In the article, we provide an original linkage between the corporate environmental, social, and governance (ESG) rating and the cost of internal control system (ICSC) stemmed from two closely related frameworks: the 2017 CoSO Framework, which calls to strengthen internal control systems to integrate ESG issues, and the EU directive on nonfinancial reporting (2014/95/EU) that entered into force in 2017. Thus, we evaluate both introductions showing ESG integration in the internal control activities. We cover firms listed on Milan Exchange from 2016 to 2019, providing a thorough analysis with robustness tests. The findings imply that firms should consider both ESG rating and the internal control system cost as strategic corporate tools for value enhancement; therefore, companies should allocate the resources appropriately to internal control activities to incorporate ESG issues and create value since internal control provides the first assurance for ESG integration. The limitations of this study pave the way for further research directions; incorporating the new amendment of the EU directive on nonfinancial disclosure, allowing for a better valuation creation assessment; and whether there is a substitution between sustainability performance and other corporate issues such as taxes and marketing expenditure.

Harasheh, M., Provas, I. (2023). A need for assurance: Do internal control systems integrate environmental, social, and governance factors?. CORPORATE SOCIAL RESPONSIBILITY & ENVIRONMENTAL MANAGEMENT, 30(1 (January 2023)), 384-401 [10.1002/csr.2361].

A need for assurance: Do internal control systems integrate environmental, social, and governance factors?

Provasi. R
2023

Abstract

In the article, we provide an original linkage between the corporate environmental, social, and governance (ESG) rating and the cost of internal control system (ICSC) stemmed from two closely related frameworks: the 2017 CoSO Framework, which calls to strengthen internal control systems to integrate ESG issues, and the EU directive on nonfinancial reporting (2014/95/EU) that entered into force in 2017. Thus, we evaluate both introductions showing ESG integration in the internal control activities. We cover firms listed on Milan Exchange from 2016 to 2019, providing a thorough analysis with robustness tests. The findings imply that firms should consider both ESG rating and the internal control system cost as strategic corporate tools for value enhancement; therefore, companies should allocate the resources appropriately to internal control activities to incorporate ESG issues and create value since internal control provides the first assurance for ESG integration. The limitations of this study pave the way for further research directions; incorporating the new amendment of the EU directive on nonfinancial disclosure, allowing for a better valuation creation assessment; and whether there is a substitution between sustainability performance and other corporate issues such as taxes and marketing expenditure.
Articolo in rivista - Articolo scientifico
corporate governance; CoSO framework; ESG rating; internal audit function; internal control cost; Italian governance bodies; nonfinancial disclosure;
English
16-ago-2022
2023
30
1 (January 2023)
384
401
open
Harasheh, M., Provas, I. (2023). A need for assurance: Do internal control systems integrate environmental, social, and governance factors?. CORPORATE SOCIAL RESPONSIBILITY & ENVIRONMENTAL MANAGEMENT, 30(1 (January 2023)), 384-401 [10.1002/csr.2361].
File in questo prodotto:
File Dimensione Formato  
Harasheh-2022-Corp Soc Responsib Environ Manag-VoR.pdf

accesso aperto

Descrizione: Research Article
Tipologia di allegato: Publisher’s Version (Version of Record, VoR)
Dimensione 1.56 MB
Formato Adobe PDF
1.56 MB Adobe PDF Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/396433
Citazioni
  • Scopus 24
  • ???jsp.display-item.citation.isi??? 22
Social impact