The world is in crisis! People are becoming more interested and better educated
in environmental, social and financial issues. Companies prefer not to break
even, but sustain themselves with a higher margin of safety. Correspondingly, we
need to sustain ourselves for many, many years to come. Unfortunately, we are
not leading ourselves towards that path. It is crucial that we, well-informed and
conscientious, take action now in order to save the world.
Companies are being held responsible for not only their financial performance
but also on their impact on the environment and society. No more can an
organisation take into account just its stakeholders and its financial profits!
Organisations, who wish to succeed and grow, need to look outwards on the
While the goal of a company or firm is sustainability, the goal of the human
species is to sustain themselves as well. Sustainability is a state of being that
can be maintained indefinitely. Sustainable development meets the needs of the
present without compromising the ability of future generations.
Although social and environmental reporting is covered by limited statutory
regulation, most disclosure is on a voluntary basis. What are the motivations in
play that bring about the varying levels and aspects of disclosure? Can
Legitimacy Theory show that the company is complying with the expectations of
society? Can Stakeholder Theory explain the expectations of powerful
stakeholders if the managerial perspective of stakeholder theory is taken on?
Will organisations accept particular practices due to Institutional Theory?
Whilst there is a general framework accepted for financial accounting, there is no
formal framework for environmental and social reporting. However, the Global
Reporting Initiative has developed the “Sustainability Reporting Guidelines” that
set out doctrines and indicators that can be used to measure and report
economic, environmental and social performance.
The institutional theoretical perspective
Institutional theorists are concerned with understanding why organisations are
similar, and why there is homogeneity in organisational forms and practices (e.g.
DiMaggio and Powell, 1983; Meyer and Rowan, 1977; Powell and DiMaggio,
1991). DiMaggio and Powell (1983) indicate that varieties exist in organisational
forms and practices in the early stages of the life cycle of an organisational field3,
but homogeneity will eventually occur once a field is established. The process of
becoming homogeneous is called isomorphism, which is described as “a
constraining process that forces a unit in a population to resemble other units
that face the same set of environmental conditions” (Hawley 1968, as cited in
DiMaggio and Powell, 1983, p. 149). It is supported that this homogeneity would
in turn stimulates, or hinders, adoption of new organisational practices, including
accounting (Bansal and Roth, 2000; e.g. Bouma and van der Veen, 2002;