Abstract
This paper provides a historical context to sustainability reporting practices of listed companies by tracing their origin and developments to determine whether such developments have resulted in decision useful reports. Using a literature review, this paper highlights the developments in the sustainability reporting practices from the 1960s to date. The findings are interpreted using the lens of legitimacy theory. The findings indicate a dramatic improvement in the decision usefulness of sustainability reports produced by listed companies from the deceptive advertisements by companies in the 1960’s to relevant, reliable, timely, comparable, verifiable and understandable reports in year 2012. The findings further suggest a change in legitimizing strategies from manipulation of the public to an attempt to genuinely educate and inform the public, which confirms the explanatory power of legitimacy theory in explaining voluntary sustainability reporting. This paper makes a number of original contributions to the literature that attempts to explain the motives of sustainabi-lity reporting. First, it is one of the few studies that have employed legitimacy theory to explain the evolution of sustainability reports. Second, it is unique in that it uses legitimacy theory to explain the evolution of decision usefulness of sustainability reports
Highlights
This paper makes a number of original contributions to the literature that attempts to explain the motives of sustainability reporting
The findings further suggest a change in legitimizing strategies from manipulation of the public to an attempt to genuinely educate and inform the public, which confirms the explanatory power of legitimacy theory in explaining voluntary sustainability reporting
This paper examined the changes in sustainability reporting practices from the 1960s to 2012 to determine whether such enhanced the decision usefulness of the reports
Summary
The theory posits that, for a company to continue to exist and thrive, it must act in congruence with the values and norms of the society in which it operates A legitimacy gap arises when the society’s expectations are not met, that is, when a company’s actual or perceived behavior is not in accordance with social values and norms, which, in itself, is a breach of a social contract To the extent that companies’ aims and operations are perceived to not to be in congruence with societal expectations, the legitimacy of such a company will be under a threat, as the society may act to remove the company’s right to continued operations Legitimacy theory offers a powerful explanatory tool to analyze the reporting practices of companies across time (Deegan, 2002, p. 288)
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
