Environmental disclosure in annual reports: A legitimacy theory perspective

Abstract

In recent years, corporations have increasingly used their annual reports to voluntarily disclose information relating to their social actions, particularly those concerning the natural environment. The conventional accounting framework, with its emphasis on decision-usefulness, has largely proved unsatisfactory in explaining this practice, as have various economic theories. This paper uses a legitimacy theory framework to explain why companies engage in this type of voluntary reporting. This research contributes to the accounting literature by advancing legitimacy theory as a framework for examining environmental reporting and applying this in an effort to understand the environmental disclosure practices of two Canadian pulp and paper companies.