Material legitimacy

Journal of Accounting & Organizational Change Material legitimacy: Blending organisational and stakeholder concerns through non-financial information disclosures John Dumay Geoff Frost Cornelia Beck

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Blending organisational and stakeholder concerns through non-financial information disclosures John Dumay Department of Accounting & Corporate Governance, Faculty of Business & Economics, Macquarie University, Ryde, Australia, and

Geoff Frost and Cornelia Beck Downloaded by Professor John Dumay At 11:23 22 May 2015 (PT)

Discipline of Accounting Department, The University of Sydney, Sydney, Australia Abstract Purpose – The purpose of this paper is to present a case study of how two organisations deal with disclosing non-financial information (NI). This is of interest because the reporting of NI by companies to disclose environmental, social and governance issues to their stakeholders and society is continuing to grow. Design/methodology/approach – To investigate, the authors examine the manner in which two of Australia’s largest companies approach disclosing NI from a legitimacy perspective utilising Suchman’s (1995) “institutional and strategic legitimacy” perspectives to explore the choices made by the companies when disclosing NI. Findings – The paper presents a model of legitimacy influenced disclosure based on “material legitimacy”, which we define as the form of legitimacy that enables organisations to blend what is important to the organisation (strategic legitimacy) with the primary concerns of its major stakeholders (institutional legitimacy). In this sense, the model outlines how companies try to achieve mutually beneficial “win–win” outcomes for themselves and their stakeholders. However, the difficulty is in judging what issues become “material” and whether they should be disclosed. Originality/value – The paper is novel because it presents a model of legitimacy-influenced disclosure based on “material legitimacy” and transparency to explain what and how NI is disclosed. Keywords Transparency, Legitimacy theory, Corporate reporting, Disclosures, Material legitimacy, Non-financial information Paper type Research paper

Introduction This paper presents a case study of how two organisations deal with disclosing non-financial information (NI). This is interesting because reporting NI to disclose environmental, social and governance issues to stakeholders and society is continuing to grow. Accounting researchers have responded by analysing disclosures using Journal of Accounting & Organizational Change Vol. 11 No. 1, 2015 pp. 2-23 © Emerald Group Publishing Limited 1832-5912 DOI 10.1108/JAOC-06-2013-0057

Funding from CPA Australia is acknowledged. The authors thank all interviewees for their participation in this project. Thanks also to Fiona Crawford of the Editorial Collective for her sterling editorial efforts.


content analysis. However, content analysis only tells what is disclosed, not why; few studies address the underlying reasons for reporting NI beyond existing or perceived threats to organisational legitimacy (Dumay and Lu, 2010). We seek to understand how disclosures impact an organisation’s legitimacy within society (Buhr, 1998; Deegan and Blomquist, 2006) and how legitimacy is sustained, defended or repaired in response to events that threaten (Patten, 1992; Deegan and Rankin, 1996; Deegan et al., 2002) or enhance legitimacy (Aerts et al., 2006; Aerts and Cormier, 2009). Therefore, the question this paper investigates is “How do organisations determine what NI to disclose?” We examine two of Australia’s largest companies’ approach to disclosing NI from a legitimacy perspective utilising Suchman’s (1995) “institutional and strategic legitimacy”. The paper is novel because it presents a model of legitimacy-influenced disclosure based on “material legitimacy”, which we define as the form of legitimacy that enables organisations to blend what is important to the organisation (strategic legitimacy) with the primary concerns of its major stakeholders (institutional legitimacy). Our model outlines how organisations achieve “win–win” outcomes for themselves and their stakeholders. However, the difficulty is in judging what issues are “material” and whether they should be disclosed. Non-financial performance, reporting and organisational legitimacy Organisations increasingly face internal and external non-financial performance (NFP) management. Thus, evolving business models are more inclusive of NFP, encompassing environmental, social and governance (ESG) issues. Increasing expectations of ESG performance, coupled with increasing regulatory sanctions that threaten a company’s underlying legitimacy, requires companies to modify what is managed and communicated, as argued by Buhr (1998, p. 164): […] there are two dimensions at play in an organization’s efforts to attain legitimacy (1) action – in other words, are the organization’s activities congruent with social values?; and (2) presentation – do the activities appear to be congruent with social values?

Studying legitimacy forms an important part of environmental disclosure research which finds that voluntary disclosure is an important legitimising tool (Buhr, 1998; Deegan et al., 2002). More recently, research focusses on using voluntary disclosures to manage public impressions (Toms, 2002; Aerts et al., 2006) in enhancing an organisation’s image in society or to indicate that the organisation is following trends set by industry or political leaders (Banerjee, 2008; Ball and Craig, 2010). Most accounting studies framing their analysis under the umbrella of legitimacy theory intrinsically adopt what Suchman (1995, p. 574) explains as a social construction reflecting “a congruence between the behaviours of the legitimated entity and the shared beliefs of some social group”. Therefore, legitimacy is achieved through “internal and external audiences who observe the organisation and make legitimacy assessments” (Ruef and Scott, 1998, p. 880). Thus, disclosure is a vehicle to either reiterate this congruence (Guthrie and Parker, 1989; Deegan et al., 2002) or to recover legitimacy if the shared beliefs appear to be disintegrating (Patten, 1992). Therefore, disclosure becomes strategic, whereby organisations use legitimacy as an “operational resource […] in pursuit of their goals” (Suchman, 1995, p. 576). However, there are few studies linking underlying management issues and reporting to external stakeholders. As Deegan and Rankin (1996) observe, firms

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prosecuted by Australian State Environmental Protection Agencies had significantly increased levels of environmental disclosures; however, only two organisations chose to disclose the prosecutions. From a management perspective, remediation and systems correction would be a likely focus, with external disclosure a secondary consideration. Frost (2007) confirms that few organisations are voluntarily willing to acknowledge prosecution; however, they are more likely to increase disclosures. Hence, there is an association between disclosure extent and legitimacy threats, but little evidence relating to direct legitimacy threats. Additionally, Frost (2007) observes that when companies are required to acknowledge prosecutions, they increase reporting of underlying management processes such as remedial action. This questions whether mandatory reporting is a catalyst for management action or whether management action exists and that mandatory reporting increases the need to legitimise underlying actions. Frost and Seamer (2002) observe significant correlations between proxies for developing environmental management systems and the level of environmental disclosure in annual reports, suggesting that public reporting is a subset of information generated from underlying management practices. What then are the key factors determining the transparency level of the underlying activities through external disclosures? Studies of externally available organisational disclosures reflect a pragmatic approach to legitimacy, as the disclosures produced satisfy the perceived needs of specific stakeholder groups (e.g. shareholders or employees). Thus, disclosure is motivated by a desire to exchange legitimacy whereby managers receive support for their decision-making by demonstrating how their actions benefit specific stakeholder groups (Suchman, 1995). This is in line with the stakeholder theory. The strategic approach to legitimacy stems from recurring conflicts between managers and stakeholders, and disclosure is thus understood as a mitigating factor, driven from inside the organisation (Suchman, 1995; Campbell and Beck, 2004). Meyer and Rowan (1977) argue that institutional legitimacy enhances organisational survival and Dowling and Pfeffer (1975) advocate that legitimacy is the “congruence between social values associated with or implied by [organisational] activities and the norms of acceptable behaviour in the larger social system”. Alternately, Scott (1995, p. 45) maintains, “legitimacy is not a commodity to be possessed or exchanged but a condition reflecting cultural alignment, normative support, or consonance with relevant rules or laws”. The majority of studies linking reporting with legitimacy base their research on the content analyses of externally published sources, thus addressing questions of content coverage and dissemination. Few studies address the underlying reasons for reporting NI beyond actual or perceived threats to organisational legitimacy (Dumay and Lu, 2010). Thus, it is important to understand how disclosures impact a company’s legitimacy within society (Buhr, 1998; Deegan and Blomquist, 2006) and how legitimacy is sustained, defended or repaired, in response to threatening events (Deegan and Rankin, 1996; Deegan et al., 2002) or enhancing legitimacy (Aerts et al., 2006; Aerts and Cormier, 2009). We ask “How do organisations determine what NI to disclose?” To investigate, we examine two of Australia’s largest companies’ approach to disclosing NI from a legitimacy perspective.


Method The data presented draw from two organisations – CBD and KML. Both are large Australian listed organisations chosen because of their size and long history of enhanced external reporting by disclosing NI since the early 2000s. Both organisations are in the Australian Stock Exchange top 50 and operate in different service industry different sectors (finance and telecommunications). The initial data come from their publicly available disclosures in annual and CSR reports, and press releases from 2000 to 2011. By examining these disclosures, we identify key trends in the external NI disclosure and use these as the foundation for semi-structured interviews with key personnel who have direct input and/or responsibility for producing reports. We identified interviewees following contact with the company’s chief financial officer (CFO) who put forward the names of potential interview candidates (Table I). The purpose of the interviews was to attain an internal account of NI processes in place, the main issues/ trends from an internal perspective and to get an internal view of how the company engages in NI reporting and the reasons underlying voluntary engagement. As with many companies, the extent of NI reporting is often associated with corporate social responsibility (CSR) reporting, and this is the case for both CBD and KML. During the interviews, we did not directly refer to CSR. However, in most cases, respondents synonymously aligned NI with CSR without our prompting. The exception was interviews with two managers who were responsible for managing specific aspects of NI disclosures to regulatory authorities. The transcribed interviews were subsequently categorised into broad themes using NVivo. Following the interviews, an in-depth analysis of the external materials identified key changes in structure, content and presentation of the reports, for which internal stories from the interviewees provide explanations. The secondary data were then further analysed for the messages conveyed in the interviews and justifications for the dissemination of NI – in other words, the legitimisation of practice.

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A model of legitimacy-influenced disclosure To present our findings, we use a model (Figure 1) developed based on Suchman’s institutional and strategic legitimacy perspectives and insights gained from our preliminary research. We developed the model because we observed how the organisations investigated disclosed how they developed management actions towards developing and repairing legitimacy from both strategic and institutional perspectives and that these actions were not mutually exclusive. As Suchman (1995, p. 584) outlines, Company

Code

Role title

CBD

CBD01 CBD02 CBD03 KML01 KML02 KML03 KML04 KML05

Head of Sustainability/Head of Corporate Responsibility General Manager – Community and Corporate Responsibility Head of Sustainability and Governance Risk Deputy CFO Director of Public Policy and Director of Communication Director of Communication Senior Advisor Corporate Responsibility National Energy Water & Waste Manager

KML

Table I. List of interviewees

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Figure 1. A model of legitimacy-influenced disclosure

elements of institutional and strategic approaches to legitimacy are combined to create different organisational “archetypes”. Therefore, we expect to identify elements of institutional and strategic approaches in both organisations. Thus, we placed the strategic and institutional perspectives as the axes of our model. Suchman (1995, p. 577) identifies three legitimacy types: pragmatic, moral and cognitive based on a “different behavioural dynamic”. “Pragmatic legitimacy rests on the self-interested calculations of an organisation’s most immediate audiences” (p. 577), mainly associated with the institutional perspective of how society and thus stakeholders are looking “in” (p. 577). Thus, in our model, we align the institutional perspective with pragmatic legitimacy. Additionally, Suchman (1995, p. 589) outlines that moral legitimacy reflects the “positive normative evaluation of the organisation and its activities” and that cognitive legitimacy “stems mainly from the availability of cultural models that furnish plausible explanations for the organisation and its endeavours” (p. 582). Thus, we align moral and cognitive legitimacy with the strategic perspective because it reflects how managers are looking “out” (p. 577) to discover the material issues that need addressing to build, maintain or repair legitimacy. Arguably, the strategic and institutional perspectives will be adopted in varying degrees. Suchman (1995, p. 587) describes the varying degrees of enacted legitimacy

“along a continuum from relatively passive conformity to relatively active manipulation”. Thus, we place these continua in parallel with the strategic and institutional perspectives. Another issue emerging from our examination of publicly available company disclosures was the approach to reporting disclosed by KML in their 2010 Sustainability Report (p. 10). Here, KML identified three approaches to managing and disclosing NI based on the significance of the issue to KML and its stakeholders. More importantly, KML discloses how it aligns the institutional and strategic perspectives in their approach:


We define our material sustainability issues as those that are most important to our business and our stakeholders. These key issues form the basis of this report.

Therefore, we align the approach to reporting by placing the importance to stakeholders in parallel with the institutional perspective and the significance to the corporation in parallel with the strategic perspective. The logic described is justified as follows. If the item has relative low significance to either the corporation or stakeholders, it will be managed to some degree but not publicly reported. On the opposite corner of the model, issues that are important to both stakeholders and the company are the issues covered in high-profile publicly available disclosures such as annual and CSR reports. In the middle are issues with moderate significance for stakeholders and the corporation. In this case, this information will probably be publicly disclosed on the corporate website. However, the model is not one-dimensional and the squares do not block each other out, rather the model is three-dimensional along the transparency axis. Here, we argue that an issue can be highly important to stakeholders and the company, but that item might not be publicly disclosed due to the confidentiality of the parties involved or commercial sensitivity. Likewise, some NI is on the corporate website due to the volume and dynamic changing nature of the facts or the changing information needs of the stakeholders. The organisations use the Internet for more flexible and timely delivery of disclosures, especially information that is significant to stakeholders and the corporation. Issues covered in “public reports” This section deals with the top box of our model (Figure 1) by discussing the concept of NI disclosure from the perspective of what we call “public reports”. We define public reports as all reports openly available to the general public in printed or electronic format, published as a specific document for the express purpose of disclosing NI. For example, this includes CSR, Stakeholder and Corporate Citizenship reports. However, specific information published only as a webpage is not included. As discussed previously, most CSR studies find an increase in external reporting over time, which is mostly explained by an organisation’s need to sustain legitimacy and manage external reputation, and mimetic pressures by industry competitors. However, the two organisations in our study do not follow the commonly observed pattern of increased disclosure in their respective stand-alone and annual reports. As shown in Figure 2 the total number of pages in dedicated CSR reports for CBD peaked in 2007, while KML has fluctuated during this time. In what follows, we argue the reduction in reporting is due to both organisations’ ability to learn from their prior experiences and

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Figure 2. Pages dedicated to CSR reporting 2002-2010

to their ability to combine the strategic and institutional legitimacy perspective by focussing on what they both call “material” issues. Reporting by CBD CBD published its first CSR Report in 2004. For CBD, 2004 was a year of inflection; it was faced with a public backlash against the organisation and its culture due to a public scandal, resulting in the loss of several hundred million dollars and damaging CBD’s reputation. CBD framed the release of its first CSR Report within a greater commitment to it’s stakeholders because, as the CEO and Chairman disclose, “the stakeholders asked for greater transparency and accountability, and told us we need to rebuild trust with them”. Therefore, the separate reporting of CSR was initially used as a mechanism for managing institutional and strategic perspectives, through rebuilding trust and repairing legitimacy (Suchman, 1995, pp. 597-599) with stakeholders, and to develop CSR as a part of business strategy. Fast forward to 2010 and we discover CBD’s decision to produce an integrated report rather than a separate CSR report. Again, the institutional and strategic aspects in the Chairman’s message were explained as “recognising that the success of our business relies on the goodwill of all our stakeholders” (CSR Report 2010, Chairman’s Message). CBD had thus decided in 2010 to switch to an integrated reporting Model[1] to signal that CSR is “business as usual” as one interviewee explained: […] we’re not really interested in here’s our business story, here’s our CSR story […] so we’re moving much more towards “We just have one story”. (CBD01)

The pathway to the 2010 integrated report has been a significant consideration for CBD’s reporting team from at least prior to the 2009 CSR Report with the alignment of publicly disclosed messages being a primary consideration: I think the shareholder review and the CSR review this year will be a lot more aligned, you’ll see one story in both, and then next year we’re really working towards, that is the report, rather than CSR as separate. (CBD01)

This sentiment is further explained later in the interview whereby the focus of CSR reporting is no longer about repairing the CBD’s legitimacy but about taking a more strategic approach:


But we’re working very closely with the strategy team to understand how we want to communicate and how to have one enterprise message rather than several, and so we are looking at the future of reporting and what that might mean for us. (CBD01)

Material legitimacy

The move to integrated reporting also appears to attempt to avoid overlap of content appearing in the 2009 Annual Review and CSR Report. These hard-copy reports are becoming narrative editorials as artefacts of past practice. Alternately, most of the hard data or numbers are available on the corporate website, providing stakeholders more detailed and current information on demand. Similarly, CBD also publishes a separate index, disclosing where information relating to the global reporting initiative (GRI) can be found:

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[…] the GRI can dictate what you report on corporate responsibility, but it doesn’t all have to be in the corporate responsibility report - so you can actually reference the ASR, you can reference the shareholder review, you can reference the website, you can reference other public documents, it doesn’t all have to be in 135 pages of CSR. […] So I think some companies still haven’t quite worked out that they’re allowed to do that. (CBD01)

Reporting by KML KML’s inaugural NI report is its Public Environment Report (PER), published from 2002 until 2005. The report introduces KML’s values and identifies the key stakeholders for this report as staff, customers, suppliers and contractors. Dedicated environmental managers use the GRI guidelines in preparing the report and deciding what to disclose, focussing on issues of “high and medium potential”. Subsequently, KML launched an Internet presence as disclosed in its 2002 PER. The year 2003 saw the publication of KML’s first CSR Report alongside the PER in response to KML’s desire to promote legitimacy from both a strategic and stakeholder perspective as disclosed by the Chairman’s and CEO’s statement in the 2003 CSR Report: This first report is important because it recognises that a company is not a collection of policies and capital, it is driven and given its character by its people. [Our] people are not just employees - often they are shareholders and customers as well. They are part of the communities in which we as a company participate. The character of [KML] is defined by our [KML] Values and by the people who work for us. As leaders, we will show by example and through our business direction that [KML] is here for good.

At the time of our interviews, only one CSR Report was published, even though it has had several name changes over the years such as Corporate Social Responsibility Report, Corporate Responsibility Report and Corporate Citizen Report. Arguably, the title changes reflect changing approaches to the way KML wishes its stakeholders to view it and can also be seen as a reaction to external perceptions of organisational legitimacy. However, over this time, KML’s reporting still seems motivated by a desire to derive both institutional and strategic legitimacy. Based on an excerpt from KML’s 2007 CSR Report, KML links the benefits of CSR for KML and the wider community: The heightened public interest in, and awareness of, climate change, water resources, energy efficiency and waste management make environmental compliance a business imperative. By demonstrating commitment to the conservation of limited resources and a continuous improvement in their environmental management, a company will realise benefits to its business, to the environment, and therefore, the wider community. (CSR Report 2007, p. 40)

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However, unlike CBD, KML does not integrate CSR reporting into its annual reports, keeping it as a separate mode of reporting as disclosed by one of our interviewees: Look the last time I had anything to do with our chief financial officer he was really opposed to that idea, he didn’t like the idea of it at all. A couple of years ago, eighteen months ago, there was a whole lot of articles in the CFO Magazine that talked about how these things were coming closer together, and he just didn’t agree and said he never wanted to see it like that at [KML]. (KML04)


The reason behind not integrating the reporting was outlined as a need to maintain a strategic approach: And the problem with not having any special attention focused on corporate responsibility is that you wouldn’t know; just churn this thing out every year, which after doing once, I wasn’t interested unless we had some strategic intent about it, it’d just be boring and fruitless (KML04).

Initially for KML, evidence from its past reports shows that the ultimate objective of CSR was geared towards increasing shareholder value: A company’s support of the community in this way helps demonstrate to employees that it is genuinely committed to social responsibility, potentially improving morale, loyalty and profitability. (KML CSR Report 2007, p. 20)

This sentiment is reiterated later in the same report: By demonstrating commitment to the conservation of limited resources and a continuous improvement in their environmental management a company will realise benefits to its business, to the environment, and therefore the wider community. (KML CSR Report 2007, p. 40)

However, the bluntest statement is found in its 2009 CSR report (p. 5): [Our] primary corporate responsibilities are to increase shareholder value and advance shareholder interests.

With this commitment in mind, however, the internal view shows that whilst demonstrating the impact on the bottom line is important “shareholders aren’t that interested in it [nonfinancial information] either in our experience” (KML04). So the question remains why are these reports prepared? Aligning legitimacy and public reporting […] If you include everything we did and wrote it up in all its detail you would end up with a report that’s very thick and which would be pretty much useless to everybody. (KML02)

The above quote is important because it puts into context the size and scope of the organisations, their operations and the volume of NI large companies like KML and CBD generate. Thus, communicating with stakeholders becomes difficult as a KML manager outlined: It’s pretty hard; in terms of a communication piece. It kind of has a crazy expectation that it needs to meet everyone’s needs and interests. (KML02)

For both companies, the target of their communication has changed over time. For CBD, this is not surprising, considering it was attempting to repair its legitimacy foremost with customers and employees as outlined in 2004:

Material legitimacy

Customers are central to our universe – we need to do the right thing by them […] and keep doing it!


We are committed to getting the basics right: to have 40,000 employees focused on the real task of delivering sustainable value for all of our stakeholders consistent with our Corporate Principles. (CBD CSR Report 2004, pp. 2-3)

The concept of developing “material issues” is important to show how CBD and KML attempt to reconcile stakeholder and corporate concerns, as opposed to having a bias towards a specific strategic or institutional legitimacy perspective. For example, when CBD began reporting in 2004, it was attempting to repair its legitimacy with customers and employees. Thus, we find commitment towards achieving these ends in the 2004 CSR Report, such as disclosing key performance indicators (KPIs) on customer numbers, health and safety, workforce profile, diversity profile and an employee opinion survey. CBD seems to have made significant progress in repairing the legitimacy with customers and employees. Noticeably, it has developed “trust” among employees and customers: [CBD] has made the transition to taking seriously the simple proposition that the community are also our stakeholders. [CBD] has started to gain the trust of the community. (CBD Annual Review 2010, p. 29)

Therefore, by 2010, with trust repaired, the subsequent improvement in pragmatic legitimacy translated into a broader program of stakeholder engagement, addressing “material issues” as described in the 2010 Annual Review (p. 8): We have established a long-term program of CSR action based on our assessment of material issues. It is updated by annual stakeholder engagement.

Interestingly, shareholders are not seen as a primary focus of CSR, with CBD arguing that customers and the community come first: “a positive and sustainable impact in the lives of our customers and communities […] underpins a strong and sustainable business for our shareholders” (CBD 2010 Annual Review, p. 9). Specifically, CBD identifies that “material issues” are the basis of its public reports as opposed to the GRI as revealed in the interviews: And that’s what I think everyone has fallen into the trap of is, oh that’s how I have to report every single page and every single word. […] you don’t have to do it in that strict community, environment, people, and customer. And I quite like the idea of maybe I’d structure a report around the material issues, and you know we might have eight and five of them might be customer. (CBD01)

Neither KML nor CBD is an organisational stakeholder of the GRI. They view the GRI as a useful tool to frame CSR reporting and also as a burden based on the extent of the requirements upon its adoption. Thus, the GRI is understood as a “background tool” (CBD01), which “has not really changed in terms of defining those indicators; therefore, it’s the process now […] it’s just kind of routine now” (CBD03). This routine-like application bears it risks; however, as a CBD manager put it:

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[…] you have to be careful that you don’t use the GRI, and then accidentally end up with greenwash because you’ve gone here’s a third on green when I am actually a company that’s not really renowned for environmental issues, I am renowned for ethical issues. (CBD01)

Overall, whilst acknowledging that “if we didn’t believe in GRI, we wouldn’t use it” (CBD01), CBD also sees that:

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[…] more and more people are using GRI in the background, what they are actually using is the CRI (Corporate Responsibility Index) because […] the GRI structure does not make a lot of sense. (CBD01)


Thus, there appears to be a mimetic adoption (Powell and DiMaggio, 1991) of the GRI as a form of disclosure rather than a tool to address “material issues” as one CBD manager outlines: […] we don’t need four pages on child labour policies. And if you read the GRI the social section asks almost nothing about community engagement, almost nothing, it’s all child labour and labour standards and labour conditions, which is fine, but we’re not operating in the sorts of countries where those are an issue. (CBD01)

Therefore, CBD uses public reporting to focus on the “material issues” that are important to its major stakeholders, such as its community and customers. Evidence of CBD’s commitment to developing community and subsequently customer legitimacy is seen in what they term “flagship” programmes. These programmes are designed to have maximum impact in projecting the image of CBD as a good corporate citizen: Obviously our flagship programs is where you get the sort of external community recognition […] I think our work with indigenous communities is becoming better known, so we’ve been very dedicated to that particularly through our microfinance work in providing access to indigenous communities. But that’s still growing in terms of external recognition […] And then our carbon neutral commitment is probably our more flagship one but it’s probably not as well known in the community but better known in business circles and government circles. (CBD01)

More importantly, CBD seeks to strategically align these “flagship” programmes with feedback from the community to ensure the programmes have the desired impact through formal engagement activities. This process allows CBD to know whether its actions have the desired impact: […] we’re actually just running a series of focus groups now, just again going back to the community and understanding what they think our flagship programs are and where we should be with our flagship programs. (CBD01)

In essence, CBD is actively manipulating legitimacy through its “flagship” activities. First, it develops pragmatic legitimacy by addressing the wants of key stakeholders via the “flagship” programmes while at the same developing cognitive legitimacy through formal stakeholder feedback to ensure the programmes are generating the desired positive reputation impacts (and potentially market impacts through retaining and attracting customers). The concept of “material issues” also came to the fore in our interviews with KML. However, unlike CBD, where the concept of “material issues” was well established, at KML, it was only just starting to appear in its CSR vocabulary. However, we appear to have arrived during a point of inflection towards reconciling strategic and institutional

legitimacy at KML due to the arrival of a new chief executive officer (CEO). This changed approach to legitimacy is evidenced by one manager’s perception of the CEO’s view of KML’s role in business and the community: The drive for a target isn’t financial, the drive for a target actually I think from [the CEO’s] point of view is coming from a we’re a big Australian company, we’re a part of the community, what we are doing, what we are going to say, what we’re going to do to look after our environment. (KML04)


The same manager dwelled on the concept of “material issues” several times during the interview and reconciled the strategic and institutional perspectives highlighting the influence of the CEO in the process: And because his [the CEO’s] approach is so strongly aligned with the corporate responsibility approach; he’s all about customer service, stakeholder engagement, all of those things; these are the things that he’s asking for targets on. Because we have got senior level [involvement] because we have had a proper process for identifying the material issues because we do have a strategy and because we will have targets. (KML04)

As with CBD, KML uses the GRI as an internal reporting guideline since its inaugural report. From 2004, KML hired consultants to help produce CSR report based on GRI requirements. From 2008, the CSR Report included an overview of GRI indicators and how the company has addressed individual indicators. In 2010, the CSR Report was assured by an independent Australian-based GRI assurance provider. Currently, KML supports reporting against the GRI for the mimetic reasons because the GRI is perceived as “the standard that a lot of other frameworks and standards are mapping themselves to” (KML02). Additionally, unlike at CBD, they use the GRI to help identify some “material issues”; however, it is met with reservation across the business: […] G3 is a good starting point […] a guideline […] (to) work out what the most critical issues for you are as a company. (KML02)

Some of the trepidation towards the GRI is based on feedback from a GRI training session KML managers attended: […] [the seminar facilitator] was kind of saying: “You know this is how you can do It”, and I was saying that “I would never do it like that”. And also other people in the seminar said they would never do it like that. […] if it’s not going to be something that’s useful to companies, companies won’t use it.

As a result, instead of utilising the GRI as the main reporting framework, KML’s 2010 Corporate Citizen Report (p. 2) advocated: Our reporting aims to provide relevant information about [KML]’s social and environmental approach and performance, for all of [KML]’s stakeholders. This report specifically covers the key material corporate citizenship issues for [KML] which is shown as follows:

(1) Responsible business practice: • Customer service. • Leadership, strategy and governance. • Clarity of pricing and billing. • Consumer privacy and data security.

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• National Broadband Network. • Base stations and electromagnetic energy (EME). • Responsible marketing. (2) Social impact: • Disaster relief and recovery. • Digital inclusion and accessibility. • Social application of products and services. • Cyber safety and security. • Community investment. (3) Great place to work: • Employee engagement. • Employee health and safety. • Gender diversity. (4) Environmental impact: • Climate change. • Carbon emissions and energy efficiency. • E-waste. What we found, in accordance with our model, is that only a limited amount of information is released to stakeholders in public reports and that the amount of information being released is becoming progressively summarised. This point is highlighted by a CDB Manager as: […] we’re also planning for this year is to have a page that just sums up what is CSR in a very[small] poster, stick it on your desk kind of way. That is you read nothing else. That makes you go, oh OK, now I understand what it means in the context of this enterprise story rather than in the context of CSR on its own. (CBD01)

Another reason for limiting the amount of NI is to control the message to ensure a positive light on the organisation. Here, we argue that the information contained in the reports can, at times, be manipulated to maintain a “positive spin”. The following was highlighted about how information in public reports can be manipulated by public relations managers: […] there was some data where it didn’t look as good as the year before, and even though we’d been reporting on it year on year suddenly they provided me with a graph that lumped that year in, suddenly it was a five year graph and it was still going up. And I’m just kind of saying it doesn’t matter that it’s gone down just say why if it was so insignificant anyway. (KML04)

While the reports bend the truth somewhat, we would not liken this to a form of “greenwashing” (Hubbard, 2009) but rather consider it a lighter form of managing or manipulating (Suchman, 1995, p. 597) the message we call “lime-greenwashing”. We cannot claim the reports are greenwashing because we find evidence from the interviewees and reports outlining how the “truth” was reported even when the objectives were not met. The same manager lamented further on what gets reported:

[…] it’s supposed to be about transparency […] So I don’t know what the final approval process will be on this, but I’ve just clearly stated we didn’t do it, and we didn’t do it because of this and put big cross next to that didn’t we do that bit. I think we need to if we say we’re going to do something, and we don’t do it we need to say why. (KML04)


This transparency is evidenced in KML’s 2010 Corporate Citizenship Report (pp. 6-9) where 8 out of the 27 initiatives undertaken to address “material issues” were reported as either partially complete or incomplete. However, rather than explain the incompleteness, the report mainly outlined how the objective was to be managed in the future as outlined in the report (p. 48): As at 30 June 2010, women made up 29.4 per cent of [KML’s] workforce, compared with 29.9 per cent at the same time in 2009. We recognise that this falls short of our published June 2010 target of 31 per cent, and we will continue to drive improved progress in this area. We will do this by focusing on talent, succession and pathways for women; using granular data to drive local action and accountability; embedding inclusion within the cultural change program at [KML], and focusing more on how we attract and recruit women.

CBD made similar comments about the same issue in its 2010 Annual Review (p. 27); however, the comments were scant in comparison: Like many organisations, we still face inequities in the number of women in senior leadership positions and in male-to-female remuneration ratios. [CBD’s] recently endorsed Diversity and Inclusion Strategy includes actions to address these issues.

Our observation is that CBD was more likely to positively report on issues that impacted its moral and cognitive compass while, at the same time, had the potential to strike a nerve with stakeholders. CBD’s programme for developing microfinance loans is a prime example. In the 2010 Annual Review, it is mentioned from the “Customer” perspective: Ensuring access to fair and affordable banking is the focus of our microfinance programs. […] we provide no- and low-interest loans and a matched savings program. We also offer microenterprise loans for people who have difficulty accessing business credit. We have committed $130 million in loan capital to support these programs, and this year we’ve written over 8,500 microfinance loans.

And from the “Community” perspective: As a financial services organisation, we have an important role to play in promoting access to safe, fair and affordable financial services. As discussed on page 24, our microfinance program is one of the largest of its type in a developed economy.

Thus, for CBD, microfinance has strategic impact because it is seen to be morally right. as well as makes sense from a business perspective, because all of the normal “rules of lending” apply to providing the loans: So microfinance is, in terms of our business, being good at [what we do]. So microfinance is not a community initiative it’s a customer initiative […]. (CBD01)

To summarise, what we have been able to show is that from a public reporting perspective, both organisations focus on “material issues”. We argue this represents a maturing of the process of NI within the organisations as they become more acutely aware of the need, and their ability to reconcile strategic and institutional legitimacy. Thus, activities associated with developing legitimacy need to make sense to outsiders looking into, as well as from within, the organisation.

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Broad tools of engagement: the corporate website and other media In this section, we discuss the implications of the middle box of our model as outlined in Figure 1. Here, we argue that a broader focus on stakeholder engagement is coupled with more diverse approaches for engagement once the level of public transparency declines. Initially, public reporting, by way of CSR reporting, stood out as a primary means of communication. However, by 2010, these public reports were only one of a number of formal and informal means of communication. A CBD Manager outlined their view on the subject:


So our channels of communication really depend on what we want to say, so our general corporate responsibility message is more in our reporting, our Dow Jones, our annual report, our shareholder review, our AGM, etc., whereas we wouldn’t necessarily go out with a CSR message in every single campaign because I don’t think many of the community understand CSR as a concept. And then obviously [our internal] Magazine is a big way to communicate with our staff, we have our intranet, we have [CBD] TV. So I think we have a lot of staff communication, and externally it’s through internet, through various ports, through media releases, etc. […]. (CBD01)

CBD also developed very formal approaches to stakeholder engagement, which attempt to reconcile stakeholder concerns, with corporate strategy as disclosed in the 2010 Annual Review (p. 8): Central to our CSR approach is a range of stakeholder engagement initiatives designed to ensure that we are identifying and responding to current and emerging issues. Our Customer Council, chaired by the Group CEO, provides a strong “listening post” for regular customer feedback and diagnosis. Our Community Advisory Council also plays a central role, providing external and independent opinion on strategy and actions.

In attempting to align stakeholder needs and strategy, CBD prompted a strategic review of the range of mediums used to communicate CSR, targeting specific audiences through alternate media, contrasting the use of the Internet compared to the publicly available reports: […] we’re in that process of really reviewing how do we meet the needs of the analysts but actually meet the needs of our stakeholders, like who do we actually want to read this. And what we might do is move towards more of that general GRI type reporting on the internet but what we release as a public document is much more focused on our enterprise story. It’ll just be if you really want the analysis, which really only the analysts want the analysis, then it’s on the website. If you want to understand what we’re doing […] and where we’re going, and our challenges and our risks and our achievements then you look at the shareholder review. (CBD01)

The Internet and other media make it possible to respond quickly to different stakeholder needs as opposed to waiting for the next public report. This allows companies greater flexibility in formulating timely responses to stakeholders, as well as identifying “material issues” that might appear in subsequent public reports. A KML manager summarised its approach to using the Internet in conjunction with public reporting based on day-to-day interactions with stakeholders: Yes, look we basically take the approach that what we provide on our corporate responsibility website and what we provide in the report as far as possible meets […] the GRI in particular, so we try and make what we hold publicly available as comprehensive as possible. We could never answer all of the specific enquiries that people put to us because we don’t have that many people to be able to provide it.

So we have a policy that we basically encourage those people to have a look at what we have publicly available. If for example we get a series of requests that indicate to me that we haven’t got public information available that perhaps we should, then we work with people within the business to surface that information and to present it publicly in the next report or to put it onto our website. (KML02)

Additionally, the Internet provides the opportunity to put more information online so specific stakeholder groups can find the information they need in a timely manner. This allows organisations to specifically target the information needs of a multitude of stakeholders using the analogy of an online “encyclopaedia” to describe the approach:


[…] we could make sure that it contained all of the information that might sensibly be of interest right across those stakeholder groups, and that it would be used I think as I said like an encyclopaedia – it’s available on line, easy to search for particular pieces of information. (KML04)

The same manager also outlined KML’s vision of how the internet could be further utilised in the future building on the notion of an online ‘encyclopaedia’: […] the corporate responsibility website that we have should in itself become our report, if that makes sense. It’s something that would be live that we update with information on a regular basis, and that we might provide an annual summary report […] So to have a much more kind of pointy summary report with all of those crucial issues but also to provide that whole range of information that stakeholders are wanting, but to have that in the online environment where it can be used flexibly and easily accessed and kept up to date. (KML02)

Facilitating communication with stakeholders more effectively addresses their concerns and information needs, and is important to understanding what the material issues are because they change more frequently than can be addressed by an annual report. Thus, the same manager outlined how KML provides a dedicated email address on its website explicitly inviting stakeholders to email their concerns, make comments and put forward enquiries or suggestions. This communication device proves to be highly successful in gathering timely information and concerns from KML’s major stakeholders: […] I come to work every morning and I have a stream of emails from shareholders, members of the community and customers telling us what they think in no uncertain terms. (KML04)

Engagement and feedback with stakeholders for CBD also plays a significant role. However, engagement is not undertaken just through the one-way channel of public reporting. CBD uses a different approach utilising road shows and direct interactions with stakeholders: We actually just ran an environmental expo across the country in the last two weeks, and we’ve had an enormous response to that, a lot of involvement. So it’s more, not just the odd piece of communication but more the engagement that we’re working on. […] it’s not all about sticking something in a report once a year and ignoring it the rest of the year, it’s a lot more about engagement, not just communication but engagement […]. (CBD01)

Thus, the middle square of our model shows how organisations utilise their corporate websites and other forms of media to engage with stakeholders. The advantage of using these strategies is threefold. First, organisations can act “in a more frequent and immediate manner without making stakeholders wait until the publication of formal company annual reports” (Dumay and Tull, 2007, p. 254) to disclose material issues.

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Second, organisations can provide an encyclopaedia of publicly available information which allows any stakeholder with access to the Internet to search for information as they need it rather than waiting for the organisation to respond to specific requests for information. Third, by using other forms of media including email and direct contact, organisations open up an active conversation and thus communicate with stakeholders rather than just provide information. Issues managed but not publicly reported In this section, we discuss the last and largest square of the model presented in Figure 1. As with all large businesses, both CBD and KML have a multitude of issues that, for different reasons, are not publicly disclosed. First, from a legitimacy perspective, there are many issues that would not pass the test of being “material issues”. For example, a KML Manager commented on an internal programme, looking at the efficiency of in-house printing, and how it did not spark the interest of many employees: I’ll show you an initiative that we’re running with printing at the moment called Uniflow which basically gives users visibility of their own statistics. And we have all this data – but then you say well what do I do with it? And to be honest a lot of the people that look at those emails they don’t even open it because they don’t understand what it means and they’re not familiar, they don’t like looking in the detail. So yes, getting data is a great thing, but unless you’ve got an interest there […]. (KML05)

The same manager also outlined how it was necessary for both moral and cognitive legitimacy to be aligned within the organisation before an issue could even be considered material: […] you know the immediate question comes back [to] “Well what is the value proposition for us to spend in this area as opposed to doing it in another?” And that’s where it becomes difficult to put your finger on, and something to say well this is what is means for us as a company. And people will say the employee retention and a whole other range of benefits, but it’s like well quantify – it’s like, “Well we think […]” It’s hard to do, and that’s always the problem when you’re talking non financials is that when you, as you want to invest in perhaps policies and processes that actually do that kind of thing, the accountants always come up and say “Where’s the dollars?”, “Where’s my dollars?”. (KML05)

This square of our model can also be seen as the incubator of issues that will become material in the future by allowing issues to develop from a strategic and institutional legitimacy perspective from within the organisation. A CBD Manager explains how the issue of becoming carbon-neutral developed inside CBD to become a publicly reported “material issue”: […] carbon neutral [became an issue because […] ] one, our employees wanted us […] to be doing something, and two, there’s an opportunity there if we’ve actually gone through it then we can actually talk to customers from the basis of experience, not just from theory. And there’s a lot more value in that. Plus as we set up systems for ourselves we can extend them to our customers. So that’s where that’s coming from, and the carbon neutral commitment is one part of a […] strategy. […] So the carbon neutral brings the non-financial and the financial together for us for the first time. (CDB03)

For CBD, in the past, becoming carbon-neutral was not reported as a material issue. For example, in the 2004 CSR Report, CBD only reported on its involvement with the Carbon Disclosure Project and not on becoming carbon neutral. It wasn’t until the 2007


Corporate Responsibly Review (p. 20) that CBD disclosed its intent to become carbon– neutral, and in the 2010 Annual Review (p. 30), CBD reported that it had achieved this outcome. Thus, we can see how the issue of carbon neutrality emerged from an unreported issue to one that was reported and achieved. Subsequently, only higher-level achievements are publicly reported and the finer details of the issues are not. First, the level of detail may only be useful to managers and not be useful to stakeholders as this CBD manager outlines in relation to disclosing the finer details of carbon emissions from particular locations even though carbon neutrality is seen as a “material issue”: […] a thousand sites around Australia is not a useful breakdown of information, is it to us so we can say well that site, all those [locations] if you average them well that means we know what the average is that’s way under, that’s an excellent performance – that’s way over, we’ve got to fix our [location] it’s performing way over, its inefficient. That’s useful for management information; it is not useful in the public domain to have a thousand sites up there. (CBD03)

Another reason why material issues are not disclosed in public reports or the Internet is the sensitivity of the information from a commercial and or security perspective. The same CBD Manager continues along this theme: And security wise it’s not necessarily a good thing either, like you will not ever be able to see looking on [the internet] whatever they make public where our data centres are for security reasons. If you think about it if all the [major businesses] put up their data centres you’d take them out as a terrorist and you’ve brought down an economy. And I’m sure there are other businesses who are saying, hey, we’ll give you the information but it’ll be slightly hidden, it won’t be total disclosure because of security. (CBD03)

Last, material issues may not be disclosed publicly because the disclosures are intended to be consumed by a specific internal audience, such as employees as a KML manager outlines: So the confidentiality of an internal com story going out to forty thousand employees, you know we work on the basis that they may become public. You know that said they’re obviously, you know most of them are for staff only, they’re not deliberately made public, but we wouldn’t be revealing sort of secretive information that we’d be uncomfortable being made public I wouldn’t think. (KML02)

Thus, the last square of our model shows how issues that have varying degrees of materiality are not disclosed even though they may be important to the business and or stakeholders. Issues that have low levels of importance, or are of interest to particular stakeholders such as managers and employees, are not disclosed. However, some details of “material issues” are not disclosed because of security and confidentiality reasons. Discussion and conclusion The major contribution of this paper is what we define as “material legitimacy”. As disclosed in the literature review, the discussion of organisational legitimacy is based on either a strategic or institutional perspective with the majority of accounting based papers on legitimacy taking the latter perspective. As Suchman (1995, p. 574) outlines, many organisations adopt a social construction approach that “reflects a congruence between the behaviours of the legitimated entity and the shared (or assumed shared) beliefs of some social group”. Such an approach in our view is what Gray (2006, pp. 803-5) calls a “managerialist” approach, whereby data are:

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[…] selectively reported based on the assumption that there are no conflicts between traditional economic criteria and those relating to social and environmental aspects. For this reason, readers of these types of reports cannot have a reliable picture of an organization’s […] performance. (Dumay et al., 2010, p. 534)

Hence, to offer a different perspective, we define “material legitimacy” as the form of legitimacy that enables organisations to blend what is important to the organisation (strategic legitimacy) with the primary concerns of its major stakeholders (institutional legitimacy). In this sense, organisations are trying to achieve a mutually beneficial “win–win” outcome for themselves and their stakeholders. However, the difficulty is in judging what issues become “material” and whether they should be disclosed. As shown in our model in Figure 1, all issues managed by an organisation can be assessed on a continuum of importance to the organisation or the stakeholder(s). The more important the issue, the more likely it is to be actively managed and publicly reported. For example, take CBD’s enablement and disclosure of its microfinance business. From a strategic perspective, it hits the moral legitimacy compass because it is seen as the right thing to do. Subsequently, CBD also surrounds the programme with good business practices to demonstrate that it is not merely a “payoff to constituents” (Suchman, 1995, p. 603). From an institutional legitimacy perspective, the provision of microfinance is beneficial to customers of the programme because it offers them an opportunity to borrow funds and possibly increase their economic prospects. Furthermore, other stakeholders, such as government, employees and the general community, see this as the “right thing to do” so that CBD promotes its reputation and hence its “material legitimacy” by publicly disclosing its microfinance lending activities. In doing so, CBD reports its microfinance activities in public reports in detail, for example, how many loans it has made, how much money it has committed to the project and how long the programme has been going. However, what it does not disclose are some of the downsides to microfinance such as borrowers who may, for the first time in their lives, become embroiled in a cycle of debt because of the failure of their enterprise or the number of defaulted loans. Thus, we argue that the “material issues’” approach to reporting is still somewhat manipulative in its focus on the positive; what we term “lime-greenwashing”, a diminished form of greenwashing. This is not surprising, considering it is not in the best interest of any organisation to report negatively on its activities (Gowthorpe, 2009); to “hang out their dirty laundry” (Dumay and Lu, 2010). For example, CBD clearly outlined the issues which led to their crisis of legitimacy in 2004. According to Suchman (1995, pp. 597-9), this was necessary to outline to stakeholders that CBD was restructuring to ensure the past abuses of trust no longer occurred. However, in support of our “lime-greenwashing” argument, both companies have a propensity to report on their achievements and pay scant attention to the reasons why other “material issues” remain outstanding. Our earlier discussion of both organisations’ transparency towards gender diversity is a prominent example. Another contribution from the “material legitimacy” perspective is our observation of the way both organisations use their concepts of “material issues” as the basis of their public reporting. While both organisations use the GRI, it is not the driving force behind reporting, but a form of isomorphic behaviour to justify among peers that the organisation is doing the right thing by following a standard. The GRI takes a back seat to “material issues” as evidenced by CBD’s GRI supplements and KML’s tendency to report an index to GRI disclosures on the final pages of its reports. Interviewees from


CBD and KML also question the relevance of the GRI to their respective companies. Hence, we argue that both organisations are concerned with “walking the talk” by demonstrating that developing material legitimacy is about doing, not reporting! A further contribution of our research is evidence of how annual public reports are becoming more concise and how both organisations are relying more on other forms of disclosure in an attempt to reach a broader range of stakeholders. Evidence from both organisations shows how they are creating online “encyclopaedias” of NI, which are aimed at specific stakeholders or designed to satisfy the changing demands and concerns of stakeholders. Both organisations are actively involved in gathering feedback from their stakeholders through informal and formal engagement processes such as email. This allows them to continually monitor their reputation and hence their legitimacy on a day-to-day basis and to respond to evolving “material issues” in a more timely manner without waiting for the next annual reporting cycle. It seems that formal publicly available reports are becoming increasingly less relevant and soon may be replaced by live reports, updated on a continual basis. Additionally, where the sensitivity of the disclosure or relevance to a particular stakeholder group does not warrant public disclosure, these different forms of media are effectively used to communicate directly with the stakeholders concerned. This allows the organisation to deal with “material issues” without publicly disclosing information. As with all studies, especially from a qualitative perspective, the arguments we present here are limited to the evidence we collected in relation to our two case study organisations and the view shared by the key people in these organisations at the time we conducted our interviews. Furthermore, our findings are limited to our own interpretations and others utilising similar data may reach alternate explanations. However, we argue that there are a number of lessons to be learnt from our findings. Foremost, we argue that our approach to combining strategic and institutional legitimacy to form the concept of “material legitimacy” presents a way of reconciling how different approaches to legitimacy can be considered in concert. As Suchman (1995, p. 602) outlines: Researchers who study legitimacy either should address the full range of the phenomenon or should clearly identify which aspect(s) they have in mind […] Such care might go a long way toward quelling unproductive debates over the operationalization of legitimacy in specific studies.

In this paper, we argue that we have met Suchman’s research challenge by presenting our model combining the strategic and institutional approaches to legitimacy and disclosure. The application of our model shows how “material issues” need to come to the fore to allow organisations to “walk the talk” and act to operationalise material legitimacy, rather than focus on manipulating legitimacy through appeasing specific stakeholders or only doing things that provide strategic and/or financial benefits. Thus, we argue that by concentrating on “material issues”, there is the possibility that organisations can achieve win–win outcomes with their stakeholders. As for future research opportunities, our findings open up the possibility for us and other researchers to examine the intersection of stakeholder and organisational interests and examine how “material legitimacy” is developed and reported. The future landscape of reporting is changing as CSR and sustainability reporting approaches and frameworks, like triple-bottom-line, the GRI and the UN Global Compact (UNGC, 2009)

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(to name just a few) are maturing and newer approaches, such as the initiatives currently underway to develop Integrated Reporting, are evolving. The latter is of particular interest because Integrated Reporting seeks to: […] bring together material information about an organization’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates. (IIRC, 2011, p. 6)


From our own research perspective, this opportunity is very real, as one of our case companies has joined the IIRC Pilot Program and has begun to develop Integrated Reports as part of its normal reporting practices. Thus, we will follow its progress with interest along with other organisations taking part in the pilot programme to see how they discover the “material issues” that they include in their reports and/or other forms of public disclosure. References Aerts, W. and Cormier, D. (2009), “Media legitimacy and corporate environmental communication”, Accounting, Organizations and Society, Vol. 34 No. 1, pp. 1-27. Aerts, W., Cormier, D. and Magnan, M. (2006), “Intra-industry imitation in corporate environmental reporting: an international perspective”, Journal of Accounting and Public Policy, Vol. 25 No. 3, pp. 299-331. Ball, A. and Craig, R. (2010), “Using neo-institutionalism to advance social and environmental accounting”, Critical Perspectives on Accounting, Vol. 21 No. 4, pp. 283-293. Banerjee, S.B. (2008), “Corporate social responsibility: the good, the bad and the ugly”, Critical Sociology, Vol. 34 No. 1, pp. 51-79. Buhr, N. (1998), “Environmental performance, legislation and annual report disclosure: the case of acid rain and Falconbridge”, Accounting, Auditing & Accountability Journal, Vol. 11 No. 2, pp. 163-190. Campbell, D. and Beck, C. (2004), “Answering allegations: the use of the corporate website for restorative ethical and social disclosure”, Business Ethics: A European Review, Vol. 13 Nos 2/3, pp. 100-116. Deegan, C. and Blomquist, C. (2006), “Stakeholder influence on corporate reporting: an exploration of the interaction between WWF-Australia and the Australian minerals industry”, Accounting, Organizations and Society, Vol. 31 No. 4, pp. 343-372. Deegan, C. and Rankin, M. (1996), “Do Australian companies report environmental news objectively?: An analysis of environmental disclosures by firms prosecuted successfully by the environmental protection authority”, Accounting, Auditing & Accountability Journal, Vol. 9 No. 2, pp. 50-67. Deegan, C., Rankin, M. and Tobin, J. (2002), “An examination of the corporate social and environmental disclosures of BHP from 1983-1997. A test of legitimacy theory”, Accounting, Auditing & Accountability Journal, Vol. 15 No. 3, pp. 312-343. Dowling, J. and Pfeffer, J. (1975), “Organizational legitimacy: social values and organizational behavior”, Pacific Sociological Review, Vol. 18 No. 1, pp. 122-136. Dumay, J. and Lu, J. (2010), “Disclosing improvements in human capital: comparing results to the rhetoric”, Journal of Human Resource Costing & Accounting, Vol. 14 No. 1, pp. 70-97. Dumay, J. and Tull, J. (2007), “Intellectual capital disclosure and price sensitive Australian stock exchange announcements”, Journal of Intellectual Capital, Vol. 8 No. 2, pp. 236-255.


Dumay, J., Guthrie, J. and Farneti, F. (2010), “GRI sustainability reporting guidelines for public and third sector organisations: a critical review”, Public Management Review, Vol. 13 No. 4, pp. 531-548. Frost, G.R. (2007), “The introduction of mandatory environmental reporting guidelines: Australian evidence”, ABACUS, Vol. 43 No. 2, pp. 190-216. Frost, G.R. and Seamer, M. (2002), “Adoption of environmental reporting and management practices: an analysis of New South Wales Public sector entities”, Financial Accountability & Management, Vol. 18 No. 2, pp. 103-127. Gowthorpe, C. (2009), “Wider still and wider? A critical discussion of intellectual capital recognition, measurement and control in a boundary theoretical context”, Critical Perspectives on Accounting, Vol. 20 No. 7, pp. 823-834. Gray, R. (2006), “Social, environmental and sustainability reporting and organisational value creation? Whose value? Whose creation?”, Accounting, Auditing & Accountability Journal, Vol. 19 No. 6, pp. 793-819. Guthrie, J. and Parker, L.D. (1989), “Corporate social reporting: a rebuttal of legitimacy theory”, Accounting and Business Research, Vol. 19 No. 76, pp. 343-352. Hubbard, G. (2009), “Unsustainable reporting”, paper presented at the CR Debates, London. International Integrated Reporting Council (IIRC) (2011), Towards Integrated Reporting: Communicating Value in the 21st Century, International Integrated Reporting Council, London. Meyer, J.W. and Rowan, B. (1977), “Institutionalized organizations: formal structure as myth and ceremony”, American Journal of Sociology, Vol. 83 No. 2, pp. 340-363. Patten, D.M. (1992), “Intra-industry environmental disclosures in response to the Alaskan oil spill: a note on legitimacy theory”, Accounting, Organizations and Society, Vol. 17 No. 5, pp. 471-475. Powell, W.W. and DiMaggio, P.J. (1991), The New Institutionalism in Organizational Analysis, University of Chicago Press, Chicago. Ruef, M. and Scott, W.R. (1998), “A multidimensional model of organizational legitimacy: hospital survival in changing institutional environments”, Administrative Science Quarterly, Vol. 83 No. 4, pp. 877-904. Scott, W.R. (1995), Institutions and Organizations, Sage, Thousand Oaks, CA. Suchman, M.C. (1995), “Managing legitimacy: strategic and institutional approaches”, Academy of Management Review, Vol. 20 No. 3, pp. 571-610. Toms, J. (2002), “Firm resources, quality signals and the determinants of corporate environmental reputation: some UK evidence”, The British Accounting Review, Vol. 34 No. 3, pp. 257-282. United Nations Global Compact (UNGC) (2009), “Overview of the UN global compact”, available at: www.unglobalcompact.org/AbouttheGC/index.html (accessed 25 March 2009). Corresponding author John Dumay can be contacted at: [email protected]

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