Non-Financial Violations

Non-financial performance assesses a firm’s societal and environmental impact beyond financial metrics. However, ESG ratings often fail to capture actual outcomes. This study highlights non-financial violations as a key measure of performance, revealing that they far outnumber financial violations and incur significant penalties. Factors such as low penalties, limited media coverage, and weak ESG correlations contribute to their prevalence. Strengthening compliance requires improved monitoring, whistleblower incentives, and stakeholder engagement.