The Construction of Social and Environmental

Reporting

Mia Kaspersen Copenhagen Business School

Department of Accounting and Auditing Solbjerg Plads 3, 2000 Frederiksberg, Denmark

mk.acc@cbs.dk

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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