller and Sopp (2022), consideration of the materiality principle should be improved. Fiandrino et al. (2022) confirm these findings, stating that the overall quality, comparability, and reliability of non-financial disclosure need to be improved. Regarding modern slavery reports a positive effect of readability on transparency and decision usefulness of information and firm value is likely to occur (Saha et al. 2024). Furthermore, the results support the notion that comparability is a central feature of information quality in sustainability reporting (Unerman et al. 2018). For example, there is a lack of a binding framework, sufficient specification of the content of non-financial statements/reports, and an EU-wide obligation to have the report content reviewed by an independent auditor (Korca and Costa 2021). Furthermore, neither performance indicators have been defined nor a binding reporting framework has been created (Mittelbach-Hörmanseder et al. 2021). Thus, several companies use the GRI standards in the mandatory setting of the NFRD (Pizzi et al. 2024). Based on this initial situation, companies subject to reporting requirements have considerable discretion in deciding which sustainability aspects (Kosi and Relard 2024; Mio et al. 2020) in general, and social aspects in particular, they want to disclose and which reporting framework they want to use (Schönherr et al. 2022). In line with the NFRD, the content of the disclosure may therefore vary between companies (EU Commission 2019), and comparability may be limited (Aureli et al. 2020).

Employee matters. The term ‘employee’ refers to all persons who earn income from employment. In terms of employee matters, a company addresses a wide range of concerns within its workforce and has opportunities to influence employee matters directly. Protections for workers are enshrined in national laws, and employees are recognized as crucial resources and essential for achieving company success (Dyer and Reeves 1995), thereby contributing to the creation of corporate value (Garg et al. 2018). Mandatory sustainability reporting in the EU requires disclosure of employee matters (EU Commission 2023a; EU Directive 2014). While companies regularly disclose employee matters in an attempt to gain a competitive advantage, the introduction of the double materiality approach by the CSRD may enhance the significance of employee concerns in sustainability reports (Correa-Mejía et al. 2024).

Human rights matters. Human rights matters gain relevance when a company outsources employment to external supply chains. While the company may realize cost benefits or improved access, outsourcing employment to external organizations may create several risks, including negative effects on employee morale (Belcourt 2006). In contrast to employee matters, a company outsourcing employment has fewer opportunities to directly influence human rights matters. A focus on human rights matters (e.g., external workforce/supply chain) is particularly important in the prevention of human rights violations (EU Directive 2014). Only recently has the regulation of human rights matters in global supply chains gained attention. This development stems from the inhumane working conditions (ILO 2017) to which many employees are exposed despite internationally recognized protections (ILO 1999; UN 2011). Comprehensive worker rights and protections are now widely recognized (Nolan 2017; Venkatesan 2019), which has resulted in a reduction in exploitation, such as child labour, debt bondage and forced labour (Barrientos 2013; Caruana et al. 2020; Davies 2019). This movement has given rise to numerous national laws (Saha et al. 2024), such as the US Dodd–Frank Act (United States Congress 2010), the Australian Commonwealth Modern Slavery Act (Australian Government 2019) and the German Supply Chain Due Diligence Act (Bundestag 2021). At the European level, the EU Commission updated its trade and investment strategy to promote ethical trading systems (EU Commission 2015) and adopted a supply chain law with the Corporate Sustainability Due Diligence Directive in 2024 (EU Commission 2022; EU Commission 2024). Furthermore, mandatory sustainability reporting in the EU includes disclosure requirements regarding human rights matters (EU Commission 2023a; EU Directive 2014). Additionally, the introduction of the double materiality approach by the CSRD may enhance the degree of disclosure regarding human rights matters by companies that did not previously focus on the materiality approach (Correa-Mejía et al. 2024). Table 1 summarizes the development of disclosure requirements regarding employee and human rights concerns in the EU.

The materiality principle postulates that companies should disclose only those sustainability matters that have significant impacts, risks, and opportunities within the context of their business model (EU Commission 2023c). In this regard, companies operating in the same sector often exhibit similar characteristics regarding their sustainability-oriented activities, resulting in sector-specific sustainability reporting requirements (Eccles et al. 2012). While some sectors are associated with widespread and serious human rights violations (Ahmad et al. 2022; Böhling et al. 2019; Kwarto et al. 2024), other sectors are affected to a lesser extent, with a distinction being made between sectors with direct or indirect human rights violations (Schneeweiß 2020). In terms of compliance with human rights standards, there are high-risk sectors, such as agricultural production, the garment and extractive industries, the manufacture of information and communication technology (ICT) devices, and automotive manufacturing (CHRB 2022; IPIS 2014; UN 2017). According to Costa et al. (2022), the quality of sustainability reporting can be improved through sector-specific disclosures, so sector-specific standardization of reporting is recommended (Eccles et al. 2012). To this end, several standard setters, such as the Sustainability Accounting Standards Board (SASB 2023) and the Global Reporting Initiative (GRI 2024), already provide sector-specific standards or, like the EU, intend to develop them (EFRAG 2023; European Commission 2023b).

By adopting the Second Shareholder Rights Directive (EU Directive 2017), the European legislator intended to enhance long-term shareholder engagement with the sustainable orientation of listed companies. Consequently, since then, the variable remuneration of board members in listed companies must include financial and non-financial performance criteria linked to corporate social responsibility and the short- and long-term orientation of corporate activities (Obermann and Velte 2018; Stark 2021). In line with the Second Shareholder Rights Directive, listed companies have been required to publish a remuneration report since the 2021 financial year, detailing the company’s remuneration policy (EU Directive 2017). This report must incorporate environmental and social board compensation performance criteria that are deemed material for enhancing the long-term and sustainability orientation of a listed company (EU Directive 2017). Consequently, the increasing relevance of social targets as a corporate management element can be observed. As employee matters and human rights matters regularly constitute material board compensation criteria, companies will frequently disclose compensation-relevant targets in their remuneration reports. Figure 1 illustrates the normative development of social sustainability reporting.

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Companies operating in the same organizational field regularly show homogeneous characteristics or forms over time (Fernando and Lawrence 2014). This behaviour, which is based on the theoretical insights of institutional theory in general and isomorphism in particular, illustrates how organizational changes become homogeneous over time (DiMaggio and Powell 1983). Specifically, isomorphism can be divided into three main currents that generally coexist, namely coercive, normative, and mimetic approaches to homogenization processes (DiMaggio and Powell 1983; De Villiers et al. 2014). While coercive isomorphism shows the process of becoming homogeneous over time through external pressure by powerful actors toward formalizing procedures, such as governmental pressure resulting from the adoption of law (Fernando and Lawrence 2014), normative isomorphism illustrates harmonization through common values and the professionalization of company activities (Fernando and Lawrence 2014). Mimetic isomorphism illustrates how the common processes of advanced companies are emulated by other entities (DiMaggio and Powell 1983). The theoretical insights of institutional theory in general, and the different forms of isomorphism in particular, can be used to explore differences between employee and human rights disclosures. For this purpose, a research model (Fig. 2) was designed that translates the research question into five concrete research assumptions, considering the different forms of isomorphism.

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Employee disclosures and human rights disclosures may be based on normative requirements, voluntary reporting standards, and other disclosure practices. The adoption of sustainability reporting regulations (NFRD/CSRD) by European legislator and their transformation by member states may be seen as exemplifying coercive isomorphism (Korca et al. 2021). According to Carungo et al. (2021) and Fiechter et al. (2022), this regulatory pressure in the area of sustainability reporting will improve the quality of reporting over time and, following Cicchiello et al. (2023), promote sustainable accountability of reporting companies. Empirical findings in this regard indicate that regulation can lead to the further development of sustainability reporting, even though a particular regulation is still in place (Doni et al. 2020). Regarding human rights (Schrempf-Schirling and van Buren III 2020) disclosure (McPhail and Adams 2016), there was little emphasis among companies before the NFRD entered into force (Matuszak and Rόżańska 2017). Thus, concerning the disclosure of human rights matters, the NFRD is seen as an important starting point (Neglia 2016). Consequently, it can be assumed that the introduction of the NFRD led to an increase in non-financial disclosure (Korca et al. 2021).

With regard to reporting, it can be seen that, especially in the first few years after the NFRD comes into force, companies switch to standard formulations if meaningful sustainability-related disclosure is associated with a weak incentive for the reporting company (Christensen et al. 2021). In contrast, while corporations gain experience with mandatory reporting over time and their disclosures are associated with an increasing incentive level, it may be assumed that reporting entities will increase the availability of sustainability-related disclosures over time. To measure the quality of reporting, the NFRD has been examined in empirical studies (Brejier and Orij 2022). The results show that the NFRD has no influence on the tone of the text (Samani et al. 2023). Lock and Seele (2015) point out the need for greater standardization. The key factor here is that the NFRD is comparable neither between EU countries nor between companies (Aureli et al. 2020), which may be due to the lack of a decision-relevant assessment of reporting (Boiral et al. 2019; Monciardini et al. 2020).

According to normative isomorphism, there is increasing professionalization over time, which can lead to sustainability reporting producing sophisticated and widely accepted reporting guidelines and procedures on a voluntary basis (Stawinoga and Velte 2022). This behaviour is based on the alignment between the disclosure expectations of the addressees and the disclosure behaviour of the companies. Since employees are essential for generating excess returns through their work performance (Chadwick and Dabu 2009), they are considered a valuable corporate resource. In this regard, it is expected that employee disclosure will report content that reveals the performance of employees in the organization. With regard to the disclosure on the protection of human rights in international supply chains, it can be assumed that disclosure relates, in particular, to compliance with human rights and thus to elementary employee protection rights. The reason for this is that companies in labour-intensive sectors relocate production to less developed countries, where labour is cheaper (Christ et al. 2019). As a result, companies can benefit from lower costs, although there are also higher risks in the context of a lack of worker protection. If accidents occur on this basis, buyers and governments attempt to introduce mechanisms to promote responsible sourcing (Jacobs and Singhal 2017; Zarei et al. 2020). The trigger for this is consumer awareness of the consequences of irresponsible sourcing (Agrawal and Lee 2016). Empirical studies can confirm these explanations with regard to the scope and quality of reporting for employee matters (Samani et al. 2023) and human rights matters (Lopatta et al. 2023).

With regard to the mandatory disclosure of a non-financial statement/report, individual sectors portray different sensitivity and risk profiles toward sustainability-related matters (Eccles et al. 2012). While some sectors are characterized by low sensitivity toward sustainability-related matters, the business activities of other sectors are characterized by an intensive risk profile and high sensitivity. Because of informal norms (Panfilo and Krasodomska 2022), companies operating in sensitive sectors provide more (Reverte 2009) and higher-quality information when disclosing environmental matters. Companies operating in polluting sectors are also more likely to disclose sustainability-related matters (De Villiers and Marques 2016). According to this informal norm, companies belonging to socially sensitive sectors are more likely to disclose human rights matters in a mandatory setting.

The adoption of the Second Shareholder Rights Directive in 2017 and its entry into force in 2021 in European member states fostered the integration of non-financial performance criteria relating to the variable remuneration of the board members of listed companies. The sustainable-oriented compensation of chief executive officers has been variously analyzed, with varying results regarding the determinants and effects of a sustainability-oriented compensation scheme (Winschel and Stawinoga 2019; Velte 2024). Thus, the integration of sustainability-related targets into the compensation scheme in general, and social performance targets in particular, was expected to be more common from the year 2021 onward. As European companies operating in carbon-intensive sectors more frequently display carbon targets in their remuneration policy (Winschel 2021), it is expected that companies operating in socially sensitive sectors will do the same for social targets.

In this study, content analysis was used to assess the disclosure of employee matters and human rights matters in non-financial statements/reports and remuneration reports. In order to analyze the latent (deeper) meaning of the non-financial statements/reports and remuneration reports a qualitative content analysis has been conducted based upon inductive categories derived from a thematic analysis (Vourvachis and Woodward 2015). This approach is regularly used in the research field of sustainability reporting (Dobbs and van Staden 2016; Lock and Seele 2016). It offers a systematic approach to analyzing existing texts, and the specifics of the data are assessed in the context of the analysis. In this way, replicable and valid conclusions about the data can be obtained (Conley and Tosti-Kharas 2014; Krippendorff 2004).

To meet the challenges of qualitative content analysis (Landrum and Ohsowski 2018; Vourvachis and Woodward 2015) regarding validity, systematics, and regularity, the analysis was based on a structured process (Berniak-Woźny and Kwasek 2020). Atlas.ti software established for qualitative evaluations has been used for the analysis (Aureli 2017; Ploum et al. 2019). The process steps are presented in the following explanations in conjunction with Fig. 3, Table 2 and the complete overview of the coding in the Appendix. Step 1 (evaluation focus: Fig. 3): Only mandatory elements of sustainability reporting (non-financial statement/report; remuneration report) were coded by considering all disclosure formats. This approach, which is common among researchers (Korca et al. 2021; Zarzycka and Krasodomska 2022), allows for a standardized analysis. Step 2 (analysis focus: Fig. 3): The analysis of two related social reporting matters enabled a qualitative comparative assessment (Ragin 1999) of the matters and expanded the understanding of differences in corporate social reporting. Following the selection of the case (chapter 4) the qualitative comparative assessment contains the three major steps (Ragin 1999) testing the causal conditions and presentation of the results (chapter 5) as well as interpretation of the results (chapter 6 and 7). In this way, the study extended the existing state of research on social sustainability reporting (Di Vaio et al. 2020; Lopatta et al. 2023; Samani et al. 2023) through insights into the reporting of employee matters and human rights matters. Step 3 (coding system: Table 2 and Appendix): A deductive approach is used for the analysis, in which the aspects to be examined (meta-aspects) and codes (main aspects) are determined from a normative derivation (Boiral et al. 2019). For this, a direct link between the reporting requirements (CSRD ESRS S1/S2; Second Shareholder Rights Directive) and the corporate disclosure (non-financial statement/report; remuneration report) was essential (Aureli 2017). Based on this, an iterative revision of the codes followed, in which they were adapted to the data material through new formation, condensation, and expansion (Hsieh and Shannon 2005; Mayring 2014). As a result, 25 codes were derived for coding the non-financial statement/report; remuneration report: 4 codes for social matters; 15 codes for disclosure requirements and 6 codes for quality and comparability. Step 4 (unit of analysis: Fig. 3): For the coding of employee matters and human rights matters in the non-financial statement/report, the smallest unit of analysis (one sentence/one key figure) was selected to achieve the exact results (Romero et al. 2019). For this purpose, all codes about which the sentence/figure provided information were appended to the coding – e.g. the sentences “The Lost-Time Injury Frequency (LTIF) indicator measures work-related accidents per million hours worked that result in lost time.” disclosed on employee matters were coded with 3 codes (specific concerns (employee); health/safety; qualitative data) and “The LTIF for employees deteriorated to 2.1 (2020: 1.5).” with 5 codes (specific concerns (employee); health/safety; qualitative/quantitative data; historical value; actual value). In addition, nonspecific disclosures (not covered by ESRS S1/S2), such as the sentence disclosed in a report “We are convinced that listening to our employees is crucial to creating a first-class employee experience and to recruiting and retaining the best talent.” were coded as nonspecific disclosures. This coding enabled an evaluation according to specific and nonspecific disclosures and thus an overall evaluation of the non-financial statements/reports disclosed by the companies. For the coding of employee-related remuneration targets and human rights-related remuneration targets, the remuneration report was selected as the unit of analysis. Each target reported on one of the matters was coded.

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The data collection and thus the determination of the sample to be analyzed, which is shown in Table 3, is based on a scientific procedure that is explained in the following four steps. The 1. step of the procedure concerned the selection criteria for the sustainability reports. To achieve comparable results, the evaluation of standardized sustainability reporting was required. The NFRD reporting requirement currently applied in the EU is suitable for this purpose. This regulation offers the advantage of a reporting obligation and enables a comparison between reporting requirements and published reports. As the NFRD reporting requirement can be disclosed in different ways (separately/integrated in the annual or status report, in the sustainability report, or in a non-financial statement), a review of all reporting elements was carried out. The 2. step concerned the selection criteria for the reporting country. Based on a heterogeneous transformation of the NFRD in the member states of the EU (GRI/CSR Europe 2017) and diverging labour standards and employee protection rights (ILO 2022a) within the EU, the evaluation was conducted on a representative EU member state to ensure comparability. Based on comprehensive standards and protection rights (ILO 2022b), an extensive import economy with intensive use of global value chains (WTO 2022) and a coordinated market economy – e.g. in form of pressure/arrangements from unions, with work councils and workers’ representatives (Ehnert et al. 2016) – an analysis of companies located in Germany seems appropriate. For the selection of a delimited sample representing an economy, an evaluation of the companies listed in the German indices DAX, MDAX, and SDAX was deemed suitable. The indices contained the largest companies with the highest turnover, were compliant with the interpretation of the NFRD, and have regularly been used in empirical studies (Lock and Seele 2015; Michaels and Grüning 2018). To ensure that all companies referred to the reporting requirements of the German CSR Directive Implementation Act, which transformed the NFRD reporting requirement into national law, only companies headquartered in Germany were examined. The 3. step concerned the selection criteria for the sectors: sectors with and without specific social risks were selected to identify sector effects. For this purpose, companies with comparable business models and belonging to a specific sector had to be listed on the DAX, MDAX, or SDAX, with sectors comprising at least three companies to ensure comparability. The selection of sectors was based on publications identifying sectors with particular human rights risks, such as the textile (Desore and Narula 2018) and automotive (Schlie and Yip 2000) sectors, as part of the UN Guiding Principles (CHRB 2022; IPIS 2014). Sectors with primarily indirect impacts on sustainable development, such as the insurance sector (Scholtens 2011), or sectors with a major effect on social harmony, such as the utilities sector (Yu 2022), were evaluated as a reference group without inherent risks regarding aspects of social rights. The 4. step involved the selection criteria for periods. Only non-financial statements/reports whose financial years coincided with the calendar year were included in the evaluation to meet the criterion of comparable reporting over time. The fiscal year 2017 was analyzed as the first reporting period under the requirements of the NFRD and the fiscal year 2021 as the first reporting period under the requirements of the Second Shareholder Rights Directive.

The highest level of obligation included reporting concerns arising from the NFRD. The medium level comprised reporting requirements stemming from GRI standards, which are commonly used on a voluntary basis. The lowest level of commitment comprised reporting matters related neither to the NFRD nor to the GRI standards (new disclosure matters according to ESRS S1 and S2), thereby representing novelty. Measured by the frequency of disclosure on employee matters and human rights matters, the findings indicate the effect of regulation. To enable a comparison, the frequency of disclosed employee matters and human rights matters (Table 4, columns A to C) according to the existing (GRI, NFRD) and new (CSRD) disclosure requirements (Table 4, columns D to F, highlighting) have been added and the result divided by the number of disclosure matters included in each case. The findings illustrate that companies most frequently provided disclosures on employee matters and human rights matters based on NFRD (legal) requirements (1959 disclosures divided by 4 disclosure matters = 490 relating to employee and 1803 disclosures divided by 1 disclosure matter = 1803 relating to human rights), followed by disclosures based on GRI (voluntary) requirements (427 relating to employee and 933 relating to human rights). In contrast, companies were least likely to disclose new disclosure requirements created by ESRS S1 (55 relating to employee) and S2 (47 relating to human rights). Furthermore, companies had largely fulfilled the employee disclosures required by ESRS S1 (disclosures for all 11 mandatory matters), while human rights disclosures under ESRS S2 were less frequently met (disclosures relating to 9 of the 15 mandatory matters). This finding can be explained by the historically longer-term disclosure of employee matters to human rights matters and thus also confirms the development of regulatory pressure over time. In accordance with coercive isomorphism, the empirical results show that regulatory pressure promotes sustainability-oriented accountability of reporting companies (Cicchiello et al. 2023), so assumption 1 can be confirmed with reference to Table 4.

The analysis is based on the type of disclosure, it measures the intensity of qualitative information (sentences), qualitative and quantitative information (sentences with key figures), and quantitative information (key figures) and examines the time reference of the disclosure in relation to historical, current, and future key figures. In this respect, it can be assumed that quantitative information promotes the quality and comparability of reporting more than purely qualitative information (Boiral and Henri 2017) due to the clarity of the information. Since the valuation of listed companies was forward-looking, the same applies to forward-looking rather than historical values. Overall, companies disclosed 56.25% of information on employee matters and human rights matters in sentences, 10.92% combined in sentences and key figures, and 32.83% in key figures. By including the reporting matters, it becomes apparent that quantitative information was mainly used to describe the workforce and supplier structure and that material employee matters and human rights matters were mainly disclosed in qualitative form; thus, key figures were used to a very limited extent to measure performance. With regard to the time reference of the disclosure, the results show that current key figures on employee matters and human rights matters were most frequently reported (62.25%), followed by historical key figures (35.21%) and the very reluctant reporting of future key figures (2.54%). Contrary to the assumption based on coercive isomorphism, the results of the analysis of disclosure types do not indicate an improvement in report quality and comparability over time. Although Table 5 shows that the scope of reporting is increasing in relation to all three types of disclosure (sentences, sentences with key figures, and key figures), the increase from unclear (sentences 77.32%) to clear (sentences with key figures 36.43% and key figures 5.47%) information dominates. This corresponds to the existing criticism of a high degree of disclosure autonomy. However, with regard to the time reference of the disclosed information (historical, current, and future key figures), the effect of coercive isomorphism can be confirmed in the context of the disclosure of human rights matters. Table 5 also shows that the recognizable increase in key figures over time does not apply to employee matters but to human rights matters. This finding indicates that the increased regulatory pressure in recent years has promoted the extent of human rights disclosure and that coercive isomorphism is particularly effective after regulation. Thus, assumption 2 can be partially confirmed.

The results show that with regard to employee matters, the companies most frequently disclosed information on health/safety (26.08%), diversity/violence/harassment (24.44%), and training/skills development (18.41%). In this connection, information on employee training/skills development (an indication of the future-oriented qualifications of employees), health-related accidents at work, and sickness rates (an indication of employee performance) established a direct economic link. Companies are willing to prove their performance through high qualification levels and health rates among employees. Concerning the disclosure of matters of diversity/violence/harassment, it was apparent that companies were not focused on incidents of discrimination but, rather, on measures to promote diversity, particularly in the context of women’s advancement. The disclosures show that the aim is to create a culture of diversity that has a positive impact on identifying customer needs and attracting and retaining talent. Regarding human rights matters, the results show that an above-average number of disclosures were made on severe human rights impacts (72.73%). The emphasis here points to the strategy of specifically eliminating existing risks by demonstrating that the company accepts its social responsibility and complies with minimum labour standards. Overall, non-prioritized topics were disclosed significantly less or not at all. Specifically, 68.93% of the employee disclosures were related to 3 of the 11 matters (health/safety, diversity/violence/harassment, and training/skills development), and 31.07% were related to 8 of the 11 matters. An even greater concentration could be observed in the case of human rights. Here, 72.73% of the reports were related to severe human rights impacts and 27.27% to the remaining 14 of the 15 matters. By comparing the disclosure of employee matters and human rights matters, this finding points to the correctness of the view held by normative isomorphism that there is an increasing professionalization of reporting over time (Stawinoga and Velte 2022). Furthermore, the formation of shared values described in the normative isomorphism can be confirmed with regard to the matters disclosed on employee and human rights. Therefore, there is consistency between disclosure behaviour and expectations. Assumption 3 can be confirmed by the results in Table 6.

The results show that three sectors (insurance/utilities/automotive) reported on human rights matters much more selectively (3, 2, and 5 out of a total of 15 matters) than in the textile sector (9 out of a total of 15 matters). In contrast, all sectors reported almost completely on employee matters, with at least 10 out of 11 matters. The results also show that the same three sectors disclosed human rights matters in conjunction with specific vs. nonspecific information (35% vs. 65%, 62% vs. 38%, and 58% vs. 42%) with a lower level of decision usefulness than employee matters (76% vs. 24%, 85% vs. 15%, and 79% vs. 21%), while the textile sector had significantly more specific disclosures (96% vs. 4% and 78% vs. 22%). Overall, employee matters are disclosed regardless of sector, and human rights matters are disclosed depending on the sector (of high-risk sectors). In this respect, it can be shown that the social grievances in the textile industry were recognized by the companies concerned and regarded as real risks that they wanted to counter through proactive reporting. The view held by mimetic isomorphism that there is uniformity of disclosure within a sector can be confirmed for social matters. Furthermore, the pioneering role of the textile sector in the disclosure of human rights matters is also evident, although other sectors have yet to follow suit. Assumption 4 can be confirmed based on the results in Table 7 for employee matters and for human rights matters in relation to high-risk sectors.

The results show that social targets were included in the remuneration policy, even though this inclusion is manageable, with only 36 targets in 24 remuneration reports examined. The view of sector-specific uniformity of disclosure advocated in mimetic isomorphism can be established for employee matters by comparing remuneration targets in the context of uniform matters. This finding cannot (yet) be confirmed for human rights-related remuneration targets, as only three human rights targets were formulated across all reports. Remuneration targets on employee matters and human rights matters currently focus on training, health, diversity, and human rights, with employee satisfaction targets being the most frequently mentioned nonspecific topic. A comparison between the disclosure of employee matters and human rights matters and the formulation of employee-related remuneration and human rights-related remuneration targets shows a higher degree of professionalization in the context of reporting. Since the increase in employee-related remuneration targets coincides with the entry into force of the regulation in 2021 and the obligation to report on sustainability has existed since the regulation came into force in 2017, the findings also confirm those of coercive isomorphism in particular. In reference to Table 8, confirmation of assumption 5 is restricted to the sector-specific disclosure of targets related to employee compensation.

The results confirm the general findings on sustainability reporting by showing that social reporting on employee matters and human rights matters also depends significantly on the degree of regulation. As the CSRD expands the scope of mandatory sustainability reporting, the comparability considerations of sustainability reporting in general, and reporting quality of employee matters and human rights matters in particular, are gaining in relevance.

To enhance the degree of comparability and reporting quality of employee matters and human rights matters, coercive isomorphism plays a crucial role by contributing to the degree of standardization of sustainability reporting processes. Based on the reporting obligations of the NFRD, the European legislator passed the Corporate Sustainability Reporting Directive (CSRD) by the end of 2022. Additionally, for the first time, European Sustainability Reporting Standards (ESRS) have been developed, which have to be used to publish a sustainability report in line with the CSRD. Thus, in line with coercive isomorphism and the research results, it may be assumed that CSRD as a form of mandatory sustainability reporting (Carungo et al. 2021) and by establishing mandatory sustainability standards (Stawinoga and Velte 2022) in the form of ESRS will increase the quality of employee matters and human rights matters over time.

The results extend the existing finding that the relatively young discipline of sustainability reporting is becoming more professional with increasing reporting practice in the area of social reporting on employee matters and human rights matters. Overall, the results show that reporting on employee matters is currently at a higher level of professionalization than reporting on human rights matters. The comparison between specific and nonspecific reporting on employee matters and human rights matters also shows that reporting does not only serve to ensure due diligence obligations but also to enhance reputation.

In general, in accordance with the normative isomorphism and the results of the study, it can be assumed that the degree of professionalization of sustainability reporting according to CSRD/ESRS for employee matters and human rights matters will increase over time after the CSRD comes into force. Specifically, it will be intriguing to ascertain whether the design of the CSRD framework can elevate the extent of precise disclosures to align with the prerequisites outlined in ESRS S1 and S2, while concurrently reducing nonspecific disclosures. Moreover, it is imperative to explore the trajectory of the development of human rights disclosures in the foreseeable future.

The finding from environmental sustainability research that the risk of a sector has an impact on sustainability reporting is also confirmed for the disclosure of human rights matters in the context of high-risk sectors. This effect is also evident with regard to the remuneration report, although it is also clear that the anchoring of sustainability-related remuneration targets in general, and employee-related remuneration and human rights-related remuneration targets in particular, is still in the early stages of development.

Drawing from the concept of mimetic isomorphism, it can be hypothesized that companies may replicate sector-specific standards or prevalent sustainability reporting practices adopted by advanced counterparts. Notably, listed companies comprising more than 500 entities possess prior experience with non-financial reporting in a mandatory setting (NFRD) and are mandated to comply with the CSRD requirements starting from the fiscal year 2024 onward. Consequently, it is plausible to anticipate that these companies will initially encounter coercive isomorphism, assuming the role of pioneering entities. In line with mimetic isomorphism, companies subject to CSRD reporting obligations commencing one year later (large companies) or two years later (small- and medium-sized listed companies) are likely to emulate the reporting practices of their advanced counterparts. Figure 4 summarizes the research project and the results.

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