Why Do Governments Support or Oppose More Stringent Transnational Regulation? Lessons from the Struggles over the Sustainability Reporting Directive 2014/95/

What are the prospects for more stringent transnational regulation? And why do some governments support and others oppose upward regulatory harmonization? To answer these questions, this paper examines the EU’s sustainability disclosure Directive 2014/95/EU, which requires large firms to report on their social, environmental and human rights impacts. Despite favorable circumstances, the Directive was weakened, and the positions different countries took in the negotiations are puzzling: Germany was the most hardline opponent, France was the strongest supporter, and the UK was somewhere in between. I draw on in-depth fieldwork, interviews with key decision makers, bivariate correlations and fuzzy-set qualitative comparative analysis to explain the underlying motivations of different actors and the different pathways to support and opposition. I find that adjustment costs to regulation are the most powerful determinant of government support and opposition, but domestic politics and Varieties of Capitalism also matter. Left-wing governments, LMEs, domestic disclosure requirements, large capital markets, and SRI are associated with support, whereas higher adjustment costs and CMEs are associated with opposition.