MODULE NO: MAN00009M_________ _______
MODULE TITLE: Critical Perspecives on Accounting__________
Module Tutor: Caroline Chaffer & Jill Webb_____________
Essay Title: The Benefits of Social and Environmental Reports and The Usefulness to Users_
Word Count: ____2837________
The Benefits of Social and Environmental Reports and The Usefulness to Users
The increasing emphasis on environment result in a growing number of companies voluntary provide social and environmental reports. This paper brief evaluate the benefits of SERs, from users' perspective, usefulnesses of SERs are examined. Adopting concepts from legitimacy, stakeholder, institutional and positive accounting theory, the analysis assesses the motivation and advantages of social and environmental reports.
Key Words: social and environmental reports (SERs), legitimacy theory, stakeholder theory, decision-making
Company's activities not merely impact the economic market, but also produce social and environmental outcomes. The traditional financial reports are considered too narrow as they only disclose information in relation to entity's financial performance. Many organisations in UK started to report their environmental performance since early 1990s (Gray et al,1996). Afterward, the number of environmental reporting increased and the report became more sufficiency in terms of scope and sophistication. Firms, therefore, began preparing comprehensive social and environmental reports differ from the annual financial reports. Although some companies still unaware the importance of the environmental performance disclosures, these practices have become widespread in many industries around the world.
Generally, organisations set sustainability as the primary goal. Companies cannot solely focus on their financial or economic performance. The success and sustainable development of entities also rely heavily on the environmental protection and social expectation. Social and environmental report, therefore, is necessary in order to provide communities with information about companies' environmental performance. The Commission of European Communities (2001,p.6) defined social and environmental reporting as a conceptual framework that organisations voluntary publish environmental impact owing to their operation and interaction with stakeholders.
This essay will attempt to analyse the motivation and evaluate the benefit of social and environmental reports (SERs). The next section demonstrates why managers prepare and what the potential advantages of the report through positive accounting theory, legitimacy theory, stakeholders theory and institutional theory. This section also offers some evidence and examples to support the analysis. From users aspect, the section 3 will try to explore the usefulness of social and environmental reports.
2. Motivations and possible benefits of social and environmental reports
Although there is few accounting standards and legal regulations require companies to disclose environmental impact, most companies aware the importance of SERs. The doubt of if entities should prepare social and environmental reports is moving to why more and more companies produce SERs. Several accounting theories could facilitate to explain why firms commit to SERs.
2.1. Legitimacy theory
Legitimacy theory is one of most adopted theories to analyse social and environmental accounting, this theory derives from the notion of a social contract between the corporations and society (Mathews,1993). It suggests that firms adherence to the bounds, norms, beliefs, and expectations valued by society. They could help companies gain support from outside parties, and hence legitimacy (Scapens, 1994). From this aspect, environmental reporting can be regarded as a particular resource that crucially important to the