SDG reporting and sustainability performance: insights from Italian companies

Sustainability reporting has gained prominence as a tool for organisations to communicate their sustainability performance (Camilleri, 2015; Arvidsson and Dumay, 2022). In this context, Torelli poses the question: “If we are talking about sustainability, about sustainable behaviours (regardless of whether we implement them or not), are we already achieving results on the road to effective sustainability?” (Torelli, 2021, p. 724). Existing literature argues that corporate communication is crucial for the dissemination of positive messages about sustainability and related practices, thereby motivating other businesses, organizations, and individuals to engage with these issues (Pérez‐López et al., 2015; Laine et al., 2021). This approach is expected to foster meaningful behavioural changes, potentially leading to significant real-world impacts. This behaviour is also explained by the “talking to walk” formative view on the relationship between sustainability talk and action, as proposed by Schoeneborn et al. (2020), which suggests that sustainability communication can significantly influence how sustainability is implemented in corporate practices (Schoeneborn et al., 2020). This relevance is further emphasized in mandatory settings. Indeed, EU legislative developments have advanced the provision of sustainability information, beginning with the introduction of Directive 2014 / 95/EU, followed by the Corporate Sustainability Reporting Directive (CSRD). As a result, companies meeting specific criteria are required to prepare and publish a non-financial sustainability disclosure statement, covering three main areas: environmental, social, and governance (ESG). However, sustainability accounting researchers have expressed some concerns related to the effectiveness of mandatory reporting on sustainable development, since many barriers to corporate transparency and accountability have been identified (Chauvey et al., 2015; Costa and Agostini, 2016). Indeed, different perspectives on the link between sustainability reporting and performance are available in the literature. On one hand, given the pressures posed by stakeholders, companies are increasingly expected to disclose ESG information to legitimise their sustainability practices (Manes-Rossi et al., 2018; Phan, De Luca and Iaia, 2020). On the other hand, despite the growing use of sustainability reporting, research has shown no consistent link between discussing sustainability (as represented by sustainability reporting) and actual sustainability practices, raising concerns about the effectiveness of such disclosures (Tsoutsoura, 2004; Allouche and Laroche, 2005; Todaro and Torelli, 2024).

In this context, aligning corporate performance with the United Nations Sustainable Development Goals (SDGs) has been shown to enhance transparency and disclosure, contributing to improved sustainability practices (Vigneau et al., 2015; Martínez-Córdoba et al., 2020; Nicolò et al., 2022; Beretta et al., 2024). However, while more companies are incorporating SDGs into their reports, only a minority have adopted specific SDG strategies, and thus translating the communication of sustainability into real practices, despite the increasing importance of evaluating corporate sustainability performance through commonly adopted frameworks (Schramade, 2017; Hummel and Szekely, 2022; Monteiro et al., 2023; United Nations Global Compact, 2015).

Although some progress has been made in understanding the factors that drive firms’ engagement in the sustainability journey, there are two significant gaps in the literature. First, only a few studies investigated how companies shape their sustainability talk and subsequently engage with sustainability walk (Girschik, 2020; Penttilä, 2020; Trittin-Ulbrich, 2023). Second, there is a lack of studies investigating the interaction between the reporting of sustainability information adopting the SDG framework (from herein “SDG reporting”) and companies’ sustainability performance (García-Meca and Martínez-Ferrero, 2021; Low et al., 2023). In particular, Howard-Grenville et al. (2019), stated that “there is considerable research to be done to understand the SDGs and their effects on businesses more holistically” (Howard-Grenville et al., 2019, p. 355). Thus, definitive conclusions on this relationship are lacking (Ramos et al., 2022). Additionally, there is a call for research examining whether SDG reporting can influence the implementation of sustainability practices and thereby encourage companies to move towards sustainability (García-Meca and Martínez-Ferrero, 2021). Indeed, studies empirically assessing the impact of SDG reporting on sustainability performance are limited, especially in recent years (García-Meca and Martínez-Ferrero, 2021; Khaled et al., 2021).

Thus, this study aims to investigate the role of SDG reporting in influencing sustainability performance. In doing so, it seeks to clarify whether talking about sustainability, by addressing the SDGs, can be considered a driver for companies to walk towards sustainability and, consequently, an improvement in a company’s sustainability performance (García-Meca and Martínez-Ferrero, 2021). Furthermore, since companies may perform differently across various ESG areas, this study examines the relationship for each ESG pillar and its corresponding SDGs individually (Khaled et al., 2021). In doing so, this study aims at answering the following research question:

This study investigates the non-financial disclosures (NFDs) published by Italian companies between 2019 and 2022. Italy provides an interesting context to conduct this analysis because it is one of the largest industrial European countries under the Directive 2014 / 95/EU. Results demonstrate the relevance of SDG reporting on affecting sustainability performance. In particular, this study contributes to the understanding of the “talking to walk” framework (Schoeneborn et al., 2020) by demonstrating that mandatory sustainability reporting can lead to sustainability performance improvements. More specifically, it contributes in advancing knowledge on the relevance of SDG reporting on impacting sustainability performance, providing support for the stream of literature according to which companies referencing SDGs in their sustainability reporting take concrete steps toward change.

Results of this study provide practical, policy and theoretical implications. First, with regards to practical implications, results of this study suggest that companies can improve their sustainability performance by aligning their practices to the SDG Framework in their reporting. More specifically, managers should focus on environmental and social SDG-related disclosures as they can drive tangible improvements. However, efforts to enhance governance performance may require more than SDG reporting alone, which, alone, cannot lead to significant improvements. Indeed, results show that referencing to SDGs when reporting governance aspects does not affect governance performance. Second, with regards to policy implications, results demonstrate that mandatory reporting fosters sustainability performance improvements, especially with regards to environmental and social aspects. Thus, policymakers can benefit from the results of this study in shaping future legislative directions. Third, with regards to theoretical implications, this study advances knowledge on the “talking to walk” performative approach as provided by Schoeneborn et al., by showing that SDG reporting can lead to sustainability improvements.

The remainder of this paper is structured as follows: Section 2 reviews the existing literature on the topic; Section 3 develops the hypotheses; Section 4 outlines the methodology, with the results presented in Section 5; finally, the discussion is provided in Section 6, and the conclusions in Section 7.

Companies are increasingly expected to implement sustainability actions progressively and effectively while providing stakeholders with comprehensive information about this process (Manes-Rossi et al., 2018; Phan et al., 2020). Sustainability reporting can serve as a valuable tool for promoting and communicating a company’s sustainability efforts and achievements and the actions taken to meet predetermined objectives. One of the main reasons behind such sustainability disclosure is that transparency in risk management and sustainability practices enables stakeholders to enhance their evaluation of firms (Di Tullio et al., 2021; Demartini et al., 2024). However, while sustainability reports are effective in conveying progress and outcomes, they should not be considered the only and primary mechanism through which a company walks towards sustainability (Adams, 2002; Boiral, 2013; Brennan and M. Merkl-Davies, 2014), but, instead, as an intermediate instrument.

At this regard, the performative nature of sustainability communication, according to which, under certain conditions, the way a company communicates sustainability concerns to its stakeholders can become actionable and binding enough to influence the organization’s behaviour (Schoeneborn et al., 2020), has gained increasing attention in the recent years (Schoeneborn and Trittin, 2013; Schoeneborn et al., 2020; Trittin-Ulbrich, 2023). Thus, according to this perspective, communication is a central factor in driving organizational change (Ford and Ford, 1995). To have a better understanding of the relationship between sustainability reporting (talk) and implementation (walk), this study adopts the theoretical framework proposed by Schoeneborn et al. (2020), in which the formative potential of sustainability communication is emphasized in relation to tangible actions, which can be categorized into three temporal perspectives: “talking to walk”, “walking to talk”, and “t(w)alking”. These perspectives reflect the sequence in which communication and implementation of sustainability actions occur. Indeed, according to the formative view, the communication of sustainability is, partially, contributing in the construction of the object itself, namely sustainability practices (Schoeneborn et al., 2020). More specifically, according to the “talking to walk” approach, the communication of sustainability “takes the driving seat and thereby can become influential with the ways in which CSR is exercised in corporate practice” (Schoeneborn et al., 2020, p. 14); in the “walking to talk” approach, sustainability actions occur before they are communicated, but sustainability communication also influences future sustainability practices, creating a feedback loop and, thus, shaping future activities (Schoeneborn et al., 2020); while in the “t(w)alking” approach, sustainability actions implementation and communication “are mutually and ongoingly constitutive”.

In a mandatory context, companies are required to engage in sustainability communication, regardless of their actual involvement in sustainability practices (Mion and Loza Adaui, 2019). At the European level, following Directive 2014 / 95/EU (Doni et al., 2020; Korca et al., 2021), companies meeting specific criteria are required to prepare and publish a sustainability report. Furthermore, under the CSRD, the range of companies legally mandated to report on their sustainability-related actions and achievements will be expanded. When the communication of sustainability actions is mandatory, previous studies grounded on legitimacy theory identified two main processes in the talk-walk relationship (Trittin-Ulbrich, 2023): in the recognition-attainment process, the sustainability talk is transformed into meaningful action with the potential to drive further sustainability practices, while in the recognition-commodification process, the perceived misrecognition eventually reduced such talk to mere formality. Concerning this second function, previous studies highlighted the possibility that communication may have only a representational function, mainly adopted for image restoration or preservation, and, thus, representing a reality that is conceptually and ethically disconnected from actual practices (Sandberg and Holmlund, 2015). This creates substantial room for image manipulation, as communication may operate independently of a broader process aimed at achieving corporate objectives. In such cases, companies do not engage in a continuous cycle of self-improvement through self-measurement and reporting (Schoeneborn et al., 2020). Instead, communication exists as a separate entity, allowing for the establishment of distinct, self-contained communicative goals.

Since the introduction of the 2030 Agenda and the SDGs in 2015, corporate communication efforts have increasingly focused on disclosing information related to business practices and objectives associated with the 17 key themes established by the United Nations (Martínez-Córdoba et al., 2020; Tsalis et al., 2020; Pizzi et al., 2021; Fiandrino et al., 2022; Hummel and Szekely, 2022; Benito et al., 2023). As argued by Torelli, the SDGs represent “a possible further push for those who want to apply themselves to greater sustainability with an ethical and responsible vision” (Torelli, 2021, p. 731). The SDGs have been extensively examined within the corporate sustainability literature (Rickels et al., 2016; Schramade, 2017; Schönherr et al., 2017; Topple et al., 2017; Sullivan et al., 2018; Lopez-Torres et al., 2022; Kiran et al., 2024).

First, it is widely recognized that reporting on SDGs contributions can lead to various benefits, such as mobilizing responsible investment in the SDGs (Gugler, 2015; Rasche, 2020), facilitating the integration of SDGs into business practices (Adams, 2017), and increasing company transparency, which is essential for progress toward the SDGs (Agarchand and Laishram, 2017; Anasi et al., 2018). Thus, sustainability reporting can catalyse SDG actions, as stated in the “Reporting on the SDGs” initiative, which aims to assist businesses in integrating SDG reporting into their existing processes, empowering them to enact and achieve SDG outcomes (Rasche, 2020). The literature suggests that companies adhering to these reporting standards often demonstrate a higher level of transparency and disclosure, contributing to enhanced sustainable development (Vigneau et al., 2015; Erin et al., 2022; Demartini et al., 2024). Various studies have examined the integration of SDGs into corporate reporting (Costanza et al., 2016; Hummel and Szekely, 2022). For instance, Donoher suggested that multinational corporations are more likely to adopt a sustainability agenda when their stakeholder network encompasses diverse interests and beliefs (Donoher, 2017). However, previous studies indicate that only a minority of companies currently reference the SDGs in their reports and have adopted specific SDG strategies (Schramade, 2017; Rosati and Faria, 2019; García-Meca and Martínez-Ferrero, 2021; Low et al., 2023), even though the number of companies referencing SDGs in their annual reports is increasing (Hummel and Szekely, 2022). In this context, previous studies argued that adopting sustainability reporting framework, such as SDGs, can help determine whether companies have adopted positive behaviours, rather than merely engaging in superficial reporting (window-dressing).

Second, many studies investigated the influence of SDG reporting on financial performance. Indeed, SDG reporting can contribute to “creating or increasing value for shareholders, society, and the environment” (Low et al., 2023, p. 111660). However, although the literature provides abundant evidence on financial value (Muhmad and Muhamad, 2021), this “limited” notion contradicts the perspectives of researchers who argue that the value generated should extend to a wider group of stakeholders (Low et al., 2023, p. 111660), resulting in controversial findings (Lopez, 2020; Van der Waal and Thijssens, 2020; García-Meca and Martínez-Ferrero, 2021). Previous studies have argued that reconciling SDG concerns with shareholder value creation poses challenges, as the expected win-win situation is not always evident for companies (Phan et al., 2020; Van der Waal and Thijssens, 2020). Furthermore, as stated by Van der Waal and Thijssens, “the overall lack of meaningful SDG disclosures implies that stakeholders with an SDG interest, such as institutional investors, cannot rely on sustainability reports for their decisions” (Van der Waal and Thijssens, 2020, p. 10). However, other studies have highlighted benefits associated with SDG reporting, such as enhanced financial performance, competitive advantage, reputation, and the reduction of information asymmetries (Eccles et al., 2014). Indeed, as argued by Haywood and Boihang, “the SDGs will need to be at the heart of value creation for business. This value creation would not only be measured in terms of profitability but also in terms of societal and environmental value. Companies that are able to show this in their business models and measure their contribution toward achieving the SDGs will be positive agents of change, driving the future of sustainable business” (Haywood and Boihang, 2021, p. 185). Disclosure of companies’ actions toward SDGs may help institutional investors evaluate sustainability performance (Rosati and Faria, 2019). Stakeholders may perceive SDG reporting as signalling a shift in business strategy, potentially increasing companies’ (non-)financial values. Indeed, organizations demonstrate their economic, social, and environmental value annually, benefiting various stakeholders by integrating SDGs into their operations (López and Monfort, 2017; Lopez, 2020).

Despite firms’ intentions to address the SDGs, scepticism persists around sustainability reporting due to a lack of regulation, vagueness, and limited substance (Arena et al., 2015). According to extant evidence “72% of companies mention the SDGs in their annual corporate or sustainability report”, but only “23% of companies disclosed meaningful Key Performance Indicators and targets related to the SDGs” (PwC, 2018, page 5). Indeed, companies still have relevant issues to address to explore the full potential of the SDGs. Indeed, even when SDGs are referenced in their reports, only a few have prioritized them individually (PwC, 2017). Some authors suggest that firms engage in environmental and social activities merely to meet stakeholders’ expectations, rather than to effect real change in their business strategies, thus providing support for the recognition-commodification process of sustainability talk (Sandberg and Holmlund, 2015). This view is supported by van der Waal and Thijssens, who found limited corporate involvement in the SDGs, suggesting that firms treat the goals as non-binding frameworks (Van der Waal and Thijssens, 2020). Thus, according to this perspective, firms may use sustainability actions primarily to shape stakeholders’ perceptions of sustainability, rather than to genuinely address environmental or social issues (Brammer and Pavelin, 2008).

Previous research suggests that companies disclose sustainability information to legitimize their operations to society, providing evidence that they function within socially accepted boundaries (Di Tullio et al., 2021). Despite this, criticisms persist regarding the ability of sustainability disclosures (the “talk”) to accurately reflect the commitment to sustainability and sustainable development (the “walk”).

In this regard, a substantial body of research has found no consistent relationship between sustainability disclosure and firm performance (Tsoutsoura, 2004; Allouche and Laroche, 2005). However, companies publicly committing to SDGs can align strategic priorities with SDGs, tracking, communicating, and reporting progress toward them (Tsalis et al., 2020). Such commitments signal to investors an ability to manage environmental and social risks, fostering competitive advantages linked to sustainability performance. For instance, SDG reporting can be viewed as a “walking to talk” tool to demonstrate a stronger commitment to SDG achievement, by disclosing which investments are aimed at improving sustainability performance (Calabrese et al., 2021, p. 202). Despite widespread support for sustainability reporting’s business case, a sceptical perspective exists, viewing it as more about influencing perceptions and focussing on the “talk” only, rather than genuinely addressing environmental or social issues (Brammer and Pavelin, 2008; Mal et al., 2022). Cho et al. noted that contemporary sustainability reporting often fails to provide information relevant to company valuation, primarily driven by concerns regarding corporate legitimacy (Cho et al., 2015). By contrasting the performative role of sustainability reporting (i.e. the talking to walk approach), and in line with the window-dressing argument, Scalet and Kelly observed that companies tend to highlight positive initiatives while omitting negative events (Scalet and Kelly, 2010). Birkey et al. highlighted the limited value of sustainability information, finding no significant impact on financial performance, suggesting alternative objectives beyond informing investors (Birkey et al., 2018). They further noted the generally low quality of analysed reports, limiting their effectiveness in communicating sustainability performance.

These challenges become more pronounced when applied to SDGs, especially when there is a lack of direct alignment with core business objectives. SDG reporting often lacks reference to actual sustainability performance, which may not influence firm value (Buallay, 2019; Khaled et al., 2021; Kücükgül et al., 2022). The absence of comprehensive and comparable sustainable information further undermines the potential impact of such reporting on sustainability performance. In line with this view, van der Waal and Thijssens (2020) conducted a recent qualitative study on SDG reporting and found that corporate involvement often remains a window-dressing rather than an accountability practice. Hence, it could be possible to argue that companies don’t always shift from the talking to the walking approach. Many companies either do not articulate how SDGs are integrated into their operations or lack a clear focus on key SDGs, using them merely to categorize existing activities. This can be due to some barriers to SDG implementation, which could prevent the walking to talk approach, such as challenges in the implementation process and practical steps to implement the SDGs, measuring and reporting challenges, SDG complexity and difficulty in understanding their nexus approach (de Almeida et al., 2023). Moreover, some barriers to SDG reporting, such as the lack of mandatory framework for companies, the lack of managerial commitment, and the lack of regulatory enforcement to report on SDG activities have been found to inhibit the talking to walking approach (Erin et al., 2022). Consequently, SDG reporting may be perceived as trivial or irrelevant by investors, who view it as a symbolic gesture without tangible effects on firm performance. However, by adopting the “talking to walk” approach, communicating sustainability is expected to lead to the execution of sustainable actions in corporate practices, thus resulting in improved sustainability performance (Schoeneborn et al., 2020). To the best of our knowledge, there is a lack of studies examining the role of SDG reporting on sustainability performance. Therefore, we develop the following hypothesis:

Different dimensions of corporate sustainability performance, namely environmental, social and governance, can be differently affected by different thematic areas of firms’ sustainability reporting, in general, and SDG reporting in particular (Schaltegger and Wagner, 2006). Prior literature identified a relevant link between sustainability reporting and corporate environmental performance. In this sense, Taglialatela et al. found four possible strategies in terms of discrepancy between environmental disclosure and related performance (Taglialatela et al., 2024): laggard firms are those with a low level of green disclosure and green performance, whereas pragmatic companies tend to report less despite high levels of environmental performance. The moral approach pertains to companies that communicate more with poorer performance. Finally, leaders are those firms with a good coverage of environmental issues in their reports and performing better in terms of environmental impact. They found that larger and gender-balanced boards can foster the alignment between green disclosure and environmental performance (Taglialatela et al., 2024). However, critical environmental accounting literature (Patten, 2002; Michelon et al., 2016) suggests that sustainability reporting may prioritize image enhancement over accountability, as a strategy to foster legitimacy.

With regards to the relationship between SDG reporting and environmental performance, prior literature found mixed results: firms showing a high level of SDG reporting, specifically with reference to environmental related SDGs, display worse outcome-based, but, at the same time, higher process-based environmental performance (Ferrón Vílchez et al., 2022). According to Ferrón Vilchez et al. (2022), the outcome-based related result could be due to a greater company’s commitment to achieve better environmental outcomes in the future, as a response to actual low performance, as reported in the SDG reporting. Hence, by disclosing their commitment towards the achievement of environmental-related SDGs, companies aim at restoring their decreased legitimacy due to worse environmental performance. Conversely, in environmental sensitive industries, consistent with the talking to walk approach in SDG reporting, companies were found to effectively address environmental-related SDG issues in their report, compared to companies operating in non-environmentally-sensitive industries (García-Meca and Martínez-Ferrero, 2021). Based on the analysis of the prior literature on this topic, and considering the “talking to walk” approach, we develop the following hypothesis:

Social performance has been defined as “societal expectations of corporate behaviour”, that is considering the expectations of stakeholders and the entire society (Whetten et al., 2002, p. 374). Companies have to face increasing challenges related to social performance (Latif and Sajjad, 2018; Sun et al., 2019). In this sense, companies are committing more and more themselves towards social practices aimed at enhancing their social performance (Arayakarnkul et al., 2022), which is one of the most impactful pillars for European larger companies’ financial performance (Gonçalves et al., 2023). In doing so, they are seeking to increase their social accountability (Gray et al., 1995). Consistent with this assumption, the reporting of social performance can play a significant role in the company’s commitment towards its social advancements. Following the talking to walk approach, recent literature found that social-related SDG reporting can be considered as a “booster” for corporate social performance, since it portrays corporate strategy and management policies to meet the SDGs (Di Vaio et al., 2022). More specifically, previous studies conducted in the energy industry, show that higher SDG coverage with regard to the social thematic areas is connected with higher commitment in terms of social performance (Calabrese et al., 2021). More generally, industries with a higher societal impact are reporting more on social-related SDGs than those in other sectors (Elalfy et al., 2021). From the discussion of the extant research, the role of social-related SDG reporting can foster the talk towards corporate social performance (i.e. the walk). Hence, we develop the following hypothesis:

The SDGs have also been considered as a tool for “good governance” (Massey, 2022, p. 79), or a governance innovation (Kanie and Biermann, 2017). Hence, by adopting a talking to walk perspective, SDG reporting on governance aspects of the firm can showcase the company’s commitment to SDG achievement (Adams, 2020). Empirical findings from prior literature highlighted that sustainability reporting mediates the relationship between national governance and SDG achievement (Alsayegh et al., 2023). More specifically, previous studies conducted in the fintech industry show that corporate governance disclosure has a negative impact on governance-related SDGs achievement (Susilowati et al., 2022). Considering the talking and walking towards sustainability relationship, the adoption of governance mechanisms, such as a young and gender-balanced board of directors, can be conducive to higher quality in SDG reporting, especially with regards to governance-related SDG issues (Rosati and Faria, 2019b). Since the extant literature on the “talking to walk” approach is scant and mixed in terms of results, but relevant in this context, we develop the following hypotheses:

To examine the research hypotheses, we obtained the NFDs for the last four available fiscal years (2019–2022) from all Italian companies which published their NFDs in this timeframe. In particular, this timeframe was selected because it is subsequent to the introduction of “The National Sustainable Development Strategy 2017–2030”. Additionally, since the study aims to investigate the talk-walk relationship in a mandatory setting, we focused on the period following the transposition of EU Directive 95 / 2014 into Legislative Decree 254 of December 30, 2016, which mandates that companies meeting specific criteria publish their sustainability reports. This analysis focuses on Italy because of its status as one of the largest industrial European countries compelled by Directive 2014 / 95/EU.

The data collection phase proceeded in three steps.

First, we compiled a list of Italian companies that published their NFDs during the analysis period. Specifically, for each fiscal year, we consulted the list provided annually by the Italian securities market regulator, CONSOB (Commissione Nazionale per le Società e la Borsa), which includes all companies that have published their NFDs. This resulted in a list of 260 companies. However, we retained only those companies that published their NFDs every year within the investigation period (from fiscal year 2019–2022). Additionally, the sample was limited to companies with complete information, excluding those with inaccessible financial or non-financial data.

Second, financial and non-financial data for the same period were gathered from the LSEG Database.

Finally, we visited the websites of all companies on the list that had accessible financial and non-financial data and manually collected the available NFDs for the fiscal years under investigation. In line with prior research (Melloni, 2015; Beretta, Demartini, and Trucco, 2019, 2024; Hummel and Szekely, 2022; Beretta, Demartini, and Sotti, 2023; Zampone et al., 2024), we adopted content analysis to manually investigate each report included in the sample. Content analysis is defined as a research technique used to “objectively and systematically identify specified characteristics of messages” (Carney, 1972, p. 21) and is widely adopted in accounting research to codify the content of specific documents and ensure replicability (Zampone et al., 2024). As noted in existing research, content analysis “more than any other research method, is inextricably tied to human intellectual abilities” (Krippendorff, 2009, p. 209), meaning subjective interpretation is an inherent aspect of this approach (Baumgart et al., 2021). To ensure consistency in the data collection phase, all the authors firstly analyzed the same small subset of the reports, before expanding the coding procedure to the whole sample (Orwin and Vevea, 2009). This procedure was implemented to measure the extent to which companies report on the SDGs (Beck et al., 2010; Vourvachis and Woodward, 2015), by examining whether the terms “SDG” or “sustainable development goals” appeared in the reports. In line with previous studies (Jiang et al., 2023; Van der Waal and Thijssens, 2020), data on SDG reporting were hand-collected using a deductive content analysis method. Reports were examined for explicit mentions of SDG-related terms, including full phrases (e.g., “sustainable development goals”), acronyms (e.g., “SDGs”), and individual SDG titles (e.g., “Goal 1 No Poverty”). Stemmed words related to SDGs were also considered, and only explicit mentions were included.

Consequently, our database comprises 240 NFDs entries related to 60 Italian companies. The final sample is composed of companies operating in the following sectors: 2 in Insurance, 3 in Automobiles and Components, 10 in Banks, 6 in Consumer Business, 6 in Construction and Infrastructure, 8 in Energy & Utilities, 1 in Holding, 10 in Industrial Products and Services, 3 in Technology & Communications, 2 in Transport, 4 in Other Financial Activities and 5 in other sectors. 24 companies in the sample are listed in the FTSE MIB Index.

Multiple regression analyses are conducted to examine the relationship between the theorized variables and the dependent variable(s). In particular, the following models are run:

Table 1 presents the variables adopted in the analysis.

The study employs a range of dependent, independent, and control variables. Each variable is defined and measured based on established methodologies and existing literature.

The dependent variables relate to sustainability performance. First, the ESG_Score represents a company’s overall ESG performance, commitment, and effectiveness across ten key themes, such as emissions, environmental product innovation, human rights, and shareholder relations. Consistent with existing literature, instead of focusing on specific selected measures, we examine ESG scores (both overall and pillar scores) to provide a comprehensive view of firms’ contributions to the SDGs and their sustainability performance (Khaled et al., 2021). The score is measured as a continuous variable and is sourced from the LSEG Database (formerly Refinitiv, Thomson Reuters, 2018). According to LSEG (2024), these scores are designed to transparently and objectively assess ESG performance using publicly reported data. The methodology aligns with prior research by Beretta et al. (2019), Buallay et al. (2020), and Beretta et al. (2023).

The ESG category scores are combined to generate the E, S, and G pillar scores, with each pillar score ranging from zero to 100. Higher overall aggregated ESG scores indicate a greater level of ESG responsibility (Sahin et al., 2022).

Subsequently, the three pillars of ESG performance were analyzed separately:

1. Environmental_score: This captures a company's environmental performance through the Environmental Pillar Score, measured as a continuous variable obtained from the LSEG Database. Specifically, it includes information related to three main categories: resource use, emissions, and innovation (Refinitiv, 2021; Senadheera et al., 2021).

2. Social_score: Social performance is measured by the Social Pillar Score, a continuous variable provided by the LSEG Database. It captures information related to four main categories: community, human rights, product responsibility, and workforce (Refinitiv, 2021).

3. Governance_score: Governance performance is evaluated using the Governance Pillar Score, another continuous variable sourced from the LSEG Database. It captures information related to three main categories: CSR strategy, management, and shareholders (Refinitiv, 2021).

The independent variables adopted in this study represent the SDGs reporting of the companies in the sample.

First, the variable SDG_Reporting measures the presence of a reference to the SDGs on the company’s NFD. Corporate engagement with the SDGs was treated as the primary dependent variable and analyzed using mechanistic content analysis (Beck et al., 2010; Vourvachis and Woodward, 2015). This was operationalized by examining whether the terms “SDG” or “sustainable development goals” appeared in the reports. Consistent with previous studies (Jiang et al., 2023; Van der Waal and Thijssens, 2020), data on SDG reporting were hand-collected. Using a deductive content analysis method, reports were examined for explicit mentions of SDG-related terms, including full phrases (e.g., “sustainable development goals”), acronyms (e.g., “SDGs”), and individual SDG titles (e.g., “Goal 1 No Poverty”). The presence of SDG references was coded dichotomously, assigning a score of “1” if at least one SDG was mentioned and “0” otherwise. The use of a binary system has been extensively used in extant literature (Khan et al., 2021; Bose et al., 2024). Thus, this approach follows methodologies from prior studies (Jiang et al., 2023; Van der Waal and Thijssens, 2020; Curtó-Pagès et al., 2021, among others). In line with previous research measuring the extent to which SDGs are present or absent in corporate documents, SDGs is a dummy variable equal to 1 when SDGs are reported in the document and 0 otherwise. This variable measures whether there is any mention of SDGs if the score equals 1.

Additionally, SDG reporting was further divided into different pillars following the classification system proposed by Khaled et al. (2021), which aligns SDGs and their targets with a firm’s sustainability practices as reflected in ESG scores. The classification assigns SDGs to different ESG pillars as follows (Khaled et al., 2021):

• Environmental: Goals 2, 3, 6, 7, 8, 9, 11, 12, 13, 14, 15, and 17.

• Social: Goals 1, 2, 3, 4, 5, 8, 10, 12, 16, and 17.

• Governance: Goals 5, 12, and 17.

Following this classification system, the following independent variables were introduced:

• SDG_Environmental: Measures the presence of SDGs related to environmental aspects. Companies are assigned a score of “1” if they report on at least one environment-related SDG and “0” otherwise.

• SDG_Social: Assesses the presence of reporting on social-related SDGs. Companies disclosing at least one social SDG receive a score of “1” and “0” otherwise.

• SDG_Governance: Captures the presence of governance-related SDG disclosures. Companies reporting at least one governance SDG receive a score of “1” and “0” otherwise.

Finally, the following control variables were included in the analysis:

• ROE (Return on Equity): Included to account for a company’s financial performance, with data sourced from the LSEG Database.

• ENV_SENS_IND (Environmental Sensitive Industry): Identifies whether a company operates in environmentally sensitive industries, based on studies by Lourenço and Branco (2013), Izzo et al. (2020), and Curtó-Pagès et al. (2021).

• SIZE: Firm size, proxied by the logarithm of total assets, sourced from the LSEG Database.

• EMPLOYEES: Workforce size, measured by the logarithm of the total number of employees, with data from the LSEG Database.

• FTSE_MIB: A dummy variable indicating inclusion in the FTSE MIB Index (1 = inclusion, 0 = otherwise).

• VOLUNTARY: Distinguishes between mandatory and voluntary sustainability reporting (1 = voluntary, 0 = otherwise).

• 2020, 2021, 2022: Dummy variables capturing temporal effects (1 = respective year, 0 = otherwise).

To gauge the extent to which parametric assumptions were upheld, different diagnostics were carried out ( Appendix 1).

First, Variance inflation factors (VIFs) were computed initially to assess the level of multicollinearity among the variables in the model. According to Gujarati (2003), VIF values exceeding 10 can be concerning as they suggest inflated standard errors of the coefficients. In this study’s model, all VIF values are below 10, indicating that multicollinearity is not a significant issue.

Second, as post estimation test, to address potential endogeneity concerns, to explore whether the non-financial performance had an impact on SDG reporting, we re-estimated the previous models through the adoption of a probit analysis with the SDG reporting as a dependent variable and the non-financial performance as independent variables. The results ( Appendix 2) were insignificant, which accords with expectations (Abhayawansa, 2011; Abhayawansa and Guthrie, 2016a, b; Melloni et al., 2017).

Table 2 provides the descriptive statistics of the variables included in the statistical analysis.

The overall ESG_Score has a mean value of 66.11. The scores range from a minimum of 26.57 to a maximum of 95.02, with a standard deviation of 14.30, showing variability across companies. The mean value for the Environmental_Score is 61.97, with a larger standard deviation of 20.77, indicating more variation in environmental performance across companies. The Social_Score has a mean of 72.21, which is slightly higher than the overall ESG and environmental scores, with less variability (standard deviation of 14.51). The Governance_Score has a mean of 61.14 and the scores range from 13.17–96.97, showing substantial variation across the sample. For SDG_Reporting, SDG_Environmental, SDG_Social, and SDG_Governance, the proportion of entities reporting (value = 1) is consistently high at approximately 80%. The confidence intervals are quite narrow, indicating stability across these dimensions. The distribution of the companies referring and not referring to SDGs in their report is in line with extant literature. Indeed, previous studies have argued that corporate SDG reporting is expected to address the limitations of current sustainability reporting practices used by most organizations (Lanka et al., 2017). Furthermore, studies by Kroll (2015) and Cuckston (2017) suggest that SDG reporting provides a more detailed, comprehensive, and clearer view of what is expected in a corporate sustainability report. The 17 SDGs serve as a foundation for key performance indicators (KPIs) to measure sustainable performance. Following the introduction of the 17 SDGs in 2015, most regulatory bodies, interest groups, and standard setters have advocated for performance-based sustainability reporting by corporate organizations. For these reasons, SDG reporting has become one of the most widely adopted frameworks for sustainability disclosure (Erin et al., 2022; Konstantinos and Dimitrios, 2016). The financial performance, as measured by ROE, has a considerable variability, with a mean of 10.49% and a high standard deviation of 19.54. The mean SIZE, measured as the logarithm of total assets, is 9.75. The variable EMPLOYEES, measured as the logarithm of the number of employees, has a mean of 0, and a minimum and maximum values of −0.63 and 3.92, respectively. Out of 240 observations, 104 observations (43.33%) are classified as environmentally sensitive, whereas 136 are not. A majority of observations (60.83%) are not listed on the FTSE MIB, while 94 observations (39.17%) are listed. Finally, the vast majority of observations, 228 (95%), do not engage in voluntary reporting, while only 12 companies (5%) do.

Table 3 presents the correlation matrix for the variables included in the statistical analysis. In particular, we adopted the point-biserial correlation, as a specification of the Pearson correlation, when one variable is dichotomous and the other variable is continuous (Kornbrot, 2014).

Results of the correlation analysis show that ESG scores are highly positively correlated with the Environmental, Social, and Governance pillars, particularly with the Social dimension (r = 0.8859, p < 0.001). Governance has a moderate but consistent association with the overall ESG score (r = 0.7514, p < 0.001) and weaker correlations with the Environmental (r = 0.3662, p < 0.001) and Social dimensions (r = 0.5029, p < 0.001). Firm size indicators, such as Total Assets and the number of employees, exhibit moderate positive correlations with ESG scores and pillars. Financial performance, measured by ROE, has weak and generally negative correlations with ESG and its pillars.

The regression results are presented in Table 4.

In terms of performance of the model with regard to the coefficients, results from the analysis conducted on the full sample reveal a positive statistically significant relationship between SDG_Reporting and ESG_Score, thus supporting “H1: SDG reporting positively affects sustainability performance”. Concerning the analysis on the single pillars, results reveal a positive statistically significant relationship between SDG_Environmental and Environmental_Score, thus supporting “H2: SDG reporting on environmental aspects positively affects environmental performance”, and between SDG_Social and Social_Score, thus supporting “H3: SDG reporting on social aspects positively affects social performance”. No statistically significant relationship has been detected between SDG_Governance and Governane_Score, thus rejecting “H4: SDG reporting on governance aspects affects governance performance”.

Furthermore, the results for the control variables provide interesting insights. First, larger companies, whether measured by total assets or number of employees, tend to exhibit better sustainability performance, including across some of the three pillars. Second, firms operating in environmentally sensitive industries are associated with superior sustainability performance. Third, companies with weaker financial performance appear to achieve better sustainability outcomes. Finally, firms listed on the FTSE-MIB demonstrate stronger sustainability performance, particularly in the social and governance pillars.

This study aims to investigate the role of SDG reporting in affecting sustainability performance. In particular, the “talking to walk” approach is adopted to examine the extent to which companies that talk about sustainability, and reference the SDGs in this action, are also taking steps toward sustainability, thus improving their sustainability performance. The study also investigates these relationships separately for the three pillars of sustainability, namely environmental, social, and governance.

Regarding the impact of SDG reporting on sustainability performance, this study supports the stream of literature suggesting that SDG reporting plays a crucial role in affecting companies’ sustainability performance (García-Meca and Martínez-Ferrero, 2021), thus supporting the talking to walk approach (Schoeneborn et al., 2020). Indeed, when companies are mandated by law to communicate their commitment towards sustainable development, the recognition-attainment process in the talk-walk relationship is supported, and, thus, results of this study show that the sustainability talk is transformed into meaningful actions that can drive sustainability practices (Trittin-Ulbrich, 2023). This study thus supports the perspective stated by previous research, according to which the SDGs can stimulate advancements in sustainability reporting by offering a comprehensive and universally recognized framework for sustainable development, serving as a fly-wheel for sustainability efforts (Bebbington, Russell and Thomson, 2017; Stafford-Smith et al., 2017; Bebbington and Unerman, 2018; Shoaf et al., 2018; Thorlakson et al., 2018). Specifically, this study provides evidence that reporting on a company’s commitment to the SDGs can lead to improved performance (Rasche, 2020). Thus, the results diverge from the stream of the literature on corporate sustainability disclosures which claims that companies engage in reporting practices primarily to enhance their public image rather than substantively improve sustainability performance (Patten, 2002; Cho et al., 2015). Indeed, contrary to the findings of Ferron Vilchez et al. (2022), this study shows that firms with high SDG reporting are not necessarily associated with lower past performance. On the contrary, SDG reporting can translate into improved sustainability outcomes. In contrast, this study does not provide evidence for the stream of literature suggesting that sustainability strategy implementation is primarily aimed only at influencing perceptions rather than addressing environmental or social issues (Brammer and Pavelin, 2008; Scalet and Kelly, 2010; Cho et al., 2015). Thus, the results of this study align with the literature that suggests sustainability reporting can effectively assess, understand, drive, and communicate an organization’s initiatives toward achieving the SDGs.

When considering the different pillars separately, this study supports the work of Taglialatela et al. (2024), who found that SDG reporting is not a uniform practice, and its effectiveness depends on how well it aligns with actual corporate performance (Taglialatela et al., 2024). As such, different strategies can be adopted by firms with regards to environmental, social and governance actions’ communication and implementation.

First, the environmental dimension of sustainability performance is one area where SDG reporting has gained significant attention in the past years (Bebbington and Unerman, 2018; Mio et al., 2020). While some studies found that companies with poor environmental performance may disclose more information to mitigate negative perceptions (Ferrón Vílchez et al., 2022; Taglialatela et al., 2024; Todaro and Torelli, 2024), this strategy can lead to mixed outcomes. This study supports the stream of literature suggesting that talking more about environmental actions through SDG reporting can influence environmental performance, consistent with the talking to walk approach in SDG reporting (García-Meca and Martínez-Ferrero, 2021). As such, this study aligns with Ferrón Vílchez et al. (2022), who found that companies disclosing SDG information related to environmental goals show improved process-based environmental performance, indicating that such disclosures can foster enhanced internal processes aimed at environmental sustainability.

Second, regarding social aspects, this study supports the work of Di Vaio et al. (2022), who found that SDG reporting on social aspects, such as human rights, labour standards, and community impact, can act as a booster for corporate social performance, thus supporting the talking to walk approach (Di Vaio et al., 2022). Higher SDG reporting on social aspects correlates with better social performance outcomes, suggesting that firms using SDG reporting as a strategic tool to enhance social accountability can also achieve tangible benefits (Calabrese et al., 2021). This, in turn, can also lead to enhanced corporate reputations and improved stakeholder relations (Latif and Sajjad, 2018; Sun et al., 2019).

Third, contrary to expectations, according to which SDG reporting on governance aspects might improve governance performance, this study found that, while governance is integral to the overall sustainability framework, it might not be directly influenced by SDG reporting. Therefore, this study supports the work of Susilowati et al. (2022), who found that reporting alone is insufficient to drive improvements in governance performance. Moreover, governance performance is often shaped by broader structural and regulatory factors that go beyond the scope of voluntary SDG reporting (Susilowati et al., 2022). Alsayegh et al. (2023) found that national governance systems play a crucial role in mediating the relationship between sustainability reporting and SDG achievement (Alsayegh et al., 2023). Therefore, improvements in governance performance may require stronger institutional and regulatory support, rather than relying only on corporate reporting practices.

With regard to the role of the industry in which a company operates, the results of this study are in contrast with previous research, which suggests that SDG reporting is not influenced by the sector, specifically by the sector’s environmental sensitivity (Izzo et al., 2020; Calvo-Centeno et al., 2022). Indeed, contrary to prior studies (Lourenço and Branco, 2013; Garcia, Mendes-Da-Silva and Orsato, 2017), SDG reporting has a significant positive impact on sustainability performance in specific sectors, indicating that companies operating in environmentally sensitive industries are associated with better sustainability outcomes. This suggests that companies may exhibit different behaviours concerning the sector in which they operate when it comes to sustainability performance (Cancela et al., 2020).

Finally, in contrast to recent studies (Ramos et al., 2022), the results of this study indicate that sustainability performance is also influenced by company size, even when considering each of the three pillars independently.

This study investigates the role of SDG reporting in influencing a company’s sustainability performance. Grounding on the framework put forward by Schoeneborn et al. (2020), it explores whether discussing sustainability through SDG reporting encourages companies to improve their sustainability practices. Additionally, the study examines the relationship between SDG reporting and each ESG pillar individually. Thus, results of this study ought to reply to the following research question: Is SDG reporting a driver for walking towards sustainability?

By investigating the NFDs of Italian companies for the time frame 2019–2022, results show that referencing to the SDGs framework in their reporting, companies can achieve better sustainability performance, thus providing support for the “talking to walk” formative view of sustainability communication, according to which talking about sustainability can lead to sustainability performance improvements (Schoeneborn et al., 2020). The results confirm this relationship for both environmental performance (in relation to environment-focused SDGs) and social performance (in relation to socially focused SDGs). On the contrary, referencing to governance-related SDGs does not translate into better governance performance.

First, this study contributes in advancing some knowledge on the relevance of the performative view of sustainability communication. More specifically, by adopting the theoretical lenses of the “talking to walk” approach (Schoeneborn et al., 2020), this study provides further evidence on the impact of talking about sustainability in a mandatory context.

Second, the study contributes to the literature on SDG reporting by examining its impact on sustainability performance. More specifically, it demonstrates the positive influence of SDG reporting on sustainability outcomes, advancing understanding of SDG reporting as a driver for meaningful sustainability actions. It shows that companies that “talk” about sustainability through SDG reporting often take concrete steps (“walk”) to improve their sustainability practices, supporting that stream of research according to which SDG reporting is considered a tool for substantive change rather than mere image enhancement (e.g., Calabrese et al., 2021; Taglialatela et al., 2024).

Third, by distinguishing between the ESG pillars, the study contributes to knowledge on the different approaches companies may adopt regarding these aspects (Khaled et al., 2021). Results demonstrate that referencing to SDGs related to the environmental and social aspects positively impacts environmental and social performance, respectively. On the contrary, governance-related SDG reporting has limited influence on governance performance.

Fourth, the study provides additional evidence on the importance of integrating sustainability policies into a company’s objectives to enhance sustainability performance.

Finally, this research sheds some light on how industry and company size affect sustainability performance. It provides additional evidence of sector-specific challenges in sustainability reporting, showing that referencing governance-related SDGs can negatively impact governance performance in environmentally sensitive industries (Izzo et al., 2020; Calvo-Centeno et al., 2022). Additionally, it contributes to the understanding of company size in advancing sustainability outcomes, highlighting that larger companies tend to perform better in sustainability efforts, even when examining the three pillars separately.

In line with previous empirical research, this study has some limitations, which open avenues for future research. First, the analysis focuses on a single country, namely Italy. Future studies could explore whether similar results can be observed in other countries. Second, this study examined companies under the scope of Directive 2014 / 95/EU. However, the current regulation in place is the CSRD. Therefore, future research could investigate the talk-walk relationship for companies within the scope of the CSRD, thereby expanding the sample. Third, this study is deliberately conducted in a mandatory reporting context. It would be interesting for future research to explore whether the performative view of sustainability communication has the same impact in a voluntary setting. Thus, future studies could focus on companies outside the scope of Directive 2014 / 95/EU or CSRD. Fourth, although this study collected data from different years, it lacks an investigation of long-term effects. Future research could analyse the impact of implementing SDG strategies over a longer period. Fifth, results of this study did not provide support for the relevance of referencing to governance-related SDGs in influencing governance performance. Thus, it highlights the need for further theoretical exploration of why governance-related SDGs have less influence on governance performance, offering new directions for research on sustainability communication. Sixt, an existing stream of literature on corporate sustainability highlights the significance of sustainability reporting in shaping an organization’s sustainability agenda (Siebenhüner and Arnold, 2007; Lozano, 2015) because it can serve as an effective tool for evaluating, comprehending, propelling, and conveying an organization’s efforts toward SDGs. This would also be beneficial for companies to facilitate internal goal setting and guide the transition toward sustainable development (Rasche, 2020) since SDGs can drive progress in sustainability accounting and reporting by providing a comprehensive and widely accepted framework for sustainable development (Bebbington et al., 2017; Stafford-Smith et al., 2017; Bebbington and Unerman, 2018) and a compelling catalyst for sustainability initiatives (Shoaf et al., 2018; Thorlakson et al., 2018). However, as provided by previous studies, only “little attention has been paid to the policies adopted by companies” (Gazzola et al., 2020, p. 1), even though “it is important for the managers to understand and communicate the environmental policies in a clear manner” (Soni, 2023, p. 3189). As stated by Low et al. (2023), there is a need for companies to track progress toward SDGs. Indeed, the informativeness of the SDG reporting could be enhanced by demonstrating an alignment between the company’s activities and national goals (Gunawan et al., 2020; Low et al., 2023). For this purpose, Avrampou et al. found that businesses are linking the SDGs with their business strategy, emphasizing the importance of assessing changes in the sustainability reporting domain across sectors to incorporate the SDG framework (Avrampou et al., 2019). Gazzola et al. found that “Italian public interest entities have implemented active policies linked to the achievement of some specific goals” (Gazzola et al., 2020, p. 1). Dahiya found that implementing sustainability policies can have a psychological impact on employees with regards to their sustainability behaviours (Dahiya, 2020). However, there is a lack of studies investigating the impact of the adoption of these policies on sustainability performance. Thus, future research could further explore the relevance of adopting sustainability policies in the company.

Finally, various measures for SDG reporting can be adopted. In particular, a comprehensive disclosure index that effectively measures the extent of reporting could be adopted to account, for example, for both the quantity and depth of the information disclosed about each SDG, rather than merely its mention or count. In previous studies, the SDG Disclosure Index has been quantified using either a weighted or an unweighted approach (Cooke, 1989; Khan et al., 2021; Fonseca and Carvalho, 2019; Manes-Rossi and Nicolo’, 2022; Erin et al., 2022). Thus, future research could refine SDG adoption metrics, such as the proxy (Number of SDGs disclosed by the firm/Total of 17 SDGs), which measures the diversity of disclosed SDGs. Aligning with prior studies (Hamad et al., 2023; Zampone et al., 2024), this refinement could enhance transparency and corporate accountability in sustainability reporting.

Funding: Funding for this paper was provided by Progetto PRIN 2022 “Non-Financial disclosure and Audit Quality: Future perspectives in Italy and Europe (n-FAQ)” – Codice progetto 2022YALETF – CUP F53D23003200006 – Finanziamento dell’Unione Europea – NextGenerationEU – missione 4, componente 2, investimento 1.1.

Table A1 

Table A2