Corporate transparency was once as simple as sharing financial statements with investors. Today, it has transformed into a complex and evolving ecosystem, where diverse stakeholders—investors, regulators, and civil society—demand accountability on a broader scale.
At the heart of this transformation lies the interplay between mandatory and voluntary disclosures. Mandatory disclosures, like those required under the UK’s Modern Slavery Act, serve as regulatory baselines. Voluntary frameworks, such as the Global Reporting Initiative (GRI) and CDP (formally the Carbon Disclosure Project), allow companies to shape narratives that resonate with their values while addressing stakeholder concerns. Together, these approaches form an intricate ecosystem where transparency has expanded from a compliance checkbox to a strategic tool for fostering trust and demonstrating accountability.
From Compliance to Strategic Imperative
Speaking at a recent WDI panel on voluntary disclosures, Gareth Rees, former Director of Enforcement at the Financial Reporting Council, remarked “I cannot believe the difference in attitudes from what I found in the 80s to what I found in the last 10 or 15 years, a complete change.” This shift is evident in WDI’s data – for while only 38% of disclosures in its early surveys were legally required, by 2024, 83% of participating companies were voluntarily making the workforce data shared in the survey public. Non-financial reporting is on the rise globally. By 2023, 93% of Russell 1000 companies published sustainability reports, up from 90% in 2022. Similarly, KPMG noted N100 company reporting increased from 64% in 2012 to 79% in 2022.
Navigating Demands and Challenges
The ecosystem of corporate disclosures thrives on the interaction between stakeholders with investors as pivotal driver. As Adams Koshy, senior specialist with PRI, noted during the panel: “Investors have a key role to play in terms of voluntary disclosure and the development of disclosure standards because they drive the demand for the disclosure as a primary user”. Investors rely on accessible, comparable data to screen for human rights risks, measure sustainability performance, and meet targets like improving diversity, equity, and inclusion (DEI). For instance, secondary market players like Morgan Stanley offer DEI-focused solutions, such as Investing with Impact Diversity Portfolios.
Too often, however, mandatory reporting frameworks do not give a clear enough picture of how a company is performing. Over the past five years, there has been significant industry resistance to such mandates globally. In the U.S, the Securities and Exchange Commission (SEC) voluntarily stayed its climate disclosure rules in April, following extensive legal and business pushback. In Europe, the CSRD faced numerous delays and changes before passing, prompting investors to criticise the EU’s corporate sustainability reporting regime for “a significant rollback of ambition” which “reduce[es] financial markets participants’ ability to meet their own mandatory reporting obligations”. This has led investors and companies to rely on voluntary reporting initiatives to fill the data gap, as reflected in WDI’s data. Investor interest is evidenced by the fact that, in 2024, WDI attracted submissions from 25 different countries, five more than the previous year.
Risk and Rewards of Transparency
Transparency is a double-edged sword, carrying both risks and rewards for companies navigating increasingly complex stakeholder demands. Gareth Rees highlighted that the distinction between mandatory and voluntary disclosures is not binary; companies must carefully balance the risks associated with what they choose to reveal. For instance, adhering to mandatory requirements like the UK’s Companies Act is often seen as lower risk, while voluntarily sharing sensitive, non-mandated data—such as supplier relationship metrics—may expose businesses to reputational or legal challenges.
At the same time, transparency offers strategic rewards by fostering trust and meeting stakeholder expectations. In the current climate, for example, sharing workforce and labour data is particularly valuable. It helps build stakeholder confidence at a time of high inflation, a tight labour market, competition for talent, and changing expectations from younger generations.
As Lindsey Stewart of Morningstar Sustainalytics noted during the event, “Companies are only going to disclose things that they think there is some kind of advantage in it for them.” He explained that voluntary disclosures arise because “a lot of their investors have identified a risk or an opportunity that they want to know more about, and [companies] need those disclosures to fill in the gaps around that.” For many, non-financial disclosures are “an absolute commercial imperative,” providing a complete picture to evaluate risks, opportunities, impacts, and dependencies.
Moving Forward
As this ecosystem evolves, companies are beginning to recognise that their role goes beyond meeting regulatory requirements. Voluntary disclosures of today may become mandatory tomorrow, as stakeholders push for greater accountability.
To thrive in this environment, businesses should embrace transparency not as a burden but as a shared responsibility. By engaging proactively with both mandatory and voluntary frameworks, companies can help shape a future where trust and accountability are at the centre of a connected and sustainable economy.
The Thomson Reuters Foundation believes that businesses hold the key to unlocking more inclusive economies. Through WDI’s insights, we advance corporate transparency tostandards, enabling businesses to thrive whilst doing no harm. Corporate transparency is a pivotal tool to build trust with investors and consumers alike and for responsible businesses, the reward, far outweighs the risk.
This blog takes inspiration from a panel event which took place in October 2024 at the Thomson Reuters Foundation Trust Conference. Trust Conference is a global forum dedicated to tackling critical issues at the intersection of media, the law and responsible business. The annual event brings together world-class speakers and a highly informed audience from over 50 countries. The conference is held over two days in London and serves as a key platform for collaboration and thought leadership among experts at the forefront of global efforts to build free, fair and informed societies. This panel discussion focused specifically on the role of voluntary social disclosure and the importance of corporate transparency.
