Using Legitimacy Theory To Predict Company Responses To Environmental Concerns In Australia

Practical Motivation

The research study has been an individual assignment focusing to underscore the usage of legitimacy theory in predicting the manner in which the companies in the Australian market would respond to the significant enhancement in the social concern related to the environment.  The project aims to highlight carbon disclosure as the primary issue and tends to evaluate it with the support legitimacy theory. In the consideration of Michelon et al. (2018), it can be noted that legitimacy theory tends to highlight the degree to which corporate social and environmental revelations are controlled by the periphery developed by a community with the purpose of appreciating and avoiding being penalized by society in which businesses operate. The literature review section of the project aims to conduct empirical research of three different journals containing the context “Carbon Disclosure in the light of Legitimacy Theory” in annotated bibliography format. The journals would be discussed following argumentative format and statements would be critiqued by other references. Depending on the entire discussions, a suitable conclusion would be derived following strategic recommendations to overcome the identified gaps.

In the statement of Matthews et al. (2018), carbon emission has become one of the major factors that are considered responsible behind the ecological imbalances. Moreover, companies are also receiving several threats from the environmental agencies in terms of restricting their operations that can lead devote to high carbon emission. Therefore, the organizations are required to have an apparent idea regarding the carbon emission they are allowed to release in the environment to maintain ecological stability (Jiang et al. 2018).  Hence, carbon disclosure project has been a relevant criterion that can help both businesses and community to gain transparent information regarding the carbon emission an organization is causing in the environment (Fawcett and Parag, 2017). Based on which further actions can be taken. And legitimacy framework focus on corporate and environmental wellbeing, thus, following legitimacy approach would help the study to gain a better inference with logic.

Andrew, J. and Cortese, C. L. (2011) Carbon disclosures: comparability, the Carbon Disclosure Project and the Greenhouse Gas Protocol, Australian Accounting Business and Finance Journal, Vol 5(4) pp. 5-18

The specific journals emphasise on the fact that corporate carbon disclosure is increasingly becoming a common curriculum that is frequently executed as the deliberate mechanism for both the external and internal decision-making process. The author in this journal also claimed that the generation of data produced is maintained to assist the corporate positioning strategically in relation to opportunities and carbon risks they might face in the near future. Considering the external aspects, it can be noted that carbon disclosures are used in retaining the promise of helping in deciding the capital allocation. On the contrary, Fawcett and Parag (2017) denoted that although organisations are emphasising more on carbon disclosure projects to help society in gaining ecological balance. However, the businesses are seemed to be getting more inclined towards their individual profit margin and attaining their bottom lines (Ben-Amar et al. 2017). The capitals are not extensively used to develop a firm carbon disclosure projects, rather, it had been used till minimal range that can derive goodwill to the brand in the community (Schiemann and Sakhel, 2018). On the divergence, Andrew and Cortese (2011) in the chosen article defined the fact that even though carbon disclosure is presented as equivalent, even essential to economic exposure, deriving from the regulatory and legitimacy mandate, the designing of the data generated is quite less accurate than equivalent fiscal exposures. As it is considered helpful at least for the decisions concerning resource allocation, it required being evaluated alongside the qualitative traits.

Literature Review

Dawkins, C and Fraas, J.W. (2011). Coming Clean: The Impact of Environmental Performance and Visibility on Corporate Climate Change Disclosure. Journal of Business Ethics, 100, pp. 303–322

It has been identified from the concerned journals that the increasing degree of stakeholders’ and institutional pressures are enforcing the global logistics businesses to enhance their carbon disclosure related information in the market. Dawkins and Fraas (2011) in this article had highlighted different carbon exposure strategies and responses depending on both the internal and external pressures. On the other hand, Niehues and Dutzi (2018) determined that the current research is found limited in terms of categorizing the pressures and its impact on corporate carbon disclosure policies. Luo (2017) further pointed out that the literature to date has not been distinguished in this journal between the carbon disclosure policies and the ways it had changed over time. Nevertheless, the journal has been successful in underlining the fact that the degree of useful peripheral carbon management functions can be tallied to the extent to which supervisors provide precedence to contending stakeholders’ statements. It is indicating the notion of stakeholder salience in the context of stakeholder framework. In the environment amend context, the extent of salience relies on top of the degree that stakeholders can seize organizations’ responsible for carbon-concerning performances. Moreover, stakeholder salience remains on the upper side when organizations incorporated an apparent policy with intend of complete revelation, and it is found on the lower side when stakeholder stress is inept without severe propositions for businesses legitimacy.  

Herold, D., (2018). Has carbon disclosure become more transparent in the global logistics industry? An investigation of corporate carbon disclosure strategies between 2010 and 2015. Logistics, 2(3), p.13

Herold (2018) in this journal aims to evaluate the literature on the context of environmental policies and exposures by developing businesses visibility an issue. It also focused on conducting effective interactions with the stakeholders to discuss the environmental performances aimed at influencing the degree of voluntary climatic change exposures. The literature section of the article emphasizes that stakeholders had extended argument on the fact that ecological directive is necessary to impact enhanced ecological functions and majority of the large organizations presently dedicate a substantial amount of time and resources to weather-related change concerns and deliberate ecological exposures. On the other hand, Callery and Perkins (2017) determined that the factor that is often overlooked by the majority of the journals including this one is the voluntary disclosure and the impact of media visibility.  Every year carbon disclosure projects offer CEO’s of MNCs to report their carbon emissions degree and the opportunities and risks imposed on the company as a result of the climatic change. Following legitimacy approach, Herold (2018) has been able to highlight the pros and cons management of companies had to face with their carbon disclosure project reports.

It is evident that organizations are practising carbon disclosure functions; however, they are conducting the effort due to the stakeholders’ and institutional pressures. Hence, the level of efficacy and dedication on the performances are not relatively apparent.  

In the claim of Niehues and Dutzi (2018), the rate of carbon emission is always found high in the automobile sector. Therefore, in future research, the author would consider the automobile sector to continue the research work following a similar context. Both survey and descriptive methodological approach would be followed to determine the carbon disclosure aspect in the automobile sector and efforts taken by businesses to control it. Hence, with both quantitative and qualitative approach, the research would be conducted in the future project.

Conclusion

Based on the discussion and analysis performed in the preceding sections of the paper, it may be construed that the environmental legitimacy theory provides a broader base for the corporate houses to comply with the regulations and directives issued by the rule makers and standard setters in relation to the environmental safety and security. Usage of carbon and consequent emission has been a burning issue in the present business scenario especially in the backdrop of industrialization and globalization (Callery and Perkins, 2017). The carbon disclosure, therefore, becomes the compliance requirement in the corporate reporting. Therefore, it may be stated that carbon disclosure ensures the social responsibility of the business as well as transparency in the corporate reporting framework of the business. Lastly, it may be concluded that a well-designed corporate reporting with special emphasis on carbon disclosure will significantly contribute towards the corporate goal of achievement of sustainability on the long-term in most cost and time efficient manner.   

References:

Andrew, J. and Cortese, C. L. (2011) Carbon disclosures: comparability, the Carbon Disclosure Project and the Greenhouse Gas Protocol, Australian Accounting Business and Finance Journal, Vol 5(4) pp. 5-18.

Ben-Amar, W., Chang, M. and McIlkenny, P., (2017). Board gender diversity and corporate response to sustainability initiatives: Evidence from the carbon disclosure project. Journal of Business Ethics, 142(2), pp.369-383.

Callery, P.J. and Perkins, J., (2017). Unmasking Strategic Disclosure: Evidence from Voluntary Corporate Carbon Disclosures. In Academy of Management Proceedings (Vol. (2017), No. 1, p. 11436). Briarcliff Manor, NY 10510: Academy of Management.

Dawkins, C and Fraas, J.W. (2011). Coming Clean: The Impact of Environmental Performance and Visibility on Corporate Climate Change Disclosure. Journal of Business Ethics, 100, pp. 303–322

Fawcett, T. and Parag, Y., (2017). An introduction to personal carbon trading. In Personal Carbon Trading (pp. 329-338). Routledge.

Herold, D., 2018. Has carbon disclosure become more transparent in the global logistics industry? An investigation of corporate carbon disclosure strategies between 2010 and 2015. Logistics, 2(3), p.13.

Jiang, M., Zhu, B., Wei, Y.M., Chevallier, J. and He, K., (2018). An intertemporal carbon emissions trading system with cap adjustment and path control. Energy policy, 122, pp.152-161.

Luo, L., (2017). The influence of institutional contexts on the relationship between voluntary carbon disclosure and carbon emission performance. Accounting & Finance.

Matthews, H.D., Zickfeld, K., Knutti, R. and Allen, M.R., (2018). Focus on cumulative emissions, global carbon budgets and the implications for climate mitigation targets. Environmental Research Letters, 13(1), p.010201.

Michelon, G., Patten, D.M. and Romi, A.M., (2018). Creating Legitimacy for Sustainability Assurance Practices: Evidence from Sustainability Restatements. European Accounting Review, pp.1-28.

Niehues, N. and Dutzi, A., (2018). Disclosing the invisible: Measurement and disclosure pitfalls of carbon dioxide emissions. In Measuring and Controlling Sustainability (pp. 166-178). Routledge.

Schiemann, F. and Sakhel, A., (2018). Carbon Disclosure, Contextual Factors, and Information Asymmetry: The Case of Physical Risk Reporting. European Accounting Review, pp.1-28.