Social Environmental Disclosures

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Corporate Social and Environmental Reporting and it's Disclosure


In recent years, corporations have increasingly used their annual reports to voluntarily report information relating to their social actions, particularly those concerning the natural environment. More specifically, corporations have been changing their disclosure policy towards the "triple bottom line reporting", where in addition to economic performance, social and environmental issues of the company's performance are given (Deegan 2000, 101-130). Corporate environmental disclosure possesses the potential to provide an area for research in corporate activities and strategy. Such disclosures can support the assessment of a firm's level of risk exposure (Yakhou and Dorweiler, 2004; Deegan, 2002), provide insight into firm's management quality (King and Lenox, 2001a; Berry and Rondinelli, 1998), and even help predict future profitability (Cormier, Gordon and Magnan, 2004). This has drawn the attention of researchers, and a number of theories have been postulated as to why companies disclose such information. According to Deegan and Rankin (1996), there is increasing evidence that the willingness to make such disclosures may be motivated by an intention to moderate the perceptions of the corporation which are held by important groups within society. (Deegan and Gordon 1996, 50-67) Furthermore, organisations might use the disclosures as a defend policy when the organisation's legitimacy is in threat. The research also reveals information regarding how pressure groups attempt to influence managerial decisions, and how effective their techniques are at achieving their goals. The outcome of the research conducted provides an interesting insight into business ethics research area. The research attempt to highlight potential flaws in the identified shareholder and stakeholder theories of a firm, a subject in which there has been speculation for many years.

Literature Review

Johnson, Scholes & Whittington (2005) explain that corporate social disclosure is to provide information regarding ethical and environmental activities. (Johnson, Scholes, Whittington 2005, 12- 25) It is used by modern organisations in U.K and many other parts of the world. The literature of this study lies in the attempt to promote strategic management in corporate culture. The aim of the literature review is to outline the concept of legitimacy theory and stakeholder theory and the relationship of legitimacy and corporate disclosure. The intention is to focus upon the normative aspects in order to establish an understanding of the ethical implications of the two theories.

Legitimacy Theory and Social Disclosure

Deegan, Rankin & Voght (2000) have adapted the system-oriented theories to address the issue of corporate disclosures. (Deegan, Rankin & Voght 2000, 101-130) The system-oriented theory, as explained by the Legitimacy theory and stakeholder theory, argues that the organisation is influences and has influence upon the society it operates. Both Legitimacy and Stakeholder theory derive from a broader perspective of political economy theory. As Deegan, Rankin, Voght (2000) explain, political economy theory does not consider company's report as neutral and biased documents, but rather as a product of the interchange between the corporation and it's environment in an attempt to reconcile and accommodate a variety of sectional interest (Deegan, Rankin & Voght 2000, 101-130). Similar to legitimacy theory, stakeholder theory supports the same view of the relationship between legitimacy and corporate disclosures. The theory suggests that expectations of various stakeholders will have an effect on the disclosure policies of the company. Different groups will have different views about how the company should operate, and each group will have a different impact on the company. Therefore, the company will not respond to all stakeholders equally, but rather paying more attention to the more powerful groups. In this report, Exxonmobil will be use as a case study for research. As a company, Exxon are currently under a great pressure from activist groups who believe that the company are not acknowledging key stakeholder issues. In turn the activist groups view that Exxonmobil as neglecting their social responsibility.

The two theoretical perspectives should not be regarded as clearly distinct and delineated. It is more appropriate to regard them as overlapping perspectives on issues situated in a framework of assumptions supporting 'political economy' (Deegan, 2000: Gary et al, 1995). Due to their similarity, Deegan, Rankin & Voght (2000) argues that the two theories should not be treated independently. (Deegen, Rankin & Voght 2000, 101-130)

Under the notion of legitimacy theory, organisations attempt to establish congruence between social values associated with or implied by their environmental activities, and the norms and value of the society values associated with or implied by their environmental activities, and the norms and values of the society in which they are part. These bounds and norms are not considered to be fixed, but rather change over time. Therefore, organisations need to be responsive to the environment in which they operate (Deegan, Rankin & Voght 2000, 101-130).

Traditionally, the firm's profit was considered to be the measure of the organisations legitimacy. However, over the past decades public expectations have changed, and more attention is given to social issues. Dowling and pfeffer (1975) argue that with such high social expectations, a successful corporation would react and attend to the environmental and social consequences of their activities. Lindblom (1993) and Dowling & Pfeffer (1975) suggest four broad legitimation strategies that organisations may adopt.

Figure 1: Organisational Legitimisation Strategies

Source: from the work of Dowling and pfeffer (1975) and Lindblom (1994)

Suchman (1995) suggest three conditions to be fulfilled in order for legitimacy theory to represent a consistent basis for the analysis and understanding of environmental disclosures. (Suchman 1995, 571-610) Many different views are taken on the legitimising purposes of accounting. Puxty (1986) states that "by claiming to provide truth and open communication, social accounting mystifies social relations and legitimate power and domination. Consequently, accounting is not a desirable activity, as it is a means of sustaining the system circumventing its internal contradictions, and deserves the habermasian communication of the distorted communication" (Puxty 1986, p.105).

Taking a different view, Suchman (1995) argue that a company's performance is legitimate when it is socially accepted. (Suchman 1995, 571-610) Under this notion, accounting appears as a desirable activity, and it is the existence of legitimacy gaps that give a negative picture. D. Campbell et al. (2000) suggested that with regard to community disclosure, legitimacy gaps will be wider in those companies that are better known to society and that are more liable to have questions asked them by society. (Campbell, 2000, 80-100) On the other hand, less well-known companies will have structurally lower social cost liabilities and will thus have less reason to enter into disclosure narrative with regard to community involvement.


The main objective of this study is to examine corporate social disclosures. Research questions include:

(1) Managerial motivation on disclosure policy on triple bottom-line reporting from a moral and pragmatic perspective.

(2) The legitimating process and external pressure that affect the corporate social disclosure.

(3) Is corporate social disclosure a threat or opportunity to an organisation?

This study highlights different aspects of corporate social disclosures and its importance in business world. However, this research also suggests legitimacy is considered easy to maintain and can help organisations to change values. Therefore, investigations into this area are exploratory in nature.


Іn examining corporate social disclosures Ñ-n organisational culture and its possible results tо strategic management, both quantitative and qualitative research techniques are employed. Corporate social disclosures can be viewed through the annual reports, where the company communicates with the public. It is argued that corporate social disclosures are an important channel by which corporations communicate with interested members of society and they are considered to be a logical medium for communicating corporate attempts at legitimation of environmental activities. (Johnson, Scholes, Whittington 2005, 12-25) Having these views in mind, we can see the strategic importance of financial statements and other related disclosures.

Direction for Future Research

While considering the previous world of Deegan and Gordon (1996), we can take an advantage of new policies for corporate culture. In their study and research, Deegan and Gordon (1996) investigated the objectivity of environmental disclosure practices and trends over time, as well as whether environmental disclosures related to environmental group concerns. They found an increase of disclosure over time associated with environmental group membership. (Deegan and Gordon 1996, 187-199). Moreover, similar to Patten's findings mentioned above, they found a positive relation between environmental sensitivity of industry that the company belongs and the level of disclosure.

References List

Campbell, D. J. (2000). "Legitimacy theory or managerial reality construction. Corporate social disclosure in Marks and Spencer corporate reports", 1969-1997. Accounting Forum. Vol. 24. No. 1. March 2000. pp. 80-100.

Deegan, C., Rankin, M. & Voght, P. (2000) "Firms' Disclosure Reactions to Major Social Incidents: Australian Evidence" Accounting Forum, Vol. 24, No. 1, pp. 101-130.

Deegan, Craig & Rankin, Michaela (1996) "Do Australian Companies Objectively Report Environmental News? An Analysis of Environmental Disclosures by Firms Successfully Prosecuted by the Environmental Protection Authority", Accounting, Auditing & Accountability Journal, Vol.9, No.2, pp.50-67.

Deegan, Craig, & Gordon, Ben, (1996) "A Study of the Environmental Disclosure Practices of Australian Corporations", Accounting & Business Research, Vol.26, No.3, pp.187-199.

Dowling, J. & Pfeffer, J., (1975) "Organizational legitimacy: Societal values and organisational behaviour", Pacific Sociological Review, Vol.18, No. 1, January, pp.122-136.

Johnson, G., Kevan Scholes, Richard Whittington. (2005). Exploring Corporate Strategy: Text & Cases (7th edition). New York: Prentice Hall.

Puxty, A. G. (1986), "Social Accounting As Immanent Legitimation. A Critique of A Technicist Ideology". Advances in Public Interest Accounting, vol. 1, pp. 95-111.

Suchman, M., (1995) "Managing Legitimacy: Strategic and Institutional Approaches", Academy of Management Review, Vol.20, No. 3, pp.571

Web sources :-

Exxonmobil dismisses warning that anti-Kyoto stances risks market value:

23 proxy resolutions filed with exxonmobil on global warning:

Money in politics:

Shacks in the woods: Exxonmobil's failing grade on disclosure of climate science: