Part A (i): Suitability of the Article

Corporate social responsibility and reporting of various environmental and political factors is essential for the firm. In theirarticle, Stacey & Maria (2011) evaluated the applicability of a model which can be used to predict and elaborate on the voluntary disclosure of emissions practices. In their explanation, the authors focused on the traditional legitimacy theory and stakeholder theory. In addition, they explored the political and social emission related environment to examine and explain emissions disclosures by the companies. There are various benefits accruing to disclosure of environmental information and reporting of such environmental information to the public in an effort by the company to ensure corporate social responsibility. Various theoretical perspectives have been used to explain the voluntary social and environmental reporting. These include stakeholder theory, political economy theory, and legitimacy theory.

Disclosure and reporting of environmental information for the company facilitates the development of a mechanism, which reduces the risks that a firm faces in its efforts to ensure corporate social responsibility. This is done through nurturing of trust and good relationships between the corporation and various stakeholders, such as customers. The need to explain, report, and disclose environmental information of a company has risen in the recent years due to the consequences of various ethical environment and social risks. This is due to the desire by firms to maintain legitimacy of their operations and build public confidence withtheirproducts. Therefore, the company has been faced by the contradicting roles of satisfying its stakeholders and shareholders. Environmental disclosures, explanations, and reporting of the company’s environmental information are the attempts to legitimize the company’s operations through building trust with various stakeholders. There are various conflicting economic, social, and political drivers within the society, and the company needs to evaluate them and establish which one will provide a competitive advantage in the achievement of the company’s objectives. In the efforts of the firm to legitimize its operations, it focuses on theinteractions of the company with various stakeholders (Quaddus & Siddique 2009). Voluntary environmental disclosure has been viewed by different authors, researchers, and scholars as a response by the firms to constraints that have been imposed by the societal norms and values. The traditional view of stakeholder theory holds that voluntary environmental disclosure is a means by which organizations manage the relationship amongvarious stakeholders of the firm.  The multi-theoretical view of both stakeholder and legitimacy theory explains the overlapping phenomena explanations.

Part A (ii):  Evaluation of the Article

This article was written by Dr. Stacey and Maria. Dr. Stacey is a senior lecturer in central Queensland University, heading the accounting programs in the School of Commerce and the Faculty of Fine Arts in the School of Law. Her academic credentials include a PhD in voluntary and compulsory annul reporting of environmental disclosure practices. She has also been a member of CPA Australia. She has gathered wealth of knowledge in accounting theory, which she has been lecturing in the university; therefore, she has the best credibility to discuss the issue of voluntary environmental disclosure by companies. She also has substantial knowledge in financial reporting, accounting, and business ethics. Therefore, she is in the best position to cover issues related to ethics and corporate social responsibilityaffecting the firms. She has also carried out various researches on areas covering corporate social responsibility, compulsory social responsibility disclosures, compulsory voluntary environment disclosures, and environmental accounting. This article, therefore, passes the test of credibility related to author credentials and availability, since any interested party can contact the author through the university address orvia the internet.

This article was published to evaluate the applicability of a multi-theoretical evolving model, whichcouldbe used to explain voluntary environmental disclosures by companies. This topic is relevant in the current global economies, where firms are competing to ensure achievement of a competitive advantage (Renner, 2011). There has also been a change from the traditional methods of firms’ objectives to maximize profits to the current focus of firms’ achievement of a competitive advantage with increased competitiveness. The global consumers have also responded by instillingan urge in the company to address the needs of current and prospective customers. This article has provided various approaches to handling the issue of voluntary emissions disclosure practices by organizations, thereby providing different insights to the reader. In providing a different approach to the topic, the article presents diverse knowledge on the topic. This article was also published in the year 2011; therefore, it has most fully covered the current situation withthe corporate social responsibility of the firms. This relates to the firms’ disclosures of their environmental emissions and reporting. This article has also been available without any fees or charges, and readers can access it freely in the internet.

Part B (i): Stakeholder Theory in Voluntary Environmental Disclosures

Current globalizing economies and the development of industrialization have led to increased environmental degradation, which has led to global warming. This has resulted in the introduction of compulsory disclosure requirements and reporting for firms.Thereby, the stakeholders’ havea role to play in ensuring compliance with the set disclosure requirements. Various government organizations and international bodies have made various responses to address the issue of environmental degradation. For example, the Kyoto Protocol, introduced in 2005, facilitated an impetus which would facilitate the reduction of greenhouse gases emission (Cowan & Balatbat 2011). The traditional approach of stakeholder theory asserted that the corporation should act to respond to the needs of different groups of stakeholders. The theory viewed voluntary environmental disclosures by firms as a means by which the firm managedthe interdependent relationship amongvarious stakeholders.

Different stakeholders in the organization play an important role in legitimizing the various operations of the organization. For example, the organization must provide products or services that satisfy the needs of the customer. If the organization does not provide products that meet the needs of the customer, then its profitability will be at risk, since the customers will turn to other products. Therefore, such stakeholders are important to the organization, and if the organization disregards them, it will be risking its profitability. Therefore, all the stakeholders in the firm play a role in influencing and legitimizingof the flow of the organization resources and operations. They are essential in ensuring growth and survival of the organization in the competitive environment (Richardson 2002).

Onthe achievement of a competitive advantage, the organization should establish its critical success factors, both in the internal and external environment. These critical success factors must be approved by various stakeholders, which will involve a comprehensive appraisal of various activities. For example, the government plays important role in ensuring regulations in the industry through the provision of operating licenses and providing controls on disclosure requirement. The compliance with the regulatory environment and actions may influence the public perception of the company, especially the financial providers. Regulator’s perception of the organization compliance depends on the conception of the compliance strategies adopted by the firm and the performance of the organization.

There have been increased changes in the society demands, thereby increasing the need forthe organization to address these issuesas they arise. The explanation of the company voluntary environmental emissions disclosure depends on the current social and political environment. Stakeholder theory is set within the frameworks of political economy. However, society, politics, and economycoexist together and no explanation can be used to explain the economic perspective without the social or political perspective (Cowan & Balatbat 2011). Therefore, a decision on the theoretical framework adopted in voluntary environmental disclosures is influenced by the political phenomena observed. Therefore, any changes in social, political, and economic factors may imply a change of the theoretical framework adopted by the organization at that particular time. There is an increasing influence of the government in controlling the corporate affairs through regulations and expectations to meet various corporate social responsibilities. However, the organization may use corporate social responsibility disclosure as a strategy to satisfy corporate social responsibility demands by the government. The increase in corporate requirements by the government has raised various concerns and considerations by other stakeholders, e.g., financial providers (Freeman et al. 2010).

The organization’s investment decisions are affected by considerations of different stakeholders. Disclosure requirements are therefore essential to the organization when identifying and making investment decisions. Political economy theory has been applied in the environmental accounting and disclosure requirements. In political economy theory, accounting reports should reflect corporate interest ideologies, which may be construed with themanagement perspective on these issues. The legitimacy ofstakeholder theory hasbeen construed as subsets of political economy theory. Stakeholder theory that has commonly been used in environmental accounting holds that emission disclosures should be made on the basis of stakeholders’ demand. Therefore, the management should provide information on pollution that they believe will satisfy the inquiries of different stakeholders. Stakeholder theory aims at disclosing information that is desired by different stakeholders. Legitimacy theory provides information that would helpthe organization look appealing to the public. Stakeholder theory aims at providing information that is appealing to the stakeholders. However, such information should not be considered for investment decision making since it may not be appropriate. Stakeholder theories are essential in evaluating the quantity and quality of environmental disclosures in annual reports (Hibbitt 2004).

Part B (ii): Environmental Emissions Disclosures

The intergeneration report by the Australian government describes the climate change, which has been described as the largest threat to the Australian environment. However, Australia as a first world nation has been one of the largest average emittersper capita. It thus faces greater threats of environment changes than do other developed countries. This has been due the alternating dry and hot environment surrounding Australia. The resurgence of society’s concern overthe environmental issues has made organizations shift their focus on dealing with the related environmental changes (Cowan & Balatbat 2011). The resurgence can be attributed to the global attitudes towards the environment and climate change. These attitudes have further been amplified by the media attention tothe effects of climate change. The government has also been issuingconflicting regulations and policies in its effort to deal with climatechange. For example, the government refused to ratify the Kyoto Protocol on the basis that it could damage the comparative advantage enjoyed by Australia. This was attributed to the fact that Australia is rich in fossil fuels; hence, the government could not consider the Kyoto Protocol. However, this fact received an enormous public interest and the increasing opposition to the government. Therefore, the government changed its focus and approach todealing with climate change through reduction of emissions. This perspective of the ruling government, not adopting the Kyoto Protocol, received an enormous outrage from the opposition. This led to the defeatof the ruling government in elections and the opposition’s victory (Freedman & Jagg 2010). This shows that the environmental conditions in the area have been affected by the current political structures and environment.

The new government under the opposition introduced a carbon pollution reduction scheme (CPRS), which was to facilitate Australia’s compliance withthe Kyoto Protocol. The Australian approach in evaluating the environmental emissions disclosures can be analysed through legitimacy theory and the managerial stakeholder theory. In legitimacy theory, the organization will consider disclosures being driven by societal concern, which are more qualitative in nature. The organization would also evaluate the implicit terms of their social contract. According to the managerial stakeholder approach, the disclosure of emissions would be driven by government pressures. Such disclosure will be more quantitative in nature, and the organization will seek to evaluate the explicit terms of the organization. The society concerns with environment issues were increasing in Australia, while the government had minimal priority on environment-related issues (Cowan & Balatbat 2011).

Part B (iii): Stakeholder Theory and Environmental Disclosures

Stakeholder theory is considered as a subset of political economy theory, which evaluates environmental accounting. In stakeholder theory, the objective is to establish the desired environmental disclosures by different stakeholders (Cowan & Balatbat 2011). The various stakeholders in the organization include the government, consumers, shareholders, and society in general. In this evaluation, there are certain activities by different stakeholders in ensuring compliance withthe disclosure requirements that affect the actions of other stakeholders. For example, the government is aregulatory authority and various actions adopted by the government in ensuring compliance affect the actions of finance providers. In addition, anaction of the government may influence the actions of the society towards the organization. With the current increasing global awareness on climate change, investment banks, financial analysts, portfolio managers and trustees have been paying more attention to the climate change risks. This has led to the enduring pressure by various stakeholders to the organization to ensure proactive measures are taken when dealing with emissions to the environment.  The government has increased the regulatory measures, inquiring organization to disclose their emissions due to the increased risk (Solomon 2005).

Stakeholder theory is quantitative in nature, while the global warming strategies adopted are predominantly qualitative, for example, the Kyoto Protocol. This has led to a shift from the qualitative approach to a more quantitative one, which is more specific and oriented towards success. Stakeholder theory has been characterized with explicit rather than implicit approaches. These will include more finance specific disclosures, which can be measured in monetary terms rather than the general implicit disclosures, which are not measurable.


In conclusion, stakeholder theory can be used to explain the disclosure of emissions requirements by the organizations. There are various stakeholders in the organization and, in their article, Stacey and Maria have explained the multi-theoretical approach toexplaining emission disclosure practices. Various actions by different stakeholders can influence the actions of other stakeholders. The global climatic changes have led to a shift in the approach used by the global economies in dealing with climatic changes. For example, the Kyoto Protocol was introduced in 2005. Society’s awareness ofthe climatic changes have increased with the regimes resisting the new order being thrown out of power, for example, the Australian government. The current focus on climatic changes has also led to introduction of more specific approaches to dealing with disclosures of emissions.

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