The Global Reporting Initiative Accounting Essay

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This report will focus on the purpose of Corporate Sustainability Reporting by referring to the Global Reporting Initiative (GRI) reporting framework. Not only that, this report also states the clear distinction between Stakeholder theory and Legitimacy theory as well as their empirical testing. After that, the rest of this report will discuss about the comparable of two companies on economic, social and environmental aspects.

Part 1

Based on the GRI reporting framework (Appendix 1), a sustainability report can be defined as the practice of disclosing, measuring and being responsible to external and internal stakeholder for the organisational performance against the sustainable development goal. It can be used to describe reporting on environmental, social and economic impacts. For example, triple bottom line and corporate responsibility reporting. Besides that, a sustainability report also provides a reasonable and balanced representation of the organisational sustainability performance, including both negative and positive contributions. The sustainability reporting guidelines made up of the reporting guidance and reporting principles regarding defining the report content as well as the quality of the report. It also contains the guidance for setting the report boundary and the standard disclosures which include the performance indicators. These elements will consider in equal importance and weight.

Reporting guidance can be defined as the option that the reporting organisation can take action when making decision on what to report on. It usually helps the organisation to manage the use of the GRI reporting framework. Besides that, the reporting principles is the reporting process that should guide and achieve the decisions as how to report on, which topic to be selected and what indicators to report on. The reporting principles are only provided for defining report quality and content. Under report content, there are four principles that should be used together with the guidance which are sustainability context, completeness, stakeholder inclusiveness and materiality. Furthermore, there are also some principles for defining report quality which are accuracy, timeless, balance, reliability, comparability and clarity. All this principles are the fundamental for the effective transparency. The sustainability report should include its boundary that the reporting organisation will exercise over the significant influence or control through the operating and financial practices and policies. Significant influence can be defined as the power to participate in the operation and financial policy decisions. Whereas control is the power to manage the operating and financial practices so can obtain the benefits from its activities. Under the preparation of the report boundary, the organisation has the right not to choose to collect the data on a certain entity or group as long as it will not change the decision.

The last part of sustainability reporting guideline is the standard disclosures. There are three categories of standard disclosures that most organisations use to report it. The first category is strategy and profile. This category is subdivided into 5 parts which is organisational profile, management approach and performance indicators, strategy and analysis, report parameters, governance, commitments, and engagement. The second category is disclosure on management approach which covers such things as policies, responsibilities and goals. The last category is performance indicators that indicators the comparable information on the environmental, social and economic performance of the organisation. Social performance consists of human rights, product responsibility, labour practices and society. It also can be classified as additional and core performance indicators

Part 2

Critique of Stakeholder Theory

Stakeholder theory can be defined as perspective that considers the importance for an organisation's survival of satisfying the demands of its various stakeholders (Deegan 2010). There are two branches of stakeholder theory which are a managerial (positive) branch and an ethical or normative branch (Deegan 2009). Under the ethical branch, all stakeholders have certain intrinsic right that treated fairly by the organisation and this rights shall not be violated. It is also important to know the definition of stakeholders which is any individual or group that can affect or affected by the achievement of the firm's objectives. Stakeholder can also divide into primary and secondary stakeholders. Furthermore, all information about how the firm is affecting stakeholders should be providing to all stakeholders which are secondary and primary stakeholders. This is because they have the rights to have it, even though they do not use the information. Moreover, the second branch of stakeholder is the managerial branch. This branch is tried to explain when the company management will attend to the powerful stakeholders' expectations. The organisation will only respond to those stakeholders which are the most powerful. Besides that, the importance of meeting stakeholder demands will increase when the level of stakeholder power is also increase. Unlike the ethical branch of stakeholder theory, the research undertaken under the managerial branch can be tested with empirical observation.

Critique of Legitimacy Theory

Legitimacy theory is a theory that posits that organisations always seek to ensure that they operate within their society's norms and bounds (Deegan 2010). Legitimacy theory also relies on a social contract between the organisation and the society in which it operates. The social contract is used to represent the multitude of explicit and implicit expectations that society holds about the conduct of an organisation (Deegan 2009). Unlike Positive Accounting Theory (PAT), legitimacy theory is not depends on the economic based assumption which only determined by wealth maximisation and individual self-interest. The legitimacy gap is referring to the difference between the public expectations relating to how the society's beliefs on the organisation act and how the organisation should act. There are two reasons why the legitimacy gap arises which are; first, the society expectation might change, so the organisation does not meet the society expectations. Second, the formerly unknown information about the organisation becomes available to the public through the news media.

The Empirical Tests of the Stakeholder Theory

According to Alsos, Hytti & Ljunggren (2011), Stakeholder theory helps to understand the environment in order to manage the organisation (Appendix 2). Stakeholder theory allows the organisation to take into the external factors that will influence the development of a Technology Business Incubators (TBIs). Moreover, the results are informative in terms of how the stakeholder relations change and are sometimes the incubator is difficult or even impossible to manage effectively. The purpose of the incubators is to satisfy the variety expectations that seem to be difficult to do successfully. However, this purpose may lead them into a negative downward spiral of fewer incubatees, the loss of experienced incubator staff and reduced funding. Those stakeholders have the power to act and to fund the incubator. Based on Pfeffer and Salancik (1978), there are three strategies for balancing different stakeholders which are; first, the incubator managers need to reinterpret their goals. Second, the incubator managers should shift the focus between the stakeholders in order to balancing the conflict expectations. Third, if the funding situation for the incubator becomes critical, this shows that the incubator managers might abandon some stakeholders.

The Empirical Tests of Legitimacy Theory

Based on Mobus (2005), Mandatory accounting disclosures play an important role in the organisation legitimacy (Appendix 3). If the organisation continues to offer positive symbolic representations, they may tend to the higher levels of environmental regulatory. The risk of damage to legitimacy is also higher. This because the mandatory accounting disclosures for those firms which use the voluntary CSR disclosures as a manipulation device. If the mandatory accounting disclosures that positively affect the regulatory compliance, they are the potential tools of commons governance and public policy. As a result, the consistency in maintaining legitimacy is required to minimising and policing the organisational. Besides that, Legitimacy theory predicts the tactics like avoiding the appearance of impropriety and communication environmental responsibility as well as the predictable and consistent exchange behaviour for maintaining the legitimacy status with the pragmatic audiences.

Part 3

Fujifilm Holdings Corporation is Japanese multinational imaging and photographic company which was established in 1934 with the aim of producing photographic films (Fujifilm Holdings 2012). This company is one of the largest imaging and photographic company in the world (CNN Money 2012). Their business fields are imaging solutions which including photography services, supplies and equipment as well as information solutions such as recording media, graphic systems, high-performance materials, optical devices. Besides that, Canon Inc. is also Japanese company that was established in 1937 which is one of the largest corporations in the world (Canon 2012). This company is the specialist in manufacturing optical and imaging products which including photocopying machines, scanners, lenses, cameras, printers and camcorders.

Fujifilm Holdings Corporation and Canon Inc. have some similarities on the environmental aspect as they have same way in safe this world from the global warming threat. According to the Fujifilm Sustainability Report 2011 (Appendix 4), Fujifilm tries to reducing CO2 emissions from the factories and offices through the group cooperation. To achieve their goals, they are using a cogeneration system at their main domestic factories. A cogeneration system is a system supplying from both heat and electricity. This machine is in the process of changing the fuel used system from heavy fuel oil to natural gas as the process of reducing the CO2 emissions. Fujifilm is also reducing the CO2 emissions in their offices as they reduce the heating and lighting costs by installed the LED task lights. Fujifilm is used two contests to gain the employee's awareness about global warming (Fujifilm holdings 2011). The first contest is Eco-Driving Contest which has positive effects on the business management, environment and safety. As a result, Fujifilm is succeeded in reducing the CO2 emission, the number of accidents and fuel costs. The second contest is the nature and life photo contest. The purpose of this contest is to encourage people to think about biodiversity and protect the living things and nature for the next generation.

Besides that, Canon attempts to reduce the environmental burden throughout the entire product lifecycle by using the 'Action for Green' project (Canon 2011). This project means to create new product which are offer better functionality, easier to use and more convenient as well as to reduce the environmental impact. According to the Canon Sustainability Report 2011 (Appendix 5), Canon Europe and the World Wide Fund for Nature (WWF) has been launched the Polar Bear Tracker project which tracks the movements of the polar bears by the satellite. This data is useful for various studies especially for those who focused on the polar bear's habitat range as well as ice distribution. Not only that, the Polar Bear Tracker project also put effort in increasing the children's awareness and understanding of global environment conservation. Besides that, Canon also continued support for the Canon Envirothon in North America (Canon 2011). This shows that Fujifilm and Canon had a positive image which has been promoting their own projects in reducing the CO2 emission.

Canon and Fujifilm also have some different ways how to portray themselves on the social aspect. According to the Canon Annual Report 2011 (Appendix 6), Canon has a few social activities which are; first, Canon has been providing support to areas hit by the great east japan earthquake. They donated five portable digital radiography systems to the Japanese Red Cross Society to support the medical efforts. They also have a project called a 'Signal of Hope' that helps the recovery of the fishing industry. Second, Canon Vietnam Co Ltd had a scholarship program that called as 'For a Bright future". This purpose of this project is to encouraging and helping underprivileged students to continue studying. Third, the collaboration of Canon and Kyoto Culture Association is to promote the 'Tsuzuri Project' which aimed at creating high resolution facsimiles of folding screens and other ancient Japanese cultural assets. Different from Canon, Fujifilm has established the uniform standards for the suppliers. There are two policies of Fujifilm procurement which are the basic procurement concept and the procurement guidelines. This policy is aimed at ensuring suppliers compliance with the law and the guidelines. Not only that, Fujifilm also implementing a self-check survey for their suppliers. The purpose of this self-check survey is to helping suppliers with better understanding of Fujifilm's basic stance through the process of procurement. This shows that the Canon and Fujifilm had a positive image in their social activities.

In economic aspect, Fujifilm and Canon have some differences way. According to the Fujifilm Sustainability Report (2011), Fujifilm has extended their business into the healthcare business as well as pharmaceutical business. The pharmaceutical products division has two roles such as unifying the group managements involved in its pharmaceutical business and expanding the Fujifilm's pharmaceutical business. On the other hand, Canon has created innovative imaging technologies by using all of the technical expertise as well as precision and optical technologies. These technologies are including; Leading-Edge imaging technology for the progress in medicine, pursuing the improvement of its CMOS image sensor and developing and applying Mixed Reality (MR) technology into the real worlds. The purpose of these technologies is to help people healthier lives and live richer. These two companies have a positive image itself.


Legitimacy is a condition or status which exists when an entity's value system is congruent with the value system of the larger social system of which the entity is a part. When a disparity, actual, or potential, exists between the two value systems, there is a threat to the entity's legitimacy.


In conclusion, there are some similarities and differences between the Stakeholder theory and the Legitimacy theory which are,