the construction of social and environmental …...the construction of social and environmental...
TRANSCRIPT
The Construction of Social and Environmental
Reporting
Mia Kaspersen Copenhagen Business School
Department of Accounting and Auditing Solbjerg Plads 3, 2000 Frederiksberg, Denmark
2013
Summary
1. Motivation
The overall purpose of this thesis is to examine how and why internal processes,
systems, and structures influence the construction of social and environmental reports.
The three papers that are included in this thesis approach this research objective from
three different but interrelated perspectives. Each of these perspectives is an essential
aspect of reporting practices. By conducting case studies and including organisational
members who participate in social and environmental reporting (SER) processes
(Adams and Whelan, 2009; Farneti and Guthrie, 2009), this thesis strives to contribute
to increased knowledge regarding organisational reporting behaviours and the
construction of SER (Laine, 2009; Parker, 2007; Thomson and Bebbington, 2005;
Adams, 2004; Gray, 2005; Adams and Larrinaga-González, 2007; Tilt, 2006; O'Dwyer,
2005b; Spence and Rinaldi, 2012; O'Dwyer et al., 2011; Tregidga et al., 2012b). Thus,
by attempting to ‘look inside organisations’ and by emphasising the role of the
organisational context, the three articles of this thesis provide insights into details
regarding 1) the reporting environment and audit trail; 2) the role of stakeholder
engagement in SER; and 3) why certain impacts of organisational activities are included
(or excluded) in social and environmental reports. The three papers addressing these
topics have been motivated by an aspiration to establish a more nuanced understanding
of the current state of SER.
SER appears to be becoming more widespread; organisations, governments, and
standard setters are increasingly becoming involved in the development of non-financial
disclosures. This increasing interest is evidenced by a number of developments,
including the growth in the number of organisations that are producing social and
environmental reports (Wensen et al., 2011) and signing up for various voluntary
initiatives, such as the Global Reporting Initiative (GRI) (KPMG, 2011); the on-going
efforts of the GRI to develop G4, its next generation of guidelines (Global Reporting
Initiative, 2012); and the recent increase in governmental interest in the field of SER.
This governmental interest has been exhibited in a number of contexts. At the national
level, several European countries have adopted regulations with respect to reporting
activities; moreover, at the EU level, a legislative proposal regarding SER is in
preparation (The European Commission, 2011).
In the previously published SER research, it has been emphasised that external reporting
regarding social and environmental impacts is associated with shortcomings and
weaknesses (e.g. Adams, 2004; Gray, 2005; Fonseca et al., 2013) and that intended
users of social and environmental reports frequently obtain incomplete and unbalanced
views of organisational activities from these reports (Cerin, 2002; Adams, 2004; Owen,
2008). Studies have suggested that SER is incomplete and deficient because of its
omission of information with negative implications and that social and environmental
reports are individual, unbalanced, and lacking in consistency across years (Adams et
al., 2004; Cho et al., 2010; Belal and Cooper, 2011). This incompleteness can take the
form of “the inclusion of incorrectly estimated data, interrupted time series, or
superfluous descriptions of calculation methods” (Dragomir, 2012:236). In the SER
literature it has been suggested that SER is deficient to an extent that would be
unacceptable in traditional financial reporting and that this incompleteness renders it
impossible to evaluate organisational performance with respect to social and
environmental concerns (Gray, 2005; Adams, 2004; Dragomir, 2012). According to
Gray (2005), SER “is universally partial and based on relatively unimportant material or
material which conveys good news about the organization” (p. 8) (see also Cho et al.,
2012). Gray also notes that nearly the only sources that provide perspectives regarding
the consequences of organisations’ economic activities are organisations themselves and
that these perspectives are exceptionally selective (Gray, 2005). Given these conditions,
it is possible for an organisation to strengthen its organisational image (Owen et al.,
2000; Cooper and Owen, 2007; Cho and Robert, 2010; Cho et al., 2009) by directing
public attention towards areas of organisational performance that feature positive
impressions (Cerin, 2002) and avoiding addressing areas of the SER agenda that “hurt”
(Gray, 2001).
The main concern with SER may not be a lack of adequate information but rather the
fact that because social and environmental reports are similar in appearance to financial
reports1, SER achieves a ‘financial status’ that implies that the reported information in
social and environmental reports is as reliable and correct as the information that is
found in financial reports. If this impression is valid, then it should be possible to
evaluate SER against the principles that are applied in financial reporting. If this
evaluation is not possible, then there is a risk that SER legitimises unsustainable
behaviour and presents a misleading image of organisational activities (Adams, 2004).
This concern provides a reason why accounting research should play a central role
within the social and environmental agenda and why researchers in the field of
accounting must join researchers from other disciplines in contributing to research on
SER.
There may be several reasons for the identified problems and challenges that relate to
the quality of SER. These shortcomings can partially be explained by the voluntary and
flexible nature of SER (Archel et al., 2008) and by a lack of stakeholder engagement
(Adams, 2004; Owen et al., 2001; Cooper and Owen, 2007; Greenwood and Kamoche,
2012). SER that refrains from engaging stakeholders is likely to be operationalised from
an organisational rather than a stakeholder-centred perspective, an issue that eventually
affects an organisation’s discharge of accountability (Cooper and Owen, 2007; Belal,
2002; Skouloudis et al., 2010; Manetti, 2011). This lack of stakeholder engagement is
particularly problematic given the voluntary and flexible approach to SER. In traditional
financial accounting, the reporting organisation faces extensive legal requirements that
govern the content and preparation of financial reports and thereby ensure the value and
reliability of the reported information. Compared with the constraints that are placed on
financial reports, organisations experience far fewer restrictions regarding the content
and preparation of non-financial reports, suggesting that in principle, organisations may
be able to construct these reports in accordance with their own agendas (Archel et al.,
2008). Because of the diversity and range of possible topics in SER, organisations have
tremendous discretion in deciding which topics to address in their SER activities;
1 Similarly to financial statements, social and environmental reports feature sections that are devoted to
management commentary, key performance indicators, accounting policies, and auditor reports. Most social and environmental reports claim to be based on generally accepted accounting polices within SER and refer to the guidelines from the Global Reporting Initiative (GRI, 2011a) as a type of “sustainability GAAP”.
equally importantly, they can choose which areas they will avoid including in their
disclosures (Gray and Milne, 2004; Moneva et al., 2006; Fonseca et al., 2013).
Depending on whether the management of an organisation uses SER in an instrumental
manner, there may be two explanations for why social and environmental reports could
be incomplete and unbalanced. First, an organisation’s management could have
deliberately chosen to present the organisation in a certain (positive) way in these
reports. In this situation, the SER process is subjected to managerial capture and is used
to manage stakeholders rather than to engage in the discharge of accountability to these
stakeholders. Certain SER researchers tend to suspect that this type of managerial
capture occurs (e.g. Archel et al., 2011; O'Dwyer, 2003; Owen et al., 2000; Owen et al.,
2001; Belal and Owen, 2007). However, the quality of the information in social and
environmental reports may also be explained by the internal context of the reporting
process for an organisation; in particular, systems, structures, and processes may exist
that are insufficient to support SER and the generation of data for internal and external
purposes. In this case, SER issues would not necessarily reflect deliberate report
manipulation by an organisation’s management. This thesis aims to examine the
underlying environment of SER and the ways in which this environment may support
SER.
2. Prior literature
Despite calls for more research to provide insights into the underlying elements that
inform SER (e.g. Adams, 2002; Adams and McNicholas, 2007; Thomson and
Bebbington, 2005; Adams, 2004; Gray, 2005; Adams and Larrinaga-González, 2007;
Tilt, 2006; Laine, 2009; O'Dwyer, 2005b; Spence and Rinaldi, 2012; Adams and Frost,
2008; Gray, 2006; Gray, 2002; Owen, 2008; Parker, 2011a; Parker, 2011b; Tregidga et
al., 2012a), examinations of the role of the internal contexts from which external reports
are derived have received limited attention in the extant literature, although interest in
this topic appears to be growing. Analyses of SER have often been based on social and
environmental reports but have not engaged organisational members (Adams and
Whelan, 2009; Farneti and Guthrie, 2009; Parker, 2007; Parker, 2011a). This tendency
to focus on disclosed information rather than on elements that might produce change
with respect to the underlying systems upon which the external reporting process is
based (Mathews, 1997) causes certain areas of SER to remain somewhat unexplored.
A continued focus on reports alone is unlikely to advance SER; thus studies that extend
beyond the analysis of social and environmental disclosures are needed. Adams and
McNicholas (2007) argue that corporate characteristics and general contextual factors
are emphasised in the extant literature, whereas internal contextual factors, such as
processes of reporting and considerations that influence decision-making, are often
omitted from the research agenda. By primarily focusing on the external elements of
SER, researchers have made assumptions regarding the processes underlying social and
environmental reports, data collection, and the context within which the entirety of SER
transpires (Adams and Frost, 2008). Therefore, to improve SER, internal contextual
factors must be included in the research agenda to a greater extent than these factors
have previously been examined. An understanding of the fundamental aspects of the
generation of SER data might facilitate the creation of a wider and more insightful
foundation upon which research into SER could occur. Thomson and Bebbington
(2005) specifically call for more research to address “the specific organizational
mechanisms which underlie report preparation and publication” (p. 529) (see also Laine,
2009; Owen, 2008; Parker, 2011a). From a review of the literature, at least three areas
of study have been identified as central aspects of this type of research. Each paper of
this thesis addresses one of these research gaps, which are briefly described below.
Internal systems and processes for data preparation
The first area of study relates to analyses of internal systems and processes for data
preparation. At least two different approaches to this topic can be identified in the SER
literature. In one group of studies, the development of key performance indicators is
examined (Adams and Frost, 2008; Searcy et al., 2005; Keeble et al., 2003; Durden,
2008; Palme and Tillman, 2008; Clarke-Sather et al., 2011; Delai and Takahashi, 2011;
Searcy, 2012). These studies focus on the identification and assessment of the internal
use of social and environmental indicators. The focus of the second branch of studies is
the development or assessment of frameworks that are intended to guide the integration
of social and environmental issues with management systems (Bonacchi and Rinaldi,
2007; Cresti, 2009; Burritt et al., 2011; Gond et al., 2012) or the development of full-
cost accounting tools (Bebbington et al., 2007; Frame and Cavanagh, 2009; Lim, 2011;
Fraser, 2013).
However, these studies do not examine the underlying mechanisms of reports that might
impact data quality and indicators. Adams and Frost (2008) argue “that the development
of integrated sustainability reporting and management is not a “green field”, it is
influenced and constrained by existing processes, indeed for a number of case
organizations development is contained within existing processes” (p. 300). In
accordance with this perspective, examinations of SER should include considerations of
the organisational context. Such considerations would contribute to an understanding of
how “design processes”, “design choices”, and “the adaption of systems to the
organizational circumstances” (Hopwood, 1978:10; see also Burchell et al., 1980;
Hopwood, 1983) influence report preparation and publication. The first article of the
thesis responds to this requirement by examining how and why systems and processes
for data preparation support external social and environmental reporting.
Stakeholder engagement
The second area of study that has been identified in the literature relates to stakeholder
engagement processes during the course of SER. Analyses of stakeholder engagement
have been based on social and environmental reports (Cooper and Owen, 2007; Belal,
2002; Adams, 2004; Skouloudis et al., 2010; Manetti, 2011) and on interview data
(Adams, 2002; Owen et al., 2000; Owen et al., 2001; O'Dwyer, 2005b; Dey, 2007;
Greenwood and Kamoche, 2012; Belal and Owen, 2007). All of these studies have
found little or no evidence that stakeholders are engaged in SER processes. Instead,
these studies suggest that SER is being appropriated and controlled by management.
This approach to SER is often referred to as managerial capture and stakeholder
management (Archel et al., 2011; O'Dwyer, 2003; Owen et al., 2001; Owen et al., 2000;
Belal and Owen, 2007).
However, at least from an academic viewpoint, SER is concerned with the “duty to
provide an account of the actions for which one is held accountable” (Gray et al.,
1997:334) to a larger audience than shareholders. According to this perspective,
stakeholder engagement is essential for the production of social and environmental
reports (O'Dwyer, 2005a; Thomson and Bebbington, 2005; Gray et al., 1997;
Accountability, 2011; Global Reporting Initiative, 2011a); thus, the current approach
that has been adopted by organisations causes SER to remain somewhat flawed. Adams
(2004) notes that to improve accountability to stakeholders, a greater focus on the
processes of SER is required. Similarly, O’Dwyer (2005b) emphasises the lack of
existing research that focuses on determining the level of stakeholder involvement in
social accounting processes and the roles that stakeholders might play within these
processes. Thus, to obtain “a more qualitative understanding of what reports are actually
saying” (Thomson and Bebbington, 2005:529), studies should examine “stakeholder
engagement and the nature of the narratives which emerge from this interaction”
(Thomson and Bebbington, 2005:529). This thesis responds to these calls and extends
prior research by not only examining how SER has arisen but also why SER has
developed into the form that has consistently been argued by prior literature. Based on
this reasoning, the second article of the thesis examines the role of stakeholder
engagement in the construction of SER.
Boundary setting
Boundary setting in SER is the third and final area that is identified and addressed by
this thesis. Given the central role of boundary setting in ensuring that social and
environmental reports achieve completeness and disseminate a balanced view of
organisational activities, surprisingly few studies have examined this topic. However,
two studies have been conducted to address boundary setting in SER. These two papers
utilise content analyses to examine boundaries in SER and determine that boundary
setting in SER mimics boundary setting in financial accounting; thus boundaries are
strategically set as the legal structures of the reporting organisation are used to define
the accounting entity and the disclosure levels on indirect impacts originating from
outside the (narrowly) defined accounting entity are low (Archel et al., 2008; Pesci and
Andrei, 2011). This result implies that organisations might not fully discharge their
accountability through SER. Thus, it has often been suggested that SER is used to
strategically avoid accountability to stakeholders (O'Donovan, 2002; Ingram and
Frazier, 1980) and that boundary setting is used as a tool in this process (Archel et al.,
2008; Moneva et al., 2006).
However, because boundary decision-making processes are relatively under-researched,
little is known with respect to “the micro details of boundary work” (Santos and
Eisenhardt, 2009:644). Thus, to comprehend the possible complexities of reporting, an
understanding must be obtained regarding “when an organization will (not) report, why
it will (not) continue to report and why it does (not) report certain information” (Gray,
2005:16). Utilising these calls for investigation and the importance of boundary setting
in external disclosures as a point of departure, the purpose of the third paper in this
thesis is to gain a more comprehensive insight into the mechanisms underlying the
decisions that define accounting entities and the scopes of impacts in reporting contexts,
thereby helping to answer the questions of how and why limitations for organisational
accountability are established (Archel et al., 2008). In other words, this study seeks to
provide insight not only regarding how boundaries are determined but also why
boundaries are drawn in particular ways. Therefore, to achieve the research objective of
investigating the role of boundary setting in the construction of SER, the third paper in
this thesis examines why certain aspects of the social and environmental agenda are
either included in or excluded from reports.
3. The articles and their contributions
The articles of this thesis investigate the underlying context of SER and provide distinct
contributions to the overall research objective. By examining different aspects of the
production of social and environmental reports, these three papers reveal how and why
the internal reporting context represents an important source of influence on SER
processes and plays a significant role in the appearance of social and environmental
reports. These findings stress the importance of field research for enhancing the
understanding and development of SER.
From the research in this thesis, it is evident that a perceived need to align SER with
financial accounting/reporting exists. This perceived need is clearly revealed through
examinations of SER that address the reporting context in the form of systems,
structures, and processes; the role of stakeholder engagement; and boundary-setting
decisions. Two major considerations appear to underpin this aspiration. First, it appears
to be widely believed that attempts to mimick financial reporting and financial reporting
processes in SER activities will contribute to the maintenance and improvement of data
quality. Second, organisational members appear to adapt an (unquestioned) economic
and inward-looking approach to SER that mirrors the dominant organisational
discourse; this approach eventually leads to the conceptualisation and operationalisation
of SER from a traditional business perspective. The studies of this thesis suggest that
this approach to SER is necessary for legitimising CSR and the role of CSR
departments within organisations. This reasoning implies that CSR departments must
balance the internal legitimisation of their own raison d’être and the legitimisation of
their organisation with its environmental surroundings. As the articles of this thesis
reveal, this dual role for CSR departments and SER is not always a straightforward
issue and may produce certain reporting-related consequences.
Article 1: Reforming the social and environmental reporting environment in the
financial reporting way
In the first article of this thesis, the internal processes, systems, and structures that
underlie the external reporting of social and environmental indicators are examined.
Using a case study of a large multinational group as a focal point, this paper addresses
efforts to improve SER systems and processes. These efforts are viewed as a
programme that attempts to make SER auditable. Case study findings are framed with
theorizations on auditability and governmentality. The analysis of this investigation
reveals that traditional work habits, an embedded engineering culture, and eventual
confusion regarding the use of the acquired system as the cornerstone of the
aforementioned programme hindered the ease with which an auditable reporting
environment could be created.
The findings contribute to the understanding of systems and processes that are intended
to support the preparation of social and environmental reports; moreover, the results of
this study also expose a number of challenges to the establishment of an infrastructure
for social and environmental data. In general, we suggest that the perceived need to
align social and environmental reporting with financial reporting is likely to be an
aspect of a strategy to develop support for this type of reporting. By aligning SER with
financial reporting, SER activities would be regarded as legitimate, serious, and
resistant to external criticism from assurance providers. However, a number of problems
arising from this alignment are identified, including issues that are related to internal
controls, the process of closing the books, and the adoption of consolidation rules from
financial accounting. Furthermore, certain practical challenges that must be overcome
are outlined in this study, including a) the need for reporting structures to adhere to
group-based lines of responsibility and b) the discovery of methods of addressing
external demands for information at both the group and subgroup (local) levels.
The article provides several contributions to the extant literature. First, this paper
responds to calls for in-depth examinations of the internal reporting environment (e.g.
Adams and Frost, 2008; Thomson and Bebbington, 2005). Through these examinations,
it is demonstrated that SER is a product of for example the ambitions, conflicts, and the
technical possibilities for recognising, recording and reporting data that emerge from
internal systems and processes.
Second, this paper contributes to the SER literature by providing a study that
demonstrates the significance and effects of integrated reporting developments and the
ways in which these developments are manifested at the micro level. This contribution
is particularly relevant given the recent interest in the integration of financial and non-
financial reporting in annual reports (Eccles and Krzus, 2010).
Third, this paper presents an investigation of how and why auditability, which may be
perceived as a certain mode of thought with respect to government, is implicated in the
systems and processes that underlie SER. This investigation provides empirical
evidence regarding how and why ‘the idea of audit’ expands into new domains
(Pentland, 2000; Free et al., 2009; Power, 1997; Hopwood, 2009). In this paper, prior
work regarding SER assurance is extended by revelations regarding how auditability is
implicated in the efforts of auditees towards adopting the values that are associated with
auditability and the solutions that an auditee adopts in response to problematizations of
auditability.
Fourth, the case study suggests that auditors are not always the only ‘change agents’
that exist and that it is not necessarily auditors that drive the SER agenda. Certain
assumptions are embedded in the accounting knowledge base with respect to how
phenomena are recognised, recorded, and reported in a manner that enables subsequent
verification. Thus, this case study offers insights into how an auditee causes these
assumptions to become operable and documents the fact that this process produces
ramifications that extend beyond merely symbolic effects.
Article 2: The (non-)role of stakeholder engagement in the construction of social and
environmental reporting
The second article examines organisational members’ views of and approaches to SER
and stakeholder engagement. This paper uses interview data and social and
environmental reports from 23 Danish organisations to expose the rationales and
tensions that are implicated in engagement. Utilising educational theory as a lens, the
discrepancies between an accountability discourse and the managerial discourse that
appears to guide current SER practice are analysed. In this analysis, the term ‘the hidden
curriculum’, which is derived from educational theory, is emphasised to highlight the
taken-for-granted nature of the current approach to SER. This approach involves
economic and risk-based rationales and appears to produce decisive effects on
stakeholder engagement. Thus, instead of considering the managerial approach to SER
to be an attempt to capture the agenda, the identified approach to SER among
interviewees is viewed as a pervasive discourse that maintains the status quo. This
reasoning allows this article to bring nuances to the debate of managerial capture and
stakeholder management as deliberate acts of control.
The findings of this study suggest that managers unknowingly and uncritically adopt a
taken-for-granted approach to SER that is influenced by an economic and inward-
looking mindset. SER is thus approached from a business-centred viewpoint rather than
from an accountability perspective. This discourse hinders the ability of stakeholder
engagement to play a central role in the construction of SER and thereby reinforcing the
status quo. This conclusion has implications for how SER is conceptualised and
operationalised; notably, meanings are attributed to SER in the corporate world that
differ greatly from the factors that are considered to be essential to SER in other
contexts, such as academia. By providing for a better understanding of the construction
of social and environmental reports, this paper contributes to the extant literature. This
contribution is two-fold. First, an emphasis on the role of the hidden curriculum of SER
enables the taken-for-granted approach to SER that has been identified among case
organisations to be captured and explained. Second, from this taken-for-granted
approach, new insights into stakeholder engagement in SER processes are derived.
The paper suggests that materiality, as a consequence of the aforementioned taken-for-
granted approach, is determined from a business-centred viewpoint rather than from a
stakeholder perspective; consequently, stakeholders are redundant to the process of
defining report content. As a result, the meaning and values attributed to SER that have
crystallised within the corporate world have caused financial stakeholders to be the
main recipients of social and environmental reports. This adopted approach to and
perception of SER raises questions regarding whether SER in its current form can
incorporate values related to stakeholder accountability and thereby permit
organisations to fully discharge their accountability. If SER is perceived as an extension
of or an addition to financial reporting, it is doubtful whether social and environmental
reports can be detached from the prevailing economic discourse and evolve to become
more than merely imitations of financial reports. Instead, it appears that compliance
with the basic principles of SER in the form of stakeholder inclusiveness (Global
Reporting Initiative, 2011b) is prevented if SER is guided by an economic and inward-
looking mindset. Thus, the current setting and construction of the SER process appears
to discourage stakeholder engagement.
Article 3: The role of boundary setting and boundary maintenance in the
construction of social and environmental reporting
The third article examines the role of boundary setting in the construction of SER. The
purpose of this article is to obtain more comprehensive insights into the reporting
environment that underlies and shapes decision-making processes that govern the
establishment of accounting entities and scopes of the impacts of reporting
organisations to account for. This investigation draws a distinction between
organisational boundaries, which concern the determination of subunits being
recognised as a part of the reporting entity, and operational boundaries, which concern
the determination of impacts from organisational activities that are to be included or
excluded from social and environmental reports. This study is based on interviews and
analyses of social and environmental reports in 23 Danish organisations. Specific
attention is paid towards disclosure decisions and the ways in which these decisions are
guided by internal and external stimuli. By providing insights into the conditions
underlying SER and boundary setting, this paper advances the existing literature. These
insights are required for further theoretical developments and for the development of
guidelines and standards. The paper provides three contributions with respect to the
aforementioned concerns.
First, the paper identifies internal and external stimuli in the reporting environment that
guide boundary setting in SER. Internal stimuli are revealed to be highly influential in
decision-making processes. The following two elements that originate from the internal
context of SER are particularly notable: a) a focus on or requirements for high data
quality and b) the possession of an economic and inward-looking mindset by
organisational members. From the analysis of this study, it is evident that both of the
aforementioned elements may be regarded as counterproductive factors that hinder an
organisation’s discharge of accountability to society as a whole.
Second, this paper suggests that in discussions of SER, the varying roles that
organisational and operational boundaries fulfil must be considered. These boundaries
not only affect different aspects of organisational accountability but also are managed
and maintained in distinct ways. Thus, distinctions between these two types of
boundaries should be taken into account if SER is analysed or if investigations attempt
to achieve a broader understanding of the patterns of SER. The different roles of
organisational and operational boundaries have implications for standard setters, such as
the GRI. To better reflect the process of setting boundaries, guidelines should
distinguish between organisational and operational boundaries in their
recommendations regarding report content.
Third, the paper suggests that organisational and operational boundaries serve different
legitimising purposes that eventually yield different implications for the construction of
SER. Because of this two-fold purpose of boundary setting, prior assumptions that SER
is used as a tool to legitimise organisational activities might involve levels of
complexity that are not immediately apparent. Thus, this distinction between types of
boundaries and the legitimising purposes of diverse boundaries might be particularly
relevant for future work that addresses the changing patterns of SER.
4. Methodological standpoint
Chua (1986; see also Ahrens, 2008) suggests that accounting research can be
approached from the three broad perspectives of mainstream, interpretive and critical
accounting. This thesis adheres to the interpretive perspective of accounting. This
approach embraces field research (Parker, 2008). In particular, by allowing for the
consideration of the perceptions of and explanations from participants in the field
(Hopper and Powell, 1985), this approach provides insights into the workings and
outcomes of accounting (Tomkins and Groves, 1983). Thus, this approach strives to
examine social realities and how “they are socially constructed and negotiated”; insights
are sought through “the frame of reference of those being studied” and these
individuals’ “perceptions of ‘reality’” (Hopper and Powell, 1985:446). From this
reasoning, it follows that the achievement of understanding rather than the issuing of
generalisations has been central to this thesis (Chua, 1986). By examining the processes
and roles of SER in practical contexts, the interpretive approach provides the potential
to extend the available understanding of SER (Chua, 1986; Hopper and Powell, 1985).
These contributions to knowledge become more evident from the following discussions
of the ontological and epistemological assumptions of this perspective and the
methodology underlying this approach.
The underpinning logic of a methodology can be expressed in terms of the researcher’s
ontological and epistemological position. The ontological position refers to the way in
which the social world (Mason, 2002) and the phenomenon to be studied (Chua, 1986)
are understood. Ontological positions may be represented by a continuum; an objectivist
stance lies at one end of this continuum, whereas a subjectivist approach is found at the
other end of this continuum (Morgan and Smircich, 1980). The objective approach
assumes that “reality pre-exists” accounting (Hines, 1989:56) and that the “empirical
reality is objective and external to the subject” (Chua, 1986:611). By contrast, in the
subjectivist stance, “accounting is seen as socially constructed, and [is] not independent
of the organizational, social and political actors” (Humphrey and Scapens, 1996:94).
Epistemology refers to the way in which knowledge is understood (Mason, 2002) and
obtained (Ryan et al., 2002) and follows closely from adopted ontological assumptions
(Tomkins and Groves, 1983; Chua, 1986). The epistemological assumptions guide
knowledge creation and explanations of an examined phenomenon (Mason, 2002).
Epistemology can also be illustrated in terms of the two opposite ends of a continuum.
The assumption that knowledge is acquired through a hypothetico-deductive (Chua,
1986) or positivistic approach (Tomkins and Groves, 1983) is found at one end of this
continuum. These epistemological assumptions are related to the objectivist ontological
position. These assumptions imply that the generation of knowledge begins through the
testing of hypotheses with the goal of achieving generalisability (Tomkins and Groves,
1983). At the other end of the epistemological continuum, knowledge is gained through
closer interactions with the phenomenon under study, which allow for insights into the
‘black box’; this perspective is related to the subjectivist ontological stance (Morgan
and Smircich, 1980).
The ontological and epistemological assumptions that underpins an investigation
influence the methodological approach of a study (Hopper and Powell, 1985). It is clear
that the different approaches discussed above are associated with values and beliefs
regarding both knowledge and the social world (Hopper and Powell, 1985). In
particular, a positivist epistemological stance and the ontological assumptions
underlying the objectivist approach call for the use of methods from the natural sciences
(Morgan and Smircich, 1980) that are adequate for “locat[ing], explain[ing] and
predict[ing] social regularities and patterns” (Hopper and Powell, 1985:431). In these
situations, a quantitative methodological approach is appropriate. However, from a
subjectivist approach and this approach’s associated epistemological stance,
investigations from within are regarded as necessary for analysing and understanding
accounting either in its context (Hopwood, 1983) or in action (Chua, 1986); thus,
methods from natural science are inadequate (Morgan and Smircich, 1980; Hopper and
Powell, 1985), and the quantitative “methodological toolkit” must be utilised (Parker,
2007).
Methodologies may be roughly and simply categorised as either qualitative or
quantitative (Morgan and Smircich, 1980). The suitability of either approach follows
from the phenomenon that is under study (Morgan and Smircich, 1980); in other words,
the appropriateness of an approach is dependent on “the aims of the research and the
values and assumptions that lie behind it” (Hopper and Powell, 1985:446). Given the
overall research objective of this thesis and the individual research questions of the
three articles included in the thesis, which strive to examine and investigate social and
environmental accounting/reporting in its context (Hopwood, 1983; Hopwood, 1985;
Hopwood, 1987; Burchell et al., 1980), a qualitative research methodology has been
adopted. This methodology was selected because the underpinning logic of this
approach (Mason, 2002) is well suited for “penetration and unpacking from the inside”
(Parker, 2012:56). This methodological perspective offers the possibility of extending
beyond research that Hines (1989) has labelled the studying of ‘what is’ to embrace an
examination of the “processes whereby ‘what is’ comes to be” (p. 57). In particular, a
qualitative approach allows the researcher to enter the ‘black box’ (Parker, 2007;
Parker, 2008) of SER and to provide insights into the context in which SER is
conceptualised and operationalised from an micro-organisational perspective (Parker,
2012; Morgan, 1988; Vaivio, 2008).
5. Research context, method, and design
The national context
Danish organisations have a history of experimenting with different forms of non-
financial reporting including intellectual capital statements, ethical accounting
statements, sustainability reports, and CSR reports (Johansen, 2005).
In 2008, the government announced an action plan for corporate social responsibility
and an amendment to the Danish Financial Statements Act (The Danish Government,
2008). In accordance with this plan, beginning in January 2009, the largest Danish
companies, listed firms, and state-owned organisations (roughly 1,100 organisations in
total) were required to report on their CSR initiatives on a comply-or-explain basis. This
report is required to include information regarding the following topics: a) policies
concerning organisational social responsibilities; b) the ways in which these policies
have been translated into action; and c) an evaluation of the achievements that have
arisen from these policies. A lack of these policies in an organisation must also be
reported (The Danish Government, 2008). This information is required as an aspect of
an organisation’s management review; alternatively, a reference to a method of
accessing this information must be stated in this management review. In the latter
situation, CSR information can be presented in stand-alone reports, such as COP, CSR,
and sustainability reports, or on organisations’ websites (Wensen et al., 2011).
However, organisations are encouraged to pledge themselves to reporting in accordance
with the criteria found in one the following three sources: the UN Global Compact, the
Global Reporting Initiative or the OECD Guidelines. Thus, such standards can be
regarded as supporting organisations in operationalising and complying with the
relatively loose guidance provided by legislators (Searcy, 2012).
Studies (The Danish Commerce and Companies Agency et al., 2010; 2011) have
indicated that Danish organisations have increased the amount of information from the
first reporting wave to the second reporting wave. However, these studies do not
examine the quality of the reported information; thus, there is a risk that although the
quantity of CSR information provided by Danish organisations has increased recently,
the quality and usefulness of this information may not necessarily have improved
accordingly. For instance, there has been a significant recent increase among Danish
organisations in the use of COP reports, but many of these reports often include little
more than statements regarding an organisation’s visions and missions.
In 2012, another action plan for CSR was introduced (The Danish Government, 2012).
This plan led to the second amendment to the Danish Financial Statements Act in
which, beginning January 2013, the organisations mentioned above are obliged to
provide an additional account of their policies on human rights and on the reduction of
climate impact. Thus, in Denmark, there appears to be a continued governmental focus
on the establishment of a reporting culture and on increasing the transparency of
organisational activities.
Research method and design
The choice and appropriateness of a research method depends on not only the
ontological and epistemological assumptions that are held by a researcher (Morgan and
Smircich, 1980; Mason, 2002) but also the research question (Mason, 2002). Thus, a
research method should be a natural outgrowth from the underlying values and beliefs
regarding both knowledge and the social world. The qualitative methodology that has
been adopted for this thesis does not prescribe specific methods; instead, this
methodology draws on a variety of methods (Denzin and Lincoln, 2005) that share the
capability of “doing justice to the diversity of everyday life” (Flick, 2006:15). A
researcher’s choice of methods is eventually implemented based on the suitability of
these methods for answering the research question of interest; this choice must be
guided by the methodological strategy that is adopted for an investigation (Mason,
2002). Given that the objective of the thesis was to engage in an examination of how the
SER environment is experienced in an organisational context, the main source of data
for this thesis was interviews; this method allows for examinations from ‘within’.
However, in addition to interviews, the data collection process for this thesis included
informal conversations, internal and publicly available documents and reports. These
data sources served several purposes, including tying interviews to specific contexts and
comparing, substantiating, or questioning interview data with the objective of providing
richer communications for the presented studies (McKinnon, 1988; Vaivio, 2008).
Semi-structured interviews were utilised for this thesis because this type of interviewing
allows for a degree of standardisation but provides room for flexibility and for the
development of unpredicted themes (Scapens, 2004; Ryan et al., 2002; Mason, 2002).
This approach to data gathering offers an opportunity to focus on “the relevant
specifics” (p. 64) in interviews and contexts to achieve “situated knowledge with all
[…] interviewees” (p. 65) (Mason, 2002); moreover, this approach fits well with the
ontological and epistemological assumptions underlying the individual articles of this
thesis and the thesis as a whole.
According to Vaivio (2008), two aspects are central to the design of qualitative
research. The first aspect relates to the question of depth versus breadth; in other words,
this aspect refers to whether a study should be focused on a single case or should
instead pursue a study of a phenomenon across various cases. The output from these
two different approaches may vary. A single case study offers the possibility of a
detailed context and rich explanations, whereas a multiple case study provides the
opportunity to explore a phenomenon across organisations and thereby examine this
phenomenon in different environments (Vaivio, 2008). The approach that is selected
must be closely linked to the ‘intellectual puzzle’ or objective of the study of interest
(Mason, 2002). In accordance with this reasoning, although the studies included in the
thesis draw upon the same methods, these studies have adopted different research
designs.
The first article of this thesis involves an intrinsic single case study (Stake, 2005) that
allowed for in-depth analyses (Vaivio, 2008; Scapens, 2004). The specific case
organisation was selected because this organisation provided the unique opportunity to
obtain insights into not only processes that unfolded following the implementation of an
information system for non-financial data but also efforts that transpired to improve
data flows and ensure an auditable reporting environment (Siggelkow, 2007). Over a
period of time, I interacted with staff at the case company through face-to-face
interactions, lunches and emails. These interactions provided depth to the study and
information that supplemented the semi-structured interviews and the documents that
were reviewed.
In the remaining papers, broader research designs were adopted. These studies are
instrumental in their approach and include 23 organisations (Stake, 2005). Compared
with the single case study design, the research designs of these two studies are less
detailed but offer the opportunity for cross-case analyses (Vaivio, 2008; Scapens, 2004).
Therefore, in a sense, the case organisations themselves are of secondary interest
because the focus of these investigations has largely been placed on examinations of the
phenomena of interest (Stake, 2005). In particular, “the choice of case [organisations] is
made to advance understanding of that other interest” (Stake, 2005:445) and “because it
is believed that understanding them will lead to better understanding, and perhaps better
theorizing, about a still larger collection of cases” (Stake, 2005:446).
According to Vaivio (2008), the second key aspect of designing qualitative studies
involves the role of theory and the extent to which qualitative studies should be
informed by theory (see also e.g. Ahrens and Chapman, 2006; Ahrens and Dent, 1998).
The use of theory can range from a high level of prior theorisation to a low level of prior
theorisation; each specific approach is closely linked with the ontological and
epistemological assumptions of the researcher and accompanied by certain limitations
(Laughlin, 1995). An overly heavy reliance on theory and on pre-specified constructs
might result in the neglect of insights that do not match the lens of the theory that has
been adopted (Vaivio, 2008; Humphrey and Scapens, 1996) and the risk that a study
will be “little more than an additional incremental study in the great general theoretical
design” (Laughlin, 1995:66). By contrast, in the opposite approach, prior theoretical
understandings are considered to be inappropriate; as a result, empirical detail “becomes
important in its own right” (Laughlin, 1995:67). However, Laughlin (1995) proposes
the adoption of a middle-range approach in which the level of theorisation is placed
between the opposite extremes of high and low theoretical reliance. This intermediate
approach possesses the strengths of the two extreme approaches but avoids the
weaknesses of these extreme approaches (Laughlin, 1995). This intermediate approach
involves the “use of “skeletal” theories, which cannot stand on their own but need
empirical “flesh” to make them meaningful and complete” (Laughlin, 1995:83).
However, Dey (2002) suggests that Laughlin (1995) advocates “the full adoption of
skeletal theory before immersion into the empirical domain” (Dey, 2002:113). Jönsson
and Macintosh (1997) argue that theory should not direct data collection but should be
applied in later phases of investigations, allowing study data to not only be informed by
theory but also to inform theory (Dey, 2002). In accordance with this argument,
although not claiming to have initiated the studies of this thesis free from previous
theory (Vaivio, 2008; Siggelkow, 2007), the level of prior theorisation in the initial
phases of these studies was low. Thus, in the first field encounters of the individual
studies of this thesis, emphasis was placed on emerging insights or “stories”. Instead of
relying on a pre-set theory, interview themes were largely informed by analytical
categories (Miles and Huberman, 1994) that were derived from discussions in the extant
literature (and were therefore not entirely ‘theory-free’) and knowledge regarding the
specific cases that were examined. As the insights and stories of these studies unfolded,
the need to filter the quantities of acquired data became more crucial, and therefore an
increasingly exigent requirement for “skeletal” theories arose. Thus, the approach that
was adopted throughout the studies of this thesis emphasised moving from data to
theory rather than from theory to data (Ahrens and Dent, 1998). This approach allows
for the appropriate balancing of “detail and richness while at the same time retaining the
analysis and explanation offered by theoretical informed views of accounting’s role in
organizations” (Dey, 2002).
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