Accounting in Europe

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Corporate Reporting Practices in Poland and

Romania – An Ex-ante Study to the New Non-
financial Reporting European Directive

Mădălina Dumitru, Justyna Dyduch, Raluca-Gina Gușe & Joanna

Krasodomska

To cite this article: Mădălina Dumitru, Justyna Dyduch, Raluca-Gina Gușe & Joanna
Krasodomska (2017) Corporate Reporting Practices in Poland and Romania – An Ex-ante Study to
the New Non-financial Reporting European Directive, Accounting in Europe, 14:3, 279-304, DOI:
10.1080/17449480.2017.1378427

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Accounting in Europe, 2017
Vol. 14, No. 3, 279– 304, https://doi.org/10.1080/17449480.2017.1378427

Corporate Reporting Practices in Poland

and Romania – An Ex-ante Study to the
New Non-financial Reporting European
Directive

MĂDĂLINA DUMITRU ∗ , JUSTYNA DYDUCH ∗∗ , RALUCA-GINA GUS, E ∗

and JOANNA KRASODOMSKA †
∗
Bucharest University of Economic Studies, Bucharest, Romania, ∗ ∗ AGH University of Science and Technology,
Cracow, Poland and †Cracow University of Economics, Cracow, Poland

ABSTRACT The European Directive 2014/95/EU as regards disclosure of non-financial and diversity
information by certain large undertakings and groups is applicable by European Union-based entities
starting with the financial year commencing on 1 January 2017. Central and Eastern European (CEE)
countries are reported to face difficulties when implementing new European or global accounting
regulations and models. We investigate the quality of non-financial disclosures in Poland and Romania,
the biggest CEE countries, prior to the European Directive’s adoption and explain the diffusion of this
type of reporting through the lens of the institutional pressures. We find that prior regulation, local
institutional characteristics, ownership, industry and auditors have an impact on the quality of
disclosures. Poland experienced a higher extent of voluntary reporting, but Romania faced prior
regulatory demands for non-financial reporting (NFR). We find that the overall disclosure score is
higher for Romania, which provides support for the importance of regulations to strengthen the spread
and quality of NFR. The research findings are relevant to practice and policy. This ex-ante evaluation of
reporting practices and of their determinants is useful to understand how change occurs in practice and
how companies react to regulatory and other institutional demands.

Keywords: Directive 2014/95/EU, non-financial reporting, content analysis, disclosure index, corporate
social responsibility, Poland, Romania

JEL Code: M41

1. Introduction
There is an increased shared belief that economic development should be accompanied by
human development, based on social and environmental aspects, along with the economic
ones. Consequently, sustainability reporting techniques have emerged as a potential means of

Correspondence Address: Mădălina Dumitru, Department of Accounting and Audit, Bucharest University of Economic
Studies, Piat,a Romană, nr. 6, sector 1, Bucures,ti, Romania. E-mail: madalina.dumitru@cig.ase.ro

# 2017 European Accounting Association

280 M. Dumitru et al.

progressing the sustainable development agenda (Ball & Bebbington, 2008; Williams, Wilm-
shurst, & Clift, 2011). After the 2008 financial crisis, there was a strong need to rebuild inves-
tors’ and consumers’ trust in markets. This can be partly done through better information
regarding risk management and sustainability. As such, the interests in non-financial reporting
(NFR) increased. Both the European Commission and the European Parliament have been
actively promoting NFR, not only for the benefit of society but also as a means to improve
the competitiveness and innovation of businesses in the European Union (EU) (FEE, 2016, p. 1).
The European Directive 2014/95/EU ‘as regards disclosure of non-financial and diversity
information by certain large undertakings and groups’ (ED) increases the role of the accountants
and auditors in the corporate social responsibility (CSR). The ED is applicable by EU-based
entities starting with the financial year commencing on 1 January 2017. In this context, the
objective of this paper is to explore the quality of the NFR disclosures of a sample of listed com-
panies based in two Central and Eastern European (CEE) countries, Poland and Romania, prior
to the implementation of the new regulations.
CEE countries such as Poland or Romania are facing the important challenge to implement the
new resolutions and change accordingly the national legislations, as the EU mentions the
required result of the directive to be reached in a certain timeframe, but leaves the exact
means up to the Member States (Henry, Gardner, & Lienin, 2015). The paper investigates the
NFR disclosures made by Polish and Romanian public companies in 2014. This investigation
period corresponds with the transposition of the ED in the national legislation and allows us
to also discuss the local initiatives and steps in the transposition of the ED.
Previous studies conducted in CEE countries (Line & Braun, 2007) report that mainly com-
panies are important drivers of change as regards the implementation of the European Directives.
Trombetta, Wagenhofer, and Wysocki (2012) show that reporting practices, especially those
directly referenced in the standards, can be used to evaluate the effects of an adoption of or
changes to mandated reporting and disclosure rules. We investigate the NFR disclosure practices
of a sample of 40 companies which will be affected by the new legislative change. We analyse
the companies’ NFR reporting practices and the regulatory context in each country in a compara-
tive manner in order to identify what are the pressures, barriers and enablers that may have influ-
enced these companies to engage in NFR. We rely on our analysis on an assessment grid based
on the ED. A high degree of disclosure would indicate that companies are prepared to implement
its provisions and would incur a lower cost of change. The samples selected from the two
countries are comparable in size.
Poland and Romania are the largest countries in the CEE region. They share many social,
economic and cultural characteristics, but have evolved differently in terms of NFR. Further-
more, the two countries represent unique contexts where ‘voluntary’ NFR has increased in
recent years. A report from the European Sustainable Development Network (ESDN, 2011,
p. 38) characterizes Poland as a country that integrated CSR into national strategy documents.
Romania is presented in the same document among the CEE countries without any sort of
CSR strategy and action plan. The situation is different in respect of NFR: there is no mandatory
statutory requirement in Poland for public-listed companies to engage in NFR, while there are
requirements for the similar Romanian companies. This creates a tension which is worth
investigating.
Our paper makes several contributions to prior literature. First, we contribute to the literature
assessing the level of disclosures on specific NFR items and their determinants. Empirical
research on the reasons why companies do not voluntarily disclose social and environmental
information are relatively underdeveloped (Martin & Hadley, 2008). Prior studies examine
the impact of specific cultural or socio-economic factors on reporting in various countries
(e.g. Buhr & Freedman, 2001; Cormier, Gordon, & Magnan, 2004; De Villiers & Alexander,
 Accounting in Europe 281

2014; Steurer & Konrad, 2009). Our study identifies determinants of NFR in two emerging econ-
omies where companies often make very little voluntary disclosures (Belal & Cooper, 2011).
When analysing the disclosure score for the companies included in the sample on an item by
item basis we find higher scores for Polish companies than the Romanian ones for the items
which are not required by the regulations in force. Yet, the total disclosure score for Romania
is higher than the score for Poland. Therefore, the study highlights the effect of two different
approaches to NFR: voluntarism and regulation. In the same time, the aspect which is the
most stringent in each of the two countries (the environment for Poland and the social dimension
for Romania) is best covered by the non-financial disclosures of the companies based in each of
the countries. Therefore, our results bring evidence that the local characteristics have an impact
on disclosures. Also, we show that other institutional factors such as ownership, industry and
auditors impact the quality of disclosures.
Second, we contribute to the literature of NFR disclosures in emerging economies. Prior
studies mainly find that NFR evidence remains limited for emerging economies (De Villiers
& Van Staden, 2006). While NFR reporting patterns have been explored in many different
national contexts, to our knowledge, no academic study to date has focused on Poland and
Romania. Also, few papers studied NFR in a comparable format and emphasized the insti-
tutional implications (Campbell, 2007). The focus of disclosure (social, environmental, business
model) is investigated, which also brings a new perspective to the academic literature. Also,
from the point of view of the corporate reporting in CEE, the non-financial perspective is a
fresh path.
Third, we add our study to the literature using the institutional theory to explain the mechan-
isms by which NFR practices are adapted by firms to their particular institutional settings (Ali &
Rizwan, 2013; De Villiers & Alexander, 2014; Islam & Deegan, 2010). The article provides a
deeper understanding of the manifestation of isomorphic pressures related to NFR in two specific
institutional settings, Poland and Romania, which have not been significantly highlighted before.
We find that companies in different sub-groups make more NFR disclosures than the other com-
panies, which constitutes evidence of different types of isomorphism: mimetic (environmentally
sensitive companies and State-owned companies), coercive (Romanian companies) and norma-
tive (companies using NFR international frameworks, companies included in the RESPECT
Index and companies having Big 4 auditors).
Finally, the results may be useful for practitioners, regulators, users and enforcers from
countries sharing similarities in the institutional context in understanding companies’ NFR prac-
tices and responses to different type of institutional pressures.
The paper is organized as follows. In the first section, we describe the context of the NFR
development in Poland and Romania and specific country characteristics. In the second
section we describe the presentation of the requirements of the ED and the regulatory context
of NFR in Poland and Romania, along with the ED implications for the two countries. In the
third section we present the theoretical framework, namely the institutional theory, while in
the fourth section we describe the research methodology. The results are outlined in the fifth
section and the analysis of results in terms of isomorphic pressures follows. We conclude
with our contributions, implications, limitations and indications of future research directions.

2. Background
CEE countries are generally considered as less prepared to incorporate the reporting changes
(Larson & Street, 2004; Nobes & Parker, 2008). Also, they are characterized by weak regu-
lations and low transparency of corporate reporting. Given the contentious nature of these
issues, in emerging and less developed economies the need for accountability is increased
282 M. Dumitru et al.

(Belal, Cooper, & Roberts, 2013). Complete and transparent social and environmental disclos-
ures could be a mechanism to hold business organizations to account for their impacts within
these economies.
Poland and Romania are perceived as the world’s ‘rising stars’ (Morris, 2014) due to the econ-
omic and social progress and the improvement in a range of factors such as health and education,
communications technology, political, legal and regulatory frameworks and environmental sus-
tainability as compared to their prior socialist economies. Despite many similarities, these
countries cannot be seen as homogenous. Appendix 1 outlines the national statistics of both
countries.
In terms of CSR disclosures and initiatives, Poland is perceived as more ‘experienced’. In
Poland, government and academic institutions, non-governmental organizations and companies
are joining in the development of CSR in various ways (Dyczkowska, Krasodomska, & Micha-
lak, 2016; Waniak-Michalak, Macuda, & Krasodomska, 2016). There is a growing recognition
in Poland of the idea that a business must be responsible like any other party, and play an active
and positive role in society. In 2009, the Warsaw Stock Exchange (WSE) established the
RESPECT Index which is the first index of companies respecting the CSR rules in the CEE
region (WSE, 2015). Responsible Business Forum, operating since 2000, is the first non-govern-
mental organization in Poland which provides in-depth focus on the CSR issues (Responsible
Business Forum, 2016). CSR is also the topic of many academic studies and there are a
rapidly growing number of publications devoted to CSR in the national media. A study con-
ducted by Chojnacka (2014) on Polish public companies representing the energy sector shows
that CSR activities often have no relation to the investigated companies’ strategies and the
way CSR information is disclosed varies significantly. The majority of the companies included
in the WIG-Poland index and in the RESPECT Index prepare environment, social and govern-
ance reports and follow the GRI Guidelines (Macuda, Matuszak, & Różańska, 2015). However,
the level of CSR disclosures depends on the characteristics of management boards (Waniak-
Michalak & Michalak, 2013). By comparison, due to Romania’s cultural and institutional
characteristics (preference for rules, rather than principles – Olimid & Calu, 2006), CSR dis-
closures and actions relate with the constraints enforced by the state. The social reports
issued in Romania are not considered credible (Farcane, Popa, Blidis,el, & S,tirbu, 2009; Jindri-
chovska & Purcărea, 2011). Also, the general information regarding the environmental impact
included in the annual reports is coined as ‘incomplete and irrelevant to users’ (Ienciu, Muller, &
Matis,, 2011) and mostly generic (Ienciu et al., 2011; Jindrichovska & Purcărea, 2011). Yet,
during the last years the quality of the NFR in general and environmental reporting in particular
increased (Albu, Albu, Gı̂rbină, & Sandu, 2011; Apostol, 2015; Budeanu & Thidell, 2006; Ienciu
et al., 2011). This change was determined by factors such as the adherence of Romania to the EU
(Ienciu et al., 2011), the privatization of the companies (Bogdan, Ioan, & Sandu, 2007), the
implementation of environmental management systems (Ienciu, 2012) or the stakeholders
(Guşe, Almăşan, Circa, & Dumitru, 2016). Jindrichovska and Purcărea (2011) conclude that
the Romanian environmental and social reporting practices are still at an early stage: most
Romanian companies do not issue a CSR report, but instead include such information in the
annual report. Dumitru, Ionescu, Calu, and Oancea (2011) identify an association between the
CSR disclosures and industry. Jindrichovska and Purcărea (2011) consider that a more systema-
tic regulatory approach may be adopted for environmental reporting in Romania.
Given the above characteristics, it is clear that there are significant similarities between
Poland and Romania to justify a comparative approach, and also enough differences in terms
of NFR practice so as to generate pertinent conclusions about the role of different institutional
factors in shaping reporting practices.
 Accounting in Europe 283

3. The Regulatory Context of Non-Financial Reporting

3.1. The European Directive 2014/95/EU
In Europe, the first sustainability reporting programme was the Eco-Management and Audit
Scheme implemented in 1995. The programme failed and many authors consider that a cause
was its non-binding character (Dragomir, 2012). The ‘EU Financial Reporting Strategy: The
Way Forward’ suggested that ‘where appropriate, an analysis of environmental and social
aspects necessary for an understanding of the company’s development, performance or position’
should be disclosed as part of the annual report (EU, 2000). Later on, the Accounts Moderniz-
ation Directive required:

To the extent necessary for an understanding of the company’s development, performance

of position, the analysis [in the annual review] shall include both financial and non-finan-
cial key performance indicators relevant to the particular business, including information
relating to environmental and employee matters (EU, 2003).

In 2006, the EC Directive mandated that all publicly listed companies in Europe had to include a
corporate governance statement in their annual report (EU, 2006).
In 2013 the European Commission identified two major problems related with the NFR across
the Union: (1) the inadequate transparency of the non-financial information in the business
environment and (2) the insufficient diversity of the management councils of the companies,
which is primarily considered a matter related with the corporate governance processes (EU,
2013). As a result, the ED was issued. The objective of the ED is to increase the relevance, con-
sistency and comparability of information disclosed by certain large undertakings and groups
across the EU (EU, 2014). Entities which are subject to the ED are large public-interest under-
takings or groups1 that have the average number of employees higher than 500. The public-inter-
est entities are defined by the EU as undertakings which are: listed on a regulated market of any
Member State, or credit institutions, or insurance undertakings, or designated by the Member
States as public-interest entities because of the nature of their business, size or number of
employees (EU, 2013).
The disclosures are required to be me made in the form of a non-financial statement or of a
non-financial report and to include a brief description of the entity’s business model and its pol-
icies relation to environmental, social and employee matters, respect for human rights, pro-
cedures to counteract corruption and bribery and their outcomes, risks and risk management
related to those matters and non-financial key performance indicators (KPI). Companies may
rely on various frameworks (their own, national, European or international) in providing this
information. The companies subject to these regulations will be required to act on the
‘comply or explain’ principle. Therefore, there are entities for which, by the implementation
of the new Directive, NFR becomes mandatory. This fact might contribute to overcome the
limited impact of the Directive 2003/51/EC, which only stated that ‘information should not
be restricted to the financial aspects’ and ‘where appropriate, this should lead to an analysis
of environmental and social aspects necessary for an understanding of the company’s develop-
ment, performance or position’. The ‘voluntary approach’ of the Directive 2003/51/EC, the lack
of guidance for its implementation and the ad litteram translation in the national legislation con-
tributed to the problems mentioned above and led to de facto non-mandatory NFR policies in
Poland and for most of the Romanian companies. This is in line with the OECD (2006,
pp. 28– 29) assessment that some EU governments loosened their requirements on CSR report-
ing to avoid ‘an unnecessary burden on companies’ by limiting disclosures to ‘relevant’ infor-
mation in relation to the companies’ financial position. The ED intends to overcome this by
284 M. Dumitru et al.

providing a minimum list of items to be disclosed. Also, the Commission intends to issue non-
binding guidelines in the spring 2017 (EC, 2016). The statutory auditor will check the existence
of the non-financial statement.
Member States were required to implement the provisions of the ED in national law by 6
December 2016, while national regulations, taking into account these provisions, are to be
applied by entities indicated in the ED starting with the financial year commencing on 1
January 2017, or during the calendar year 2017.

3.2. The Regulatory Context of NFR in Romania and Poland

Poland and Romania provide an appropriate setting for this research looking at various insti-
tutional types of pressures, due to the different regulatory context of each country. The account-
ing regulations in both countries maintain the ‘voluntary approach’ of the Directive 2003/51/EC.
However, while in Poland NFR is still voluntary for all companies, in Romania it became man-
datory for listed entities, based on the Romanian National Securities Commission (CNVM)
Regulation No. 1/2006.2 The comparison between the two countries might provide insight as
to the effect regulation has on the NFR practices of companies in a predominantly ‘voluntary’
setting.
Overall, it can be stated that in both countries the non-financial information is disclosed via
the management commentaries/administrators’ report. The NFR regulations are briefly pre-
sented in Table 1. Currently, both countries are changing their NFR regulations to comply
with the ED.
In the course of work on the ED, Poland achieved the intended negotiation objective which
was the satisfactory limitation of the range of entities subject to the mandatory reporting of
non-financial information (originally, according to the proposal of the European Commission,
all other large companies which do not have the status of public-interest entities were to be
covered by the ED). For this reason, we grasp the idea that the Polish Ministry of Finance
does not intend to make entities other than the largest public interest companies comply with
the new requirements for reporting non-financial information. It should also be noted that
Poland was the only Member State to decide at the beginning of the legislative process that
the ED was not the most appropriate tool for popularizing the CSR concept (Szewc & Abec,
2014, p. 9). The first draft of the regulation changing the Accounting Act (2013) was published
by the Ministry of Finance in April 2016. It was posted on the Government’s Centre for Legis-
lation website (Government’s Centre for Legislation, 2016) and subjected to public consultation
and reconciliations. In August 2016 the Ministry of Finance directed the modified draft for
further debate in the Polish Parliament, and in December 2017 the Act on changing the Account-
ing Act has been published (Act on changing the Accounting Act, 2017).
In Romania, the adoption of the ED’s requirements entails significant changes in the legis-
lation. The Order of the Ministry of Finance No. 1938/2016 was published in September
2016. The Order extended the number of the entities required to apply the requirements of
the Directive to all public interest entities with more than 500 employees (not only large enti-
ties), thus taking the option granted to EU Member States to extend the scope of the ED.

4. Theoretical Framework
We employ the institutional theory and specifically the concept of isomorphism in the paper to
analyse the companies’ NFR practices and their determinants. Institutional theory concerns the
forms adopted by organizations and explains why organizations are becoming more homo-
geneous within an organizational field (DiMaggio & Powell, 1983, p. 148). It provides a
 Table 1. Summary of NFR regulatory context in Poland and Romania.
Item Poland Romania
Target firms All companies Non-listed companies Listed companies
Legal framework Accounting Act Accounting Law Accounting Law
National Accounting Standard No. 9 Order of the Minister of Public Order of the Minister of Public Finance No. 1286/
Finance No. 1802/2014 2012
CNVM Regulation No. 1/2006
Disclosure Management commentary as part of the annual Management commentary as part of Management commentary (administrators’ report)
document report the annual report (administrators’ (Order 12862012)
report) Annual report (CNVM Regulation No. 1/2006)
Character Voluntary Voluntary Mandatory (CNVM Regulation No.1/2006)
. ‘Insofar as this is relevant to the When it is necessary ‘to understand Voluntary
assessment of the situation of the entity’ the company’s development, When it is necessary ‘to understand the
(Accounting Act) performance or position’ (Order company’s development, results or position’
. If relevant for the assessment of the 1802/2014) (Order 1286/2012)
entity’s operation and condition (NAS 9)

Minimum Accounting Act Non-financial KPIs, including

information . A description of any risk factors and threats; environmental and employee-related
requirements . Financial and non-financial performance information (Order 1802/2014) . Non-financial KPIs, employee-related and
indicators, including information on environmental information (Order 1286/
environmental issues and employment. 2012)
. The analysis of the company’s activities:
NAS 9 (2014) information related to employees,

Accounting in Europe
environmental impact, risk management and
. Discussion of relevant external factors;
the associated policies and objectives, as well
. Company’s performance in different areas
as prospective information. Detailed
of development: economic (financial), presentation for each section (CNVM
environmental (impact on the natural Regulation no. 1/2006)(2006).
environment) and social;
. Information on issues related to the
entity’s corporate social responsibility
and the protection of the environment.
Source: Compiled by the authors.

285
This table presents the NFR regulatory context in Poland and Romania. We extracted the most relevant items from the regulations in force in the two countries.
286 M. Dumitru et al.

powerful lens for helping to explain how different practices become accepted in a particular
social context (Powell & DiMaggio, 1991). Deegan (2009) identified voluntary social and
environmental disclosures as institutional practices and used the concept of isomorphism to
explain the process by which reporting practices are adopted by organizations.
Prior empirical research has found that institutional pressures create an institutional context
within which organizations make decisions regarding what to disclose and how (Crawford &
Williams, 2010). As such, institutional theory can be used to understand how particular NFR
practices may be employed by organizations within a specific institutional environment due
to pressures from powerful stakeholders (Islam & Deegan, 2008, 2010). Amongst such powerful
stakeholders identified as influencing NFR are governments (Amran & Haniffa, 2011), non-
governmental organizations (Rahaman, Lawrence, & Roper, 2004), multinational companies
(Islam & Deegan, 2008), regulatory agencies (Crawford & Williams, 2010), the EU (Doh &
Guay, 2006) and the media (Islam & Deegan, 2010). We considered the following stakeholders’
impact on the NFR practices: governments, EU, Global Reporting Initiative, auditors and
shareholders.
Isomorphism is one of the dimensions of the institutional theory. It is understood as a con-
straining process of resemblance of one unit in population to other units operating in the
same environmental conditions (DiMaggio & Powell, 1983). There are three types of isomorphic
processes. Mimetic isomorphism occurs predominantly in conditions of uncertainty, when enti-
ties in one organizational field try to model their behaviour by imitating others (their actions,
structures and practices) in order to enhance their legitimacy or to achieve success. The
mimetic pressure is high and it can be exerted by: the multinational companies; industry stan-
dards and competitors (Ali & Rizwan, 2013). Coercive isomorphism is a response to formal
and informal pressures exerted on organizations – also by other organizations – and the cultural
expectations of the society within which organizations function. The coercive pressure is high
and it can be exerted by: the government; trade unions and customer associations; media;
employees; investors/financial institutions (Ali & Rizwan, 2013). Normative isomorphism
means putting pressure on the executives during their professionalization. It manifests itself
in the fact that the professional background and membership in professional associations
make the managers of organizations operating in the same field similar to one another
(Wróbel, 2011, p. 23). The normative pressure is low and the stakeholders who can exert it
are: company characteristics; CSR frameworks; NGOs; CSR labels and standard setting insti-
tutions; academic institutions (Ali & Rizwan, 2013).
We expect that in the case of a more experienced country in NFR (e.g. Poland) we find
examples of normative isomorphism. We expect that in the case of a country in which the
NFR is underdeveloped (e.g. Romania), the presence of coercive forces is the one leading to
the institutionalization of the new requirements formulated by the EU in a similar manner in
all the companies.
Moreover, we also include in our analysis the other factors identified by prior research to have
an impact on the institutionalization of the reporting practices (Albu & Albu, 2012; Buhr &
Freedman, 2001; Liguori & Steccolini, 2011): source of capital; stock exchange listing;
degree of competition; relation with taxation; training and competencies; historical and geo-
graphical differences; political differences; environmental values; legal environment; business
climate; accounting profession; the date of EU accession; the development of financial
markets or corporate governance; greater activity of international corporations; the role of reli-
gion in society.
We further analyse the results in relation to the institutional characteristics of each country, in
order to derive conclusions regarding the role of different factors in the institutionalization of
NFR, including regulation and experience.
 Accounting in Europe 287

5. Research Method
The research sample comprised a total of 40 non-financial listed companies, 20 from Poland and
20 from Romania. The exclusion of financial companies from the sample (banks, investment
funds, etc.) was motivated by the fact that they follow specific reporting criteria, different
from those applicable to other types of entities. All the investigated companies meet the defi-
nition of public-interest entities, according to the ED 2013/34/EU and have an average
number of employees higher than 500 at the balance sheet date.
The companies in the sample were selected from the companies listed on the WSE and
included in the WIG30 Index,3 and on the Bucharest Stock Exchange (BSE) included in the
BETPlus Index.4 The structure of the sample in terms of industry,5 auditor, ownership, use of
GRI guidelines, inclusion in the RESPECT index and cross listing are presented in Table 2.
The main differences between two countries’ characteristics presented in the Table 2 are:
higher number of companies audited by Big 4 in Poland than in Romania (100% and 50%,
respectively), the lack of inclusion of Romanian companies’ reports in the GRI database.
None of the companies included in the Polish sample is cross listed, while two Romanian com-
panies are.
We investigate the CSR disclosures presented by the companies in annual reports (manage-
ment commentaries) (37 cases) and in integrated reports (3 cases) for the year 2014. Manage-
ment commentaries are indicated in the ED as an appropriate part of a company’s report for
disclosing environmental, social and ethical issues (EU, 2014, p. 2). Annual reports were
accessed mainly via the companies’ websites or, when the information was unavailable, using
the documents uploaded on the WSE and BSE websites.
The basic research method applied is a semi-objective approach which is a form of content
analysis where the items to be studied are specified ex ante. The list of reporting items investi-
gated is developed using the ED. These are presented in full detail in Appendix 2.6
Prior research on CSR disclosures brings evidence that a content analysis distinguishing
between narrative and quantitative information is more informative (Al-Tuwaijri, Christensen,
& Hughes, 2004; Cormier, Magnan, & Van Velthoven, 2005; Gray, Kouhy, & Lavers, 1995).
Several studies assign different weights to the information in the CRS report, based on the
type of disclosure. For example, Al-Tuwaijri et al. (2004) and Cormier et al. (2005) assign
higher weights to quantitative disclosures (+3) than narrative ones (+2 or+1, depending on
specificity). Also, Neu, Warsame, and Pedwell (1998) argue that narrative information can be
tailored to manage public impressions, which means that the numerical information is better.

Table 2. Structure of the sample.

Poland Romania
Criteria Number Percentage Number Percentage
Total number of companies 20 100 20 100
Environmentally sensitive companies 8 40 5 25
Companies audited by a Big 4 20 100 10 50
Companies for which the State is a shareholder 10 50 9 45
Companies which included reports in the GRI database 9 45 0 0
Companies included in the RESPECT index 9 45 0 0
Cross-listed companies 0 0 2 10
Source: Compiled by the authors.
The table presents the structure of the sample. We split the companies using the relevant criteria revealed by previous
studies employing the institutional theory.
288 M. Dumitru et al.

Therefore, we develop the following scoring system which reflects the type of disclosures for
each studied item: 0 – no presentation; 1 – narrative presentation; 2 – presentation using KPIs
or other numerical/quantitative data; 3 (1 + 2) – narrative and numerical presentation, at the
same time. The higher the score is, the better the quality of the CSR disclosure. The
maximum overall number of points for one company is 60, corresponding to mixed (narrative
plus quantitative presentations) for all the studied items. By providing an indication of both
the completeness (i.e. number of disclosed CSR items) and the comprehensiveness of NFR,
the developed structure gives a clearer indication of what and how companies disclose in
terms of social, environmental and ethical matters, as required by the ED.
We analysed the reports written in Polish and, respectively, in Romanian. The first step of the
data collection process consisted in analysing two randomly selected reports from each country,
based on an initial list of items to be searched for in the reports. The reports were analysed by
each author independently. We developed the final list of items to be studied and the final scoring
system, in order to ensure the comparability of the data based on the conclusions resulting from
comparing the results of the initial data collection process. The collection of data for the rest of
the companies was done by one Polish author and one Romanian author. The other two authors
verified the scores and the final results were established. Therefore, this increases the reliability
of coding.
We determined for each company four indexes that synthesize the scores assigned, in relation
to the maximum number of points per category of CSR disclosures. The indexes are presented
below.

I1 = (P1 /12)∗100; I2 = (P2 /21)∗100; I3 = (P3 /24)∗100; I4 = (P4 /3)∗100,

where P is the number of points assigned to the company by category of studied items.
We also developed a combined index in order to assess the overall quality of NFR for each
company,

I(combined) = (I1 + I2 + I3 + I4 )/4.

The indexes were compared in order to assess the quality of disclosures, overall and for each
category of studied items. The maximum overall number of points for one company (60) corre-
sponds to a maximum combined index of 100%.
We established four levels of disclosure quality based on the disclosure indexes, as follows:
0 – no disclosure; 1– 30% – low-quality disclosure; 31– 70% – medium-quality disclosure;
71 – 100% – high-quality disclosure. Disclosure indexes are most commonly used in the CSR
literature.
The disclosure indexes provided a useful tool to evaluate the quality of NFR and to analyse it
in relation to different institutional factors such as regulation, company size, industry, owner-
ship, auditor, etc. This type of analysis is useful to highlight the different institutional pressures
that affected the NFR practices and can be considered by the regulators and standard-setters in
the process of adopting the ED on NFR.

6. Research Results
Some of the differences between the two analysed countries include the date of EU accession,
the development of the financial market, and the activity of international corporations. All of
these suggest that Poland is more experienced in implementing EDs and also that it has more
exposure and experience in NFR. In the same time, there are no mandatory NFR requirements
 Accounting in Europe 289

Table 3. Average values of NFR disclosure indexes in Poland and Romania.

Poland Romania
Sample’s Mann–
Index average Avg. Max. Min. Avg. Max. Min. Whitney
I1. Business model, risks and 32.50 24.58 58.33 0.00 40.42 83.33 8.33 0.014
policies related to CSR
issues
I2. Environmental impacts 21.07 20.24 95.24 0.00 21.90 71.43 4.76 0.140
I3. Social and employees 26.36 16.88 58.33 0.00 34.79 83.33 4.17 0.002
I4. Ethics 12.50 10.00 66.67 0.00 15.00 100.00 0.00 0.521
I. Combined 22.82 17.92 63.69 0.00 28.03 67.86 8.48 0.017
Source: Compiled by the authors.
The table presents the average, maximum and minimum values of the NFR disclosure indexes for our sample. Also, we
included Mann–Whitney test. The results obtained when running ANOVA and T-student test are relevant for the same
indexes (I1, I3, I). The medium-quality indexes and the significant statistical results are presented in bold.

in Poland, meaning that any NFR is done on a voluntary basis. On the other hand, in Romania,
listed companies are required by the CNVM regulations to make a series of non-financial dis-
closures. Therefore, each of the analysed countries is representative of a different approach in
NFR: voluntarism and regulation, respectively. The aggregated values of disclosure indexes
for the entire sample and the two subsamples are presented in Table 3.
The results show that the overall quality of disclosures is low. The average values of the com-
bined index are situated in the ‘low quality disclosures’ interval for both countries. The only
section of non-financial disclosures with an average medium-quality index is Business model,
risks and policies related to CSR issues. Therefore, the ex-ante analysis of NFR practices in
Poland and Romania indicates that, on average, companies are not experienced in reporting
the type of information required by the ED.
The comparative analysis between the two subsamples showed that the average non-financial
disclosure indexes are higher for the Romanian companies than they are for the Polish compa-
nies, for all five categories of indexes. Results suggest differences in the reporting practices
characterized by different isomorphic pressures: regulations in Romania (with an emphasis on
coercive isomorphism) and voluntary reporting in Poland (with an emphasis on mimetic and nor-
mative isomorphism). We investigate in more depth now the role of institutional pressures.
We assessed the quality and characteristics of non-financial disclosures by examining the
nature of the disclosures and the values of the indexes for each section of the ED. The results
are presented in Table 4.

6.1. Business Model, Policies and Risks Related to CSR Issues

The disclosure indexes show that the quality of disclosures in this section is higher for Romanian
than for Polish companies. The items Business model and Policies are partly covered by the
CNVM regulation7 in Romania. The analysis of these reports indicates that the overall quality
of disclosures related to these two items is higher than in the case of the Polish subsample.
Also, the quality is higher than in the case of the other two reporting items (Risks and Non-finan-
cial KPIs), which are not covered by national regulations. Therefore, the tendency to limit the
disclosures to the mandatory requirements from the legislation can be noticed. This assessment
is supported by the fact that financial risks are presented in detail (as required by legislation),
while the information about the social and environmental risks and the associated policies are
usually grouped in an ‘Other risks’ section of the reports, which is not mandatory.
 290
M. Dumitru et al.
Table 4. Number of disclosures for each type (score) of NFR disclosures in Poland and Romania.
Poland Romania
Type of disclosure/ Score 0 1 2 3 Sum Avg StDev 0 1 2 3 Sum Avg StDev
Business model – scores by type of disclosure
Business model 16 4 0 0 4 0.067 7.572 0 5 2 13 48 0.800 5.715
Policies 10 9 0 1 12 0.200 5.228 6 13 1 0 15 0.250 5.944
Risks 10 9 1 0 11 0.183 5.228 10 9 0 1 12 0.200 5.228
KPIs 6 0 10 4 32 0.533 4.163 11 1 3 5 22 0.367 4.320
Total instances 42 22 11 5 80 – – 27 28 6 19 80 – –
I1 2 11 7 0 20 0.417 4.967 0 8 11 1 20 0.550 5.354
Environmental matters – scores by type of disclosure
Environment 6 11 3 0 17 0.283 4.690 0 12 0 8 36 0.600 6.000
Health and safety 15 4 0 1 7 0.117 6.880 13 5 0 2 11 0.183 5.715
Renewable energy 13 1 3 3 16 0.267 5.416 18 2 0 0 2 0.033 8.718
Non-renewable energy 14 1 4 1 12 0.200 6.164 15 3 1 1 8 0.133 6.733
GHG emissions 13 3 1 3 14 0.233 5.416 12 6 0 2 12 0.200 5.292
Water use 16 1 1 2 9 0.150 7.348 8 11 1 0 13 0.217 5.354
Air pollution 15 1 2 2 11 0.183 6.683 11 8 1 0 10 0.167 5.354
Total instances 92 22 14 12 140 – – 77 47 3 13 140 – –
I2 6 9 3 2 20 0.350 3.162 0 15 4 1 20 0.433 6.880
Social and employee-related matters – scores by type of disclosure
Gender equality 13 3 3 1 12 0.200 5.416 13 5 1 1 10 0.167 5.657
Fundamental labour conventions 20 0 0 0 0 0.000 10.000 18 2 0 0 2 0.033 8.718
Working conditions 12 4 3 1 13 0.217 4.830 2 6 2 10 40 0.667 3.830
Informed and consulted 15 5 0 0 5 0.083 7.071 0 18 0 2 24 0.400 8.718
Trade union rights 9 8 2 1 15 0.250 4.082 5 2 10 3 31 0.517 3.559
Health and safety at work 11 5 0 4 17 0.283 4.546 5 10 0 5 25 0.417 4.082
Communities – dialogue 15 3 1 1 8 0.133 6.733 7 12 0 1 15 0.250 5.598
Communities – actions 12 6 1 1 11 0.183 5.228 8 7 2 3 20 0.333 2.944
Total instances 107 34 10 9 160 – – 58 62 15 25 160 – –
I3 5 11 4 0 20 0.317 4.546 0 9 10 1 20 0.533 5.228
Ethical matters – scores by type of disclosure
Ethical matters 15 4 1 0 6 0.100 6.880 13 6 0 1 9 0.150 5.944
Total instances 15 4 1 0 20 – – 13 6 0 1 20 – –
Total instances – sum 256 82 36 26 400 – – 175 143 24 58 400 – –
I4 15 0 5 0 20 0.167 7.071 13 0 6 1 20 0.000 5.944
Source: Compiled by the authors.
The table presents the number, average and standard deviation of NFR disclosures for each type and score. The significance of scores is: 0 – no disclosure, 1 – narrative, 2 –
quantitative, 3 – mixed disclosures.

Accounting in Europe
291
292 M. Dumitru et al.

As a positive aspect regarding the reporting practices of Polish companies, we noticed that
four companies disclosed business model information in a value-creation-oriented form, using
the narrative presentation, consistent with the International kIRl Framework (by comparison,
none of the Romanian companies provided the information in this form). The best-covered
item in this section was Non-financial KPIs. It is also the only item which was presented by
the Polish companies better than by the Romanian companies. It indicates that the existence
of voluntary reporting standards regarding NFR in the form of KPIs (i.e. GRI Guidelines) and
business model (i.e. International kIRl Framework) had a positive influence on the development
of NFR practices in Poland.
While the overall comparison would indicate that in Romania regulations have a higher
impact on the quality of disclosures (proxied by the presence of some types of information)
than the voluntary approach followed in Poland, an in-depth analysis point to some differences
in the quality and nature of disclosures. Polish companies made more complex descriptions of
the business model and provided information about non-financial KPIs, while the majority of
the Romanian companies simply answered the requirements from the regulations, without
further developments. This emphasizes the fact that regulations should be doubled by guidelines
and examples in order to stimulate the development of reporting practices.

6.2 Environmental Matters

The I2 environmental score is also higher for the Romanian companies. The item-by-item analy-
sis showed that Romanian companies generally disclose more environmental information than
Polish companies. The relevant provisions from the CNVM regulation refer to Impacts on the
environment,8 which explains the fact that the best scores in the Environment category for the
Romanian subsample were assigned to this item. Romanian companies generally disclose
very little environmental information (more than 50% of companies have a zero score assigned
to the items Impacts on health and safety, Use of renewable energy, Use of non-renewable
energy, GHG emissions and Air pollution). However, the scores are still higher than in the
case of the Polish companies for the items that can be associated with specific environmental
regulations for companies in certain sectors (Air pollution, Water pollution, and GHC emissions)
or are covered by other regulations9 than the reporting requirements enforced by the CNVM. The
Polish companies provide more information for the ED items Use of renewable energy and Use
of non-renewable energy. These are matters of public interest that have not yet been assimilated
into NFR regulation in Romania and are not present in NFR practice. One Romanian company
registered a high-quality score related with the environment (OMV – 71.43%). Four other com-
panies (20% of the Romanian subsample) were assigned a medium-quality score. We also
noticed that these companies are included in the top 10 companies, based on the number of
employees and net profit. This fact brings into discussion the size of the company as an insti-
tutional factor in relation to NFR; additional analyses were performed to establish if size is a
determinant of disclosure quality.
The environmental disclosure scores assigned to Polish companies are lower than for Roma-
nian companies.10 In line with this finding is the fact that environmental disclosure requirements
in the Polish legislation are stipulated in a general manner and are a subject of the company’s
interpretation. Since the late 1980s Polish firms have been obliged to pay ecological charges
(for emitting dusts and gases into air, water abstraction, entry of waste water and waste
storage) based on statements compiled and submitted by them to appropriate environmental
authorities. The statements are not publicly disclosed. Taking into account that many companies
with scarce (or no) environmental information exert a strong negative impact on the environment
we notice a lack of transparency in terms of environmental disclosures. This result is surprising
 Accounting in Europe 293

as it refers to companies that collect the information required by the environmental authorities
and choose not to include the information in the disclosures.

6.3. Social and Employee-related Matters

More than 50% of Polish companies did not disclose any information on the social and
employee-related matters. The only exception is the item Respect for trade union rights,
which was thoroughly presented by the companies in which trade union organizations have a
strong position (e.g. the mining, energetics and basic materials sector).11 This indicates stake-
holder pressures (trade unions) as an institutional factor in the case of social disclosures and
it is confirmed for the entire sample.
The mandatory social and employee-related disclosures from the Romanian legislation12 are
correlated with the three ED items in this section which are best covered by the disclosures:
Working conditions, Respect for the right of workers to be informed and consulted, and
Respect for trade union rights. This confirms our initial hypothesis regarding the influence of
regulation on the quality of NFR practices.
The disclosures regarding Health and safety at work within the Romanian subsample can also
be linked to the influence of regulation, as most companies state that they observe the mandatory
legislative requirements in the field (this accounts for the narrative presentations), and some of
them provide additional information regarding the investments made to secure the employees’
safety or to provide health services.
The items Dialogue with local communities and Actions taken to ensure the protection and the
development of the local communities are also well-represented within the reports, but the
number and quality of disclosures are lower than in the previous cases. This finding suggests
that the pressures exerted by the community as a stakeholder are not as high in the case of com-
panies which do not have a direct contact with the final consumer and are not concerned with
legitimizing their actions and operations.
The lack of interest from the companies in the disclosure of Implementation of fundamental
conventions of the International Labour Organization and Actions taken to ensure gender equal-
ity reflects a non-institutionalization of public interest issues in the practice of companies. It
suggests that companies do not have anything to report, or they are not interested in reporting.
The social aspects are better reflected in the Romanian companies’ reports than the environ-
mental aspects. One Romanian company registers a high-quality score (OMV – 83.33%) and 10
other companies were assigned a medium-quality score. This finding is in line with the aspects
discussed in the literature review section of the paper.

6.4. Ethical Matters

The lack of information regarding the ethical matters indicates that companies did not receive (or
did not respond to) social pressures to make this a concern. As in the case of community-related
information, pressures from society at large are not yet a significant institutional factor in none of
the two analysed countries.

6.5. Experience
The corporate reporting systems for both Polish and Romanian companies have clear specifica-
tions about the type of information that listed companies should disclose to their investors. These
requirements include information related to the company’s business model, policies and risk
management more often than information about social, environmental and ethical matters.
294 M. Dumitru et al.

Therefore, the quality of disclosures related to the business model was expected to be better than
for other ED sections, if experience is to be a factor in the institutionalization of NFR. The results
confirm this assessment: I1 for the entire sample (medium-quality index – 32.50%) is higher
than all other indexes (low-quality indexes: I2 – 21.07%, I3 – 26.36% and I4 – 12.50%).
This is also applicable for each country. The values and differences are higher for Romanian
companies, which may be explained by the fact that the business model information required
by the CNVM regulations in Romania are more closely related to traditional reporting than
the other ED sections, and can be more easily expressed in quantitative terms. Companies are
more experienced in describing these aspects than they are in other non-financial disclosures.
Therefore, it is confirmed that experience in itself (Poland) generated lower indexes than experi-
ence in conjunction with regulation (Romania).

6.6. Company Size

We investigated company size as a driver of institutionalization of the NFR. Table 5 presents an
analysis based on the numerical data collected from each company.
The company size is not a significant determinant of disclosure quality for the Polish sub-
sample, as most of the top 10 companies in the Polish subsample are low quality or ‘no disclos-
ure’ reporters. However, the medium-quality reports (based on the combined index) originate
mostly from the top 10 companies.
As it can be noticed in Table 5, most of the top 10 companies in the Romanian subsample were
assigned to the medium-quality disclosures category. The top five companies in the Romanian
subsample are all medium-quality reporters. Therefore, for the Romanian subsample it can be
noticed that there is a relationship between the size of the company and the quality of disclosures.

6.7. Content of the Reports

Aside from the values of the disclosure indexes, the content of the reports, as perceived by the
readers is an indication of their quality. We noticed that companies favour the narrative

Table 5. Quality of disclosures (combined index) and company size.

Poland Romania
Quality of No. of Total Net No. of Total Net
disclosures employees assets Turnover profit employees assets Turnover profit
No disclosure
. Top 10 2 0 0 2 0 0 0 0
. Last 10 0 2 2 0 0 0 0 0
Low quality
. Top 10 5 6 6 6 2 3 4 3
. Last 10 9 8 8 8 10 9 8 9
Medium quality
. Top 10 3 4 4 2 8 7 6 7
. Last 10 1 0 0 2 0 1 2 1
High quality 0 0 0 0 0 0 0 0
Total number of 20 20 20 20 20 20 20 20
companies
Source: Compiled by the authors.
The table presents the quality of disclosure based on the combined index and company size. The companies are split in
terms of size using the number of employees, total assets, turnover and net profit.
 Accounting in Europe 295

disclosures (75% of disclosures in Poland and 90% in Romania), which are perceived as an indi-
cation that NFR can be used for impression management (Brennan & Merkl-Davies, 2013; Neu
et al., 1998). It also shows that companies are not prepared to collect and disclose quantitative
non-financial information. This brings into discussion the need for guidance and training in order
to support the implementation of the ED.
In the Polish subsample, the content of the reports indicates a better correlation with inter-
national NFR frameworks: for example, the business model was presented by some companies
in the ‘value-oriented’ form required by the International kIRl Framework. All the Polish com-
panies refer to the IFRS as the regulations used in the preparation of the financial information.
Three companies indicate the GRI Guidelines as being used in their (integrated) reports
(KGHM, Lotos and PKN Orlen). In other four cases, the GRI Guidelines are used to
compile separate social reports (Tauron, Bogdanka, Enea and Energa). Three companies
(KGHM, Lotos and PKN Orlen) mentioned the UN Global Compact and the International
kIRl Framework and there is a reference to the ED in one integrated report. Therefore,
Polish companies resort to the international NFR referential to develop their voluntary report-
ing practices.
None of the analysed companies in Romania indicates an international NFR reporting
standard as being used in their reports. The only standards mentioned are the IFRS and
the CNVM regulation. An important aspect to be noted is that, for the Romanian sub-
sample, the reports’ structure indicates that most companies (13 out of 20) use the
CNVM regulation as a template, even if it was not intended as such by the regulator.
Only seven companies integrate the NFR into their annual reports (Antibiotice, Aerostar,
Electrica, OMV, Romgaz, Transelectrica and Transgaz). This finding is in line with the
other observations regarding the Romanian subsample and reveals the compliance of
NFR practices with regulations rather than best practices resulting from the companies’
reporting experience.
Therefore, we expect the implementation of mandatory NFR as required by the ED to produce
similar effects for Polish companies as the mandatory requirements have produced for the
Romanian subsample, the lack of which might hinder the development of reporting practices.
This suggests that the regulators should provide companies with guidelines and implementation
examples that will act in favour of the institutionalization process.

7. Analysis of the Isomorphic Pressures

The three types of isomorphism usually occur at the same time; however, discussing them sep-
arately provides a clearer picture. We grouped the companies in the sample in different cat-
egories based on their characteristics in terms of industry, ownership, auditor, reference to
international NFR frameworks and the inclusion in the RESPECT Index. For each group, we
determined the average values of disclosure indexes as presented in Table 6 and we identified
the type of isomorphic pressures exerted by each factor on NFR practices.

7.1. Mimetic Isomorphism

The companies tend to imitate the practices within the same industry. The best-represented
sector covered by the study is energy (electricity, energy, mining, oil and gas producers),
with 17 out of 40 companies (nine from Poland and eight from Romania). We grouped the com-
panies on environmentally sensitive and non-sensitive domains. There are eight environmentally
sensitive companies in the Polish subsample and five in Romania. The best reporters in both
countries are included in the sensitive domain category (Lotos for Poland and OMV for
 296
M. Dumitru et al.
Table 6. Average values of disclosure indexes for different groups of companies.
Sensitive Non-sensitive State No State
Romania domain domain t-Test ownership ownership t-Test Big 4 No Big 4 t Test
I1 58.33 34.44 2.671 53.70 29.55 3.344 45.83 35.00 1.233
I2 32.38 18.41 1.560 35.45 10.82 4.150 24.76 19.05 0.701
I3 46.67 30.83 1.913 46.30 25.38 3.387 40.00 29.58 1.394
I4 6.67 17.78 0.844 29.63 3.03 2.697 16.67 13.33 0.287
I 36.01 25.37 1.297 41.27 17.19 4.960 31.82 24.24 1.050
Poland Sensitive Non-sensitive t-Test State No State t-Test GRI No GRI t Test RESPECT No RESPECT t-Test
domain domain ownership ownership Index Index
I1 32.29 19.44 1.744 31.67 17.50 2.008 31.48 18.94 1.726 31.48 18.94 1.726
I2 27.98 15.08 1.022 36.19 4.29 3.112 34.39 8.66 2.288 36.51 6.93 2.762
I3 21.35 13.89 0.819 28.33 5.42 3.131 24.54 10.61 1.633 28.24 7.58 2.671
I4 8.33 11.11 0.312 16.67 3.33 1.633 14.81 6.06 1.024 14.81 6.06 1.024
I 22.49 14.88 0.928 28.21 7.63 3.100 26.31 11.07 2.048 27.76 9.88 2.339
Isomorphism Mimetic Mimetic Normative Mimetic/Normative
Source: Compiled by the authors.
The table presents the values of disclosure indexes on different groups of companies. We split the companies using the relevant criteria revealed by previous studies employing the
institutional theory. The statistically significant values of the t-Test are bold.
 Accounting in Europe 297

Romania). Also, the average disclosure indexes for the companies from sensitive domains are
higher than the average indexes for the companies from non-sensitive domains.
Another factor that may determine mimetic isomorphism is ownership. In our case, State own-
ership (the presence of the State as a shareholder) determines an improvement in the reporting
quality noticed in both countries. This assessment is verified even if the State is not a majority
shareholder.

7.2. Coercive Isomorphism

Examples of coercive forces exerted on the NFR process of the companies are: the legislation
and the stakeholders.
As both countries are members of the EU, IFRS accounting standards apply both in Poland
and Romania to all listed companies. Regulation can either have a positive or a negative
impact on the non-financial disclosures. Unerman and O’Dwyer (2007) argue that effective stat-
utory regulation of NFR could enhance corporate economic performance and shareholder value
and prevent corporate actions and decisions resulting in damaging social and environmental con-
sequences. As this approach is contrary to the dominant business discourse, the process through
which new NFR legislation is enforced is very important. At a macroeconomic level, regulation
becomes more important, as most of the companies adopt NFR for legal compliance.
Therefore, we found that in terms of non-financial disclosures, the most influential insti-
tutional factor is regulation for both subsamples. The presence of mandatory regulations
explains the higher scores attributed to Romanian companies for a series of reporting items.
The lack of compulsory regulations in Poland and for some items in Romania also explains
the overall low quality of disclosures: in both countries, 15 out of the 20 companies fall
under the ‘no disclosure’ and ‘low quality disclosure’ categories. This supports the positive
impact of regulations on the quality of NFR.
Items such as use of renewable energy, use of non-renewable energy and air pollution (which
are not required by the Romanian regulations) register a better score in Poland. It indicates that
Polish companies are able to develop NFR practices for the reporting items situated outside
national NFR regulations. Meanwhile, Romanian companies tend to limit their disclosures to
the mandatory requirements, thus avoiding the development of best practices. This speaks of
the negative impact of regulations on NFR.

7.3. Normative Isomorphism

The normative isomorphism appears when a system is mature. A normative nature can have, for
instance, the GRI guidelines, the International kIRl Framework and the UNGC. In September
2016 there were 35,430 reports included in the GRI Database. Out of them, 210 reports were
published by Polish companies and 48 by Romanian companies. Eight reports published by
Polish companies obtained the highest application level. Nine Polish companies and no Roma-
nian company included in our sample adopted the GRI guidelines.
The Polish companies included in our sample which adopted the GRI guidelines registered
significantly higher scores than the companies not following GRI. The most important difference
was registered for the environmental disclosures. Also, the best reporter adopted the GRI guide-
lines. Three companies from Poland use the International kIRl Framework. In line with our
study, they registered the highest three scores in the Polish subsample. No Romanian
company makes any reference to international voluntary reporting guidelines.
Another factor that can contribute to the appearance of the normative isomorphism is rep-
resented by the auditor. The Big 4 firms also provide assurance services and drive the
298 M. Dumitru et al.

implementation of the best NFR practices in the analysed companies. All the Polish companies
and only 10 Romanian companies are audited by Big 4 companies. All the indexes are higher for
the Romanian companies audited by Big 4 companies than for the other analysed entities.
Based on the institutional context of the listed companies included in our sample, we find evi-
dence about the importance of GRI and Respect Index in Poland and of Big 4 auditors in
Romania. The average values of disclosure indexes for the two groups of Polish companies
that display evidence of normative isomorphic pressures are significantly higher than in the
case of the other companies. In Romania, the differences between the average value of
indexes for the group of companies subjected to normative isomorphic pressures and the
other companies are smaller. This proves that the normative isomorphism is more visible in
Poland and therefore the NFR in Poland is more mature than in Romania.

8. Conclusions and Future Research

Our findings support the views of Trombetta et al. (2012) that the effects of standards ‘are not
always clear-cut in highly complex environments’; instead, they are the result of interactions
‘with other numerous existing institutions and markets’. Thus, we identify institutional factors
and isomorphic mechanisms that influenced NFR in Poland and Romania so far, while also out-
lining the institutional factors that had a limited impact on the quality of NFR.
We find evidence of all types of isomorphism in the two analysed CEE countries. Coercive
isomorphism is supported by our findings related to the impact of regulation on reporting prac-
tices. The positive effect of regulations is proved by the higher values of disclosure indexes for
the reporting items covered by national regulations; thus, regulation is identified as the most
important institutional factor in NFR, to the detriment of the voluntary practices. The negative
effect of regulations lies in the tendency of Romanian companies to limit the disclosures to the
mandatory requirements, thus avoiding the development of best NFR practices. However, its
influence can be summarized as ‘more focused information’, and not necessarily as ‘better
quality information’. These findings indicate that regulation must be doubled by other
changes in the reporting system, to support the development of best NFR practice. For
example, specific guidance on how to report social, environmental and ethical matters and refer-
ences to other reporting frameworks may contribute to increasing the overall quality of reports.
Also, the involvement of the accounting professionals and professional organizations in NFR
may contribute to the building and dissemination of good practices even to professionals and
entities which are not under the umbrella of mandatory NFR. Mimetic isomorphism is supported
by the fact that the quality of NFR is higher in companies from environmentally sensitive
domains and companies having the State as a shareholder. Normative isomorphism is supported
by the fact that the quality of NFR is higher for Romanian companies that benefited from the
services of a Big 4 auditor and for Polish companies that referenced the GRI as a voluntary
reporting framework and/or were included in the RESPECT Index.
We also identify proof of stakeholder pressure as an institutional factor of NFR, in the case of
trade unions, and establish that pressures from the community or society at large are not yet a
determinant institutional factor in the two analysed countries. For the Romanian subsample,
we notice a relationship between company size and quality of disclosures. The content of the
Polish reports indicates that reporters’ experience, as well as the presence and use of voluntary
reporting standards and guidance have a positive influence on the quality of reports.
Our study has several potential theoretical and practical implications. We see this moment as
a crucial point for the development of the NFR in the EU Member States. Understanding what
happens now will enhance the understanding of the developments which will happen in the
future; the research contributes to regulation, which improves NFR (Singleton-Green, 2015).
 Accounting in Europe 299

The particular advantage of the paper is that it is a comparative study which highlights simi-
larities and differences in CSR disclosures of Polish and Romanian companies prior to the
implementation of the ED. This information might help inform regulators about the possible
effects of the ED implementation as a mandatory NFR framework and to decide which are
the ‘problem’ areas which need to be covered in the process. Action is needed in both
countries, along with the external pressures. At present, most of the literature is based on
the Western European countries, and we believe that evidence from other contexts should
also be added to it. The institutional context in CEE countries provides an opportunity to inves-
tigate NFR beyond traditional settings. Poland and Romania share both similarities and differ-
ences, which provides an appealing background to study their preparedness to implement the
new ED on NFR. Finally, the paper could encourage researchers from other countries, both
post-communist and highly developed nations, to carry out similar studies and compare the
results. Particularly with regard to developing economies, local financial accounting practices
are considered to have been inevitably shaped by international trade, foreign aid, large consult-
ing firms and banks well before such technologies acquired a national character. Even though
so far there are not any influential international accountancy organizations related with the
NFR, we can already notice that the broader politico-economic ties (i.e. the membership to
the EU) created the backdrop for the development of coercive, mimetic and normative
processes.
It should be noted that the research study has certain limitations. First, the size of the sample
(40 companies) does not allow using more sophisticated statistical methods and develop con-
clusions applicable to the entire population. Second, while the employed content analysis
method provides a number of advantages, it also has its limitations – the most important is
the coders’ subjectivity. Third, we identify limits regarding the indexes; as such, the presence
and the nature of information are used as a proxy for quality. The scoring and indexes system
can signal, for example, the companies’ preference to follow a reporting template, but it
cannot fully explain reporting practices or the preference for a certain type of disclosure, such
as the narratives. Also, the analysis is done for only one year.
Finally, since we believe that NFR is an interesting field of scientific inquiry, we propose some
avenues for future research. A longitudinal analysis is recommended to clarify how companies
change their NFR over time, as well as in relation to the ED implementation. This is in line with
the Trombetta et al. (2012, p. 134) call to analyse ‘changes in firms’ reporting and disclosure
activities between periods before the change in standards, during the transition period and
after the adoption of the standards’. Future research might also focus on the usefulness of
NFR disclosures for corporate stakeholders.

Acknowledgements
The authors thank the Editor, Professor Paul André, the Editors of this Special Issue: Professor
Cătălin Nicolae Albu, Professor Nadia Albu and Professor Andrei Filip, for comments that
greatly improved the manuscript. The authors are also grateful to anonymous reviewers for
their suggestions and to Professor Doris Merkl-Davies for discussing the paper during the
Accounting in Europe special section of the Accounting and Management Information
Systems Conference, June 2016.

Disclosure statement
No potential conflict of interest was reported by the authors.
300 M. Dumitru et al.

Notes
1
In order to be considered large, an undertaking must observe additional criteria related to either total assets (over 20
million EUR) or turnover (over 40 million EUR).
2
The CNVM Regulation No. 1/2006 is currently enforced by the Romanian Financial Supervisory Authority – ASF, in
charge with specific regulations regarding the financial market which also apply to listed companies.
3
WIG30 Index is a price index and is calculated based on the value of portfolio with shares in 30 major and most liquid
companies in the WSE Main List.
4
BET Plus Index tracks the price changes of Romanian companies listed on BVB’s regulated market that meet the
minimum selection criteria of liquidity and free float. It includes 34 companies.
5
The environmentally sensitive domains were defined using the same criteria as Barbu, Dumontier, Feleagă, and Feleagă
(2014) and are: metal mining, coal and lignite mining, oil exploration, paper, chemical and allied products, petroleum
refining, glass, metals and air transportation.
6
We study a number of 20 items, which covers information about the business model, policies and risks related to CSR
issues (four items), environmental matters (seven items), social and employee-related matters (eight items) and ethical
matters (one item). Two items mentioned in the ED are excluded from the list, based on the preliminary results of the
data collection process. ‘Outcome of policies’ is excluded because the related information is disclosed in other items
included in the scoring system. ‘Social dialogue’ is excluded because it is difficult to distinguish from two other items,
namely: ‘respect for the right of workers to be informed and consulted’ and ‘the dialogue with local communities’.
7
The relevant mandatory requirements from the CNVM regulation are: a general description of the reporting entity, and
of its mergers and acquisitions, using financial indicators; the technical development stage (products, markets, distri-
bution methods, future developments); supply chain (suppliers, prices, inventories); sales (medium and long-term per-
spectives, competition, important clients); financial risks and risk management.
8
The relevant mandatory requirements from the CNVM regulation are that environmental impacts must be evaluated
and presented, as well as information about any existing or expected litigations associated with the environmental pro-
tection legislation.
9
Impacts on health and safety. Most companies also refer to the environmental protection legislation in force, lack of
environmental accidents and negative impacts on the environment, and the integrated systems for the management of
environmental issues, quality, health and safety.
10
Only one company was assigned almost a ‘perfect’ I2 score (95.24% for PKN ORLEN S.A.)
11
Disclosures on this issue referred among others to the number of trade union organizations, disputes with unions, the
description of relations with trade unions and agreement signed between management board and trade union
organizations.
12
The relevant reporting requirements from the CNVM regulation: the number of employees and their qualifications, the
degree of syndication/trade union membership, and a description of the relationships between the management and
employees, including conflicts. The indicator found in the reports for the degree of syndication is: number or
percent of trade union members in total number of employees.

ORCID
Mădălina Dumitru http://orcid.org/0000-0001-9159-6302
Joanna Krasodomska http://orcid.org/0000-0001-8423-678X

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Appendix 1. Poland and Romania – national statistics

Country characteristics (year) Poland Romania

Population (2013) 38,480,000 19,960,000
Gross national income per capita (2014) 10,114 EUR 7500 EUR
Year GDP (2015) 474.78 billion USD 177.95 billion USD
Inflation (2015) (0.50%) (0.59%)
Foreign direct investments (mil. EUR) (2014) 5513 million EUR 2421 million EUR
Year when the Stock Exchange was established 1991 1995
Listed domestic companies on the main (regulated) 433 84
market (2015)
Market capitalization (2015) 121.8 billion EUR 32.24 billion EUR
Source: Authors’ conception based on websites of the national institutes of statistics and stock exchanges.

Appendix 2. Studied NFR items – final list developed using the ED

I. Business model, policies, risks related to CSR issues

1. Business model – brief description;
2. Policies related to environmental, social and employee matters, respect for human rights,
anti-corruption and bribery matters;
3. Principal risks related to environmental, social and employee matters, respect for human
rights, anti-corruption and bribery matters;
4. Non-financial KPIs.
II. Environmental matters
1. Impacts on the environment;
2. Impacts on health and safety;
3. Use of renewable energy;
4. Use of non-renewable energy;
5. GHG emissions;
6. Water use;
7. Air pollution.
III. Social and employee-related matters
1. Actions taken to ensure gender equality;
2. Implementation of fundamental conventions of the International Labour Organisation;
3. Working conditions;
4. Respect for the right of workers to be informed and consulted;
5. Respect for trade union rights;
6. Health and safety at work;
7. The dialogue with local communities;
8. Actions taken to ensure the protection and the development of the local communities.
IV. Ethical matters
1. Prevention of human rights abuses, instruments in place to fight corruption and bribery.