Environmental disclosure in annual reports: A legitimacy theory perspective

In recent years, corporations have increasingly used their annual reports to voluntarily disclose information relating to their social actions, particularly those concerning the natural environment. The conventional accounting framework, with its emphasis on decision-usefulness, has largely proved unsatisfactory in explaining this practice, as have various economic theories. This paper uses a legitimacy theory framework to explain why companies engage in this type of voluntary reporting. This research contributes to the accounting literature by advancing legitimacy theory as a framework for examining environmental reporting and applying this in an effort to understand the environmental disclosure practices of two Canadian pulp and paper companies.This paper stems from the lead author's doctoral thesis at the University of Port Elizabeth. An earlier version of the paper was presented at the 1998 Annual Meeting of the American Accounting Association. We thank Nola Buhr, William Cenker, three anonymous reviewers, and research forum participants at Windsor University, Canada; Oakland University, USA; California State University—Bakersfield, USA; Gonzaga University, USA; Cleveland State University, USA; University of New Brunswick—Saint John, Canada; and University of Port Elizabeth, South Africa for their comments on earlier drafts.