page
31
regulatory systems achieve their policy objectives.”
The findings are based primarily on a growing body
of anecdotes and studies from OECD countries. The
report suggests the following three factors as the
main reasons for non-compliance to a given policy:
a.
the degree to which the target group knows of
and comprehends the rules;
b.
the degree to which the target group is willing to
comply—either because of economic incentives,
positive attitudes arising from a sense of good
citizenship, acceptance of policy goals, or pressure
from enforcement activities; and
c.
the degree to which the target group is able to
comply with the rules.
The extent to which the target group knows of and
comprehends the rules of the policy can directly be
influenced by the language of the policy; the more
explicative or prescriptive the rules of the policy,
the clearer they are and the easier it should be for
the target group to comply with. Weil, Fung and
Graham (2006) argue that disclosure policies can
be strengthened by selecting accurate metrics to
be reported by target groups.
48
48 Weil, Fung and Graham. “The effectiveness of regulatory policies. Journal
of Policy Analysis and Management,” 2006, Vol. 25, No. 1, 155 – 181.
As pointed out in the OECD report, there are
several factors that may affect the target group’s
willingness to comply with a given policy’s
requirements. However, one major determinant
is the extent of enforcement activities. In most
cases, mandatory policies include provisions that
deal with enforcement mechanisms. This research
provides empirical support for our finding that
mandatory, prescriptive and broad sustainability
disclosure policies are most strongly correlated
with sustainability disclosure excellence.
Results
While based on an admittedly parsimonious
framework, our analysis finds that there are three
common characteristics to effective sustainability
disclosure policies. The takeaway for policymakers
is that disclosure policies should be mandatory (as
opposed to voluntary), prescriptive (as opposed to
principles-based) and broad (as opposed to narrow),
in terms of the number of sustainability indicators
and types of companies targeted.We refer to policies
that share these three dimensions as super policies.
Figure 16
defines the three dimensions that form
CK Capital’s Policy Analysis Tool.
Figure 16:
CK Capital’s Policy Analysis Tool
DIMENSION
OPTIONS
DESCRIPTION
RATIONALE
POLICY TYPE
MANDATORY Policies that impose a requirement to comply; i.e.,
to disclose the information specified in the policy.
Mandatory policies are more likely to generate
higher disclosure since adherence to the
provisions is motivated by the desire to avoid
the negative consequences of enforcement.
VOLUNTARY Compliance with the disclosure requirement is optional.
POLICY CLARITY
PRESCRIPTIVE The policy clearly specifies the categories
or specific items to be disclosed.
It is expected that clearer policies may
encourage adoption and may facilitate
implementation, hence leading to higher
take-up and disclosure by affected entities.
PRINCIPLES
Policies that only speak of sustainability/CSR reporting
as a general requirement.
POLICY SCOPE
BROAD The policy affects the disclosure of more than one first
generation sustainability indicator across multiple sectors.
Policies that either affect a larger number of
indicators or are applicable to multiple sectors
are more likely to lead to higher disclosure rates
as they help establish sustainability reporting as
a standard corporate practice.
NARROW
The policy only concerns a single first generation
sustainability indicator, or a single industrial sector.
Source: CK Capital
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