This paper serves as an introduction to this special issue of Accounting, Auditing & Accountability Journal; an issue which embraces themes associated with social and environmental reporting (SAR) and its role in maintaining or creating organisational legitimacy. In an effort to place this research in context the paper begins by making reference to contemporary trends occurring in social and environmental accounting research generally, and this is then followed by an overview of some of the many research questions which are currently being addressed in the area. Understanding motivations for disclosure is shown to be one of the issues attracting considerable research attention, and the desire to legitimise an organisation’s operations is in turn shown to be one of the many possible motivations. The role of legitimacy theory in explaining managers’ decisions is then discussed and it is emphasised that legitimacy theory, as it is currently used, must still be considered to be a relatively under‐developed theory of managerial behaviour. Nevertheless, it is argued that the theory provides useful insights. Finally, the paper indicates how the other papers in this issue of AAAJ contribute to the ongoing development of legitimacy theory in SAR research.

Introduction: The legitimising effect of social and environmental disclosures – a theoretical foundation

What makes organizations so similar? We contend that the engine of rationalization and bureaucratization has moved from the competitive marketplace to the state and the professions. Once a set of organizations emerges as a field, a paradox arises: rational actors make their organizations increasingly similar as they try to change them. We describe three isomorphic processes-coercive, mimetic, and normative—leading to this outcome. We then specify hypotheses about the impact of resource centralization and dependency, goal ambiguity and technical uncertainty, and professionalization and structuration on isomorphic change. Finally, we suggest implications for theories of organizations and social change.

The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields (Chinese Translation)

The impact of culture and governance on corporate social reporting

Legitimacy theory suggests companies with poorer environmental performance would be expected to provide more extensive off-setting or positive environmental disclosures in their financial reports. However, recent investigations of the performance/disclosure relation [Al-Tuwaijri, S. A., Christensen, T. E., & Hughes II, K. E. (2004). The relations among environmental disclosure, environmental performance, and economic performance: a simultaneous equations approach. Accounting, Organizations and Society, 29, 447–471; Hughes, S. B., Anderson, A., & Golden, S. (2001). Corporate environmental disclosures: are they useful in determining environmental performance? Journal of Accounting and Public Policy, 20, 217–240; Hughes, S. B., Sander, J. F., & Reier, J. C. (2000). Do environmental disclosures in US annual reports differ by environmental performance? Advances in Environmental Accounting and Management, 141–161; Patten, D. M. (2002). The relation between environmental performance and environmental disclosure: a research note. Accounting, Organizations and Society, 27, 763–773] report mixed results. In this study, we use size-matched groups based on industry membership (environmentally sensitive versus non-environmentally sensitive) and environmental performance (worse performers versus better performers, based on data from KLD Research and Analytics, Inc.) to test for differences in the use of monetary and non-monetary non-litigation related environmental disclosure. Results indicate that the use of monetary and non-monetary components of the non-litigation related environmental disclosure varies across groups. In general, the findings provide additional support for the argument that companies use disclosure as a legitimizing tool.

The role of environmental disclosures as tools of legitimacy: A research note

This study provides an integrated analysis of the interrelations among (1) environmental disclosure, (2) environmental performance, and (3) economic performance. Based on the argument that management's (unobservable) overall strategy affects each of these corporate responsibilities, we conjecture that prior literature's mixed results describing their interrelations may be attributable to the fact that researchers have not considered these functions to be jointly determined. After endogenizing these corporate functions in simultaneous equations models, we obtain results that suggest “good” environmental performance is significantly associated with “good” economic performance, and also with more extensive quantifiable environmental disclosures of specific pollution measures and occurrences.

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The relations among environmental disclosure, environmental performance, and economic performance: a simultaneous equations approach

This paper investigates climate change-related corporate governance and related disclosure practices of five major energy-intensive companies in Australia over a 16 year period (from 1992 to 2007). More particularly, we are focusing on the disclosures that provide information about the policies and procedures the organisations have in place for addressing various issues associated with climate change. This study has employed a content analysis research method to investigate disclosures within annual reports and standalone environmental or sustainability reports. A disclosure category has been developed to classify climate change-related governance disclosures provided by the respective companies. Our findings from the paper suggest an increasing trend in companies' climate changerelated disclosure performances over time.

An exploration of corporate climate change-related governance practices and related disclosures: Evidence from Australia

The role of management accounting in improving both environmental and financial performance through enhanced accountability is attracting increased recognition. However, universities have typically failed to be the focus of attention, generally, because of a mistaken belief that they generate only insignificant environmental impacts. A case-study of an Australian university demonstrates that there is a general lack of consideration given to the management of environmental costs and related cost-savings, due partly to a perceived lack of appreciation by senior management of the extent of environmental costs being incurred. Further, in the absence of relevant environmental cost information, although environmental sustainability itself is promoted as important, efforts to improve internal environmental accountability from an accounting perspective are lacking. In this study, interviews were conducted to identify barriers which affect the adoption of EMA. The results show that perceived institutional pressures and a low profile of accounting for the environment, and management’s attitudes influence the adoption of EMA within universities.

Environmental Management Accounting and Environmental Accountability Within Universities: Current Practice and Future Potential

The provision of environmental information in corporate annual reports is predominantly voluntary in Australia. Despite this, a number of research studies have observed the presence of environmental information in the annual reports of sample companies (for example, Guthrie and Parker, 1990; Gibson and O Donovan, 1994; Deegan and Rankin, 1996; Deegan and Gordon, 1996). These prior studies have found that where firms disclose environmental information they tend to only provide information which is favourable to their corporate image. Within the prior studies this lack of objectivity is typically viewed in a negative vein. However, this negativity is premised on the generally unstated assumption that environmental information is material to annual report users. This paper reports on the results of a survey of various groups of annual report users as to the importance, or "materiality", of environmental information to decisions they may wish to make. The paper also investigates how environmental information is ranked in importance relative to various other items of social and financial information. The user groups surveyed comprise shareholders, accounting academics, stockbrokers and financial analysts, financial institutions, environmental lobby groups, industry associations and other groups performing a review or oversight function. The results indicate that the majority of the annual report users surveyed believe environmental information to be material to their decisions, and that they seek the disclosure of this information in corporate annual reports. Although the results show that the users typically believe that environmental information is material, the results further indicate that the majority of the user groups rank environmental information behind traditional financial information such as profits, net assets, cash flows, and dividend payments.

The Materiality of Environmental Information to Users of Annual Reports

This report provides the results of a study of the social and environmental reporting practices of organisations operating in, or sourcing products from, a developing country; in this case, Bangladesh. The study comprised three distinct but related components:

1. an investigation of the social and environmental disclosure practices of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA)

2. an investigation of the social and environmental disclosure practices of two major multinational buying companies: Nike and H&M

3. an exploration of possible drivers for the media agenda in reporting the activities of multinationals and NGOs.

https://www.accaglobal.com/content/dam/acca/global/PDF-technical/sustainability-reporting/tech-tp-srd.pdf

Social responsibility disclosure practices : evidence from Bangladesh

This paper investigates how social and environmental NGOs use the news media to create changes in the operations and associated accountabilities of multinational companies operating in, or sourcing products from, a developing country. In this research, we explicitly seek the views of senior officers from global and local NGOs operating in Bangladesh, as well as the views of journalists from major global and local news media organisations. Our results show that social and environmental NGOs strategically use the news media to effect change in the operating and disclosure policies pertaining to corporate labour practices. More particularly, both the NGOs and the news media representatives stated that NGOs would be relatively powerless to create change without media coverage. Our results also show that the media agenda has been responsible for creating improvements in working condition within Bangladesh, but further improvements are necessary. This is the first known study to specifically address the joint role of NGOs and the news media in creating changes in the social and environmental operating and disclosure practices of organisations operating in developing countries.

Craig Deegan

Papers

An exploration of corporate climate change-related governance practices and related disclosures: Evidence from Australia

Environmental Management Accounting and Environmental Accountability Within Universities: Current Practice and Future Potential

The Materiality of Environmental Information to Users of Annual Reports

Social responsibility disclosure practices : evidence from Bangladesh

NGO's use of the media to create changes in corporate activities and accountabilities : evidence from a developing country