Materiality definition, reporting regime, and sustainability disclosure

The trend of companies issuing sustainability reports is on the rise. However, the materiality of sustainability information continues to be a topic of much debate. I experimentally examine how different materiality definitions (financial materiality vs. impact materiality vs. double materiality) for sustainability matters and the reporting regime for sustainability reports (voluntary reporting regime vs. mandatory reporting regime) jointly affect corporate managers’ tendency to disclose more details about material sustainability matters. I find that managers are more likely to disclose more details about material sustainability matters under the voluntary reporting regime when financial materiality is provided than when impact materiality or double materiality is provided. This effect, however, does not hold in the mandatory reporting regime. The effect is driven by the perceived fit of the materiality definition under the corresponding reporting regime. The findings contribute to the literature on sustainability materiality and offer insights for regulators and practitioners.