Craig Deegan

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

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.

Do Australian companies report environmental news objectively

Within Australia there is ageneral absence of professional or legislative rules requiring companies to provide information relating to their environmental performance or any environmental initiatives undertaken. Previous research studies have shown that many firms present environmental information, but only tend to present information which is favourable to their corporate image. Investigates the environmental reporting practices of a sample of 20 Australian companies which were subject to successful prosecution by the New South Wales, and Victorian Environmental Protection Authorities, during the period 1990‐1993. Indicates a significant increase in the reporting of favourable environmental information surrounding environmental prosecution. Further, the amount of positive environmental information significantly outweighed the negative environmental information presented, which was interesting given that it is clear that the firms studied did have bad news to report. The existence of a proven environmental offence was reported by only two of the companies within the sample. Raises issues as to whether information about a proven environmental offence is “material” to account users and, if so, whether financial statements could be construed as being misleading in the absence of such information.

An examination of the corporate social and environmental disclosures of BHP from 1983‐1997

This study examines the social and environmental disclosures of BHP Ltd (one of the largest Australian companies) from 1983 to 1997 to ascertain the extent and type of annual report social and environmental disclosures over the period, and whether such disclosures can be explained by the concepts of a social contract and legitimacy theory. This research is also motivated by the opportunity to compare and contrast results with those of Guthrie and Parker, in whose study the social and environmental disclosures made by BHP Ltd were also the focus of analysis. In testing the relationship between community concern for particular social and environmental issues (as measured by the extent of media attention), and BHP’s annual report disclosures on the same issues, significant positive correlations were obtained for the general themes of environment and human resources as well as for various sub‐issues within these, and other, themes. Additional testing also supported the view that management release positive social and environmental information in response to unfavourable media attention. Such results lend support to legitimation motives for a company’s social and environmental disclosures. A trend in providing greater social and environmental information in the annual report of BHP in recent years, and its variable pattern, was also evidenced.

The materiality of environmental information to users of annual reports

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. 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. Reports the results which 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, they 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.

Firms' Disclosure Reactions to Major Social Incidents: Australian Evidence

This study examines the reaction of Australian firms, in terms of annual report disclosure, to five major social incidents. These incidents had significant implications for either the environment, or the safety of both employees and community members. The incidents reviewed are the Exxon Valdez and Bhopal disasters; the Moura Mine disaster in Queens-land; an oil spill, caused by the Iron Baron, off the coast of Tasmania; and the Kirki oil spill, off the coast of Western Australia. Studies of this nature have previously been restricted to the examination of US company disclosure (e.g. Patten 1992; Blacconiere and Patten 1994), or the stock market reaction to such events in the US (e.g. Blacconiere and Patten 1994). The results of this study indicate that, following four of the incidents, sample firms operating in the affected industries provided more social information in their annual reports than they did prior to the incidents occurrence. These results support a view that organizations utilize their annual report as a means of influencing societys perception of their operations, and as a means of legitimizing their ongoing existence. The strategic nature of voluntary annual report disclosures is emphasized.

Global expectations and their association with corporate social disclosure practices in Australia, Singapore, and South Korea

Abstract This paper explores the social disclosure policies of large Australian, Singaporean, and South Korean multinational corporations. The researchers advanced arguments about why large multinational corporations respond to “global expectations” rather than simply to the expectations of those people residing in the corporations “home” country. Two large international surveys conducted in 1998 and 1999 are used to determine global expectations. The results of the testing indicate a minimal association between global expectations, as represented by the two surveys, and social disclosure policies of large multinational corporations. Consistent with previous research, country of origin and industry of operation appear to significantly influence disclosure practices.

Media pressures and corporate disclosure of social responsibility performance information: A study of two global clothing and sports retail companies

Abstract This paper investigates the social and environmental disclosure practices of two large multinational companies, specifically Nike and Hennes&Mauritz. Utilising a joint consideration of legitimacy theory and media agenda setting theory, we investigate the linkage between negative media attention, and positive corporate social and environmental disclosures. Our results generally support a view that for those industry‐related social and environmental issues attracting the greatest amount of negative media attention, these corporations react by providing positive social and environmental disclosures. The results were particularly significant in relation to labour practices in developing countries – the issue attracting the greatest amount of negative media attention for the companies in question.

An investigation of TBL report assurance statements: UK and European evidence

Purpose – The purpose of this paper is to document a study of European and UK triple bottom line (TBL) report assurance statements.Design/methodology/approach – In undertaking the research, an international database was constructed from which all known European and UK third‐party assurance statements that accompanied the release of TBL reports were selected for review.Findings – The results of the analysis indicate that there is much variability and ambiguity inherent within the contents of the third‐party statements.Research limitations/implications – The UK and European reports included within the database compiled by the researchers provide the basis of the information used to develop this paper. In selecting assurance statements to include within the database, the latest TBL report from each reporting organization was obtained (and it should be appreciated that many organizations do not produce TBL reports on an annual basis). Of the 170 reports available internationally at the time the research was u...

Social accounting research: An Australasian perspective

Abstract This paper provides an insight into the nature and the extent of social accounting research being undertaken within Australasia. It demonstrates that Australasian researchers account for a significant amount of internationally published social accounting research, but emphasises that the research effort seems to be confined to a limited number of researchers perhaps reflecting a lack of ‘take-up’ in this area in terms of the scale of participation. Information is also presented about the relative propensity of journals within the sample to publish social accounting research, and identifies that ‘top tier’ accounting journals historically have not published social accounting research. The paper also considers various factors which seem to be impeding the ‘recruitment’ of new social accounting researchers.

Corporate Disclosure Reactions to Australia’s First National Emission Reporting Scheme

This study investigates the strategic and potentially legitimising nature of voluntary emissions reporting by Australian companies. The study contributes to the existing literature by extending the chronological history of emissions disclosure and examining changes in emission disclosure practices during the implementation period of the National Pollutant Inventory (NPI). The NPI was Australia’s first extensive emission measurement and public reporting requirement. Disclosures are identified as being reactive to the introduction of actual emissions regulation; however, the extent of disclosure is not complete both within and between companies.