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In Pursuit of a ‘Single Source of Truth’: from Threatened Legitimacy to Integrated Reporting

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Abstract

This paper explores one organisation’s journey into non-financial reporting, initially motivated by a crisis in public confidence that threatened the organisation’s legitimacy to the present with the organisation embracing integrated reporting. The organisation’s journey is framed through a legitimation lens and is illustrated by aligning internal reflections with external outputs guided by predominant paradigms of good practice, such as the GRI guidelines and more recently integrated reporting 〈IR〉. We find that the organisation’s relationship with external guidelines has evolved from pragmatic adoption as a means of seeking external legitimation to the present position where those that prepare external reports are informed by the organisation’s strategic positioning and not constrained by the promulgation of voluntary guidelines. From the case study, we suggest that the International Integrated Reporting Council (IIRC) may face two hurdles: First, organisations may define social norms based on a broader definition of stakeholders than the definition currently published by the IIRC. The second hurdle is to convince report preparers that adopting integrated reporting 〈IR〉 will positively impact on capital flows.

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Notes

  1. In this paper we distinguish between ZETA’s implementation of integrated reporting IR and the guidelines developed by IIRC 〈IR〉.

  2. Suchman (1995, p. 577) further identifies three broad types of legitimacy: pragmatic, moral and cognitive legitimacy. Suchman delineates the types of legitimacy as such: “pragmatic legitimacy rests on audience self-interest, whereas moral and cognitive legitimacy do not” (p. 584); “both pragmatic and moral legitimacy rest on discursive evaluation, whereas cognitive legitimacy does not” (p. 585). Within this paper we focus upon the structures and practices adopted as part of the process to report non-financial information. We have chosen to incorporate only report content that relates to process of report development or structure. Within the context of the use of non-financial reporting, it is arguable as to whose self-interest is served by the decision to report; hence it is questionable whether the practice of reporting is an act of pragmatic legitimacy. At the other end, forceful, explicit discussion is counterproductive in the pursuit of cognitive legitimacy, however, messaging that is subtle and supportive of ‘taken-for-granted schemata’ is congruent with cognitive legitimacy. The content of disclosure and the context in which it is received therefore play a significant component in interpreting the nature of the legitimacy being pursued. Limited to the practice of reporting, we can suggest that from Suchman’s (1995) typology of legitimacy that ZETA’s actions align with ideas centred on moral legitimacy, particularly with reference to procedural and structural legitimacy. These issues will be further explored within the context of the results section. A thorough exposition of the types of legitimacy requires a more nuanced analysis of the content of disclosure and the broader context of the organisation’s actions.

  3. Each interview was conducted by at least two of the authors. Interviews lasted between 1 and 1.5 h.

  4. These were analysed by the corresponding author and the analysis was discussed and reviewed by the first author.

  5. PriceWaterhouseCoopers (2004) “Investigation into foreign exchange losses at ZETA”, 12 March 2004.

  6. APRA, “Report into irregular currency options trading at ZETA”, 23 March 2004.

  7. As to the substance of the initial decision we are not in position beyond the analysis of the CSR Report to determine whether the actions were a genuine reposition on CSR or merely symbolic gesture by the organisation.

  8. These stakeholders are not identified by the organisation. There is also no discussion of what information these stakeholders may require. The report itself therefore represents ZETA’s response to the stakeholders.

  9. This reflects a direct response to the current environment and societal concerns on climate change and business impacts on climate change.

  10. Along with the integration was a subtle change in the projected purpose of the report with the Chairman’s Message including the statement “I hope this new style Annual Review is informative and useful in understanding ZETA’s strategy and performance”.

  11. Suchman (1995) notes that even changes that were initially superficial may have unintended long term consequences as new staff are appointed who ‘adhere to the announced goals, rather than to the hidden agents.

  12. Whilst the term stakeholder was used throughout the report, there was no explicit identification of who were the external stakeholders.

  13. Since 2009, the Annual Review was supplemented with a GRI Index table and a number of additional shorter reports covering Customer, People, Community, Supply Chain and Environment (reflecting the material stakeholders identified by management).

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Acknowledgments

The authors gratefully acknowledge the financial support and technical assistance of CPA Australia in the undertaking of this project.

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  1. The University of Sydney, Sydney, NSW, Australia

    Cornelia Beck, John Dumay & Geoffrey Frost

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  1. Cornelia Beck
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Correspondence to Geoffrey Frost.

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Beck, C., Dumay, J. & Frost, G. In Pursuit of a ‘Single Source of Truth’: from Threatened Legitimacy to Integrated Reporting. J Bus Ethics 141, 191–205 (2017). https://doi.org/10.1007/s10551-014-2423-1

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