Ambiguous But Tethered: An Accounting Basis For Sustainability Reporting.

Critical Perspectives on Accounting 23 (2012) 93106
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Critical Perspectives on Accounting

journal homepage: www.elsevier.com/locate/cpa
Ambiguous but tethered: An accounting basis for sustainability

reporting
George Joseph
University of Massachusetts Lowell, One University Avenue, Pasteur Hall 216, Lowell, MA 01854, USA
a r t i c l e
i n f o
Article history:
Received 1 April 2010
Received in revised form
12 November 2011
Accepted 17 November 2011
Keywords:
Sustainability
Reporting
GRI
Measurement
Principles
Normative
Stakeholder
a b s t r a c t
Sustainability reporting continues to become more widespread, despite ambiguities underlying the concept that may lead to varied interpretations and wider scope for managing
public perceptions (e.g., Cho et al., 2010; Neu et al., 1998). An examination of the current form it takes using the GRI suggests a trade-off between principles and rules, with
reduced emphasis on normative principles and a rather simplistic pursuit of objective
measurement largely adapting to traditional accounting goals. While exploratory in nature,
the paper suggests the need for alignment through an emphasis on principles based on
normative stakeholder theory (Reed, 1999, 2002) that can draw from accounting without
usurping the stakeholder goals underlying sustainability. This normative approach adds to
the discourse on sustainability accounting by envisaging a wider and more localized perspective on rm accountability that could potentially stimulate the innovative endeavors
of the corporation in the pursuit of wider wealth creation.
2011 Elsevier Ltd. All rights reserved.
1. Introduction
Accounting for corporate social responsibility has been an area of contention that has endured neglect because of ambiguity, difculty, or questions about the necessity for rms to emphasize such socially responsible behavior (e.g., Benston, 1982;
Friedman, 1970). Despite the skepticism that has characterized all aspects of social responsibility in the past, the relatively
recent adaptation titled sustainability continues to grow in importance, if the research and developments in the area serve
as indicators (e.g., Dillard et al., 2005; Lehman, 2004; Unerman et al., 2007). The language of sustainability has also spread
beyond the realms of researchers, public relations specialists, and writers to boardrooms and corporate ofces. However,
despite this extensive literature, there continues to be an evident lack of stability and clarity in the area (e.g., Bebbington,
2009). The intersection of the social and the organizational creates the concerns that make it important for disciplines such
as accounting to play a role that is signicant, nevertheless challenging. As articulated by Hopwood (1983):
The social is not and cannot be isolated from the organizational. Indeed, in part at least, the social is manifest in
the organizational and the organizational, in turn, constitutes a signicant part of the social. . . with both wider and
more localized concerns calling upon practices such as accounting to create an ambiguous but nevertheless tethered
conception of reality (p. 302).
A variety of factors shape the social world today, perhaps none as signicantly as the growth of globalization under
the inuence of modern technology. After an initial sense of triumphal vindication of the free enterprise and free markets
globally, the power of capital and the nature of business appears to be increasingly under scrutiny as global companies
Tel.: +1 978 934 2842.

E-mail address: george joseph@uml.edu
1045-2354/$ see front matter 2011 Elsevier Ltd. All rights reserved.
doi:10.1016/j.cpa.2011.11.011
94
G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106
expand, seeking new markets, lower cost labor, raw materials and nancial resources. There is the sense that free enterprise,
left to itself, could engender more problems than it could resolve (Greider, 1997). Yet, rather than abandon the stimulant
of free enterprise, there is a call to a form of sustainable capitalism, with the increased realization that ignoring such
interests can be costly, given the new realities of communication and information dissemination. These have contributed
to the voice of different stakeholders, including the NGOs who take up causes of stakeholders by managing and organizing
dispersed and less powerful groups. Thus, despite skeptics and powerful lobbies, the idea of sustainability has taken root
and increasingly become part of the language of large rms, being subsumed within corporate goals with the pervading
business case approach to sustainability (e.g., Gray, 2010). Perhaps driven by the threats of litigation and the increased
possibility of regulation, the pragmatism underlying capitalism may be opening new doors of dialogue and insights into
consequences of corporate activity.
Thus, as sustainability develops as a desirable and increasingly popular recourse for institutions, the need for accountability and transparency points to an increased role for accounting. Having evolved on a narrow path where the larger view
is obscured and issues are now translated into puzzles to be resolved (e.g., Gray, 2002), accounting remains constrained
within articial boundaries of its own making that give the semblance of objectivity, but without the capability to address
complex issues. Hence, unsurprisingly, the accounting for sustainability endeavor appears to be plagued by an overall lack
of clarity of what accounting looks like at the organizational level (e.g., Gray, 2010), resulting in a diversity of opinions and
approaches (Bebbington and Gray, 2001) and the recognition that we are researching an unstable and moving set of practices (Bebbington, 2009). In short, an ambiguity expressed through prevalence of conicting viewpoints appears to pervade
much of sustainability. This ambiguity that lies at the root of sustainability highlights the need for a systemic view of the
issues (Gray, 2002), a view that is both wide and yet local as to sufciently capture the concerns of society (Hopwood,
1983) shaped by the global nature of business. When such ambiguity is not addressed, sustainability endeavors are vulnerable to manipulation and adaption to variations such as a business case approach, which in form appears appealing, but in
substance, may be capitulation to the pre-existing prot based approach, subsumed within the narrow protability goals
of the rm. Confronting ambiguities underlying sustainability is therefore a rst step in developing a form of accounting for
sustainability that is both transparent and does not revert to being another adaptation of the managerial capitalistic model.
Using principles underlying normative stakeholder theory (Reed, 1999, 2002), this paper suggests an alternative normative framework that provides the rationale to address rather than evade difcult and ambiguous situations. Specically,
the approach provides rms the lens to understand the global (or wider) and local issues when establishing ambiguous and
often apparently conicting stakes of stakeholders. Accounting for sustainability based on such principles begins with the
recognition that transparency, an extension of the accounting principle of completeness, is more relevant than an objectivity that fails to reect reality. An examination of the GRI sustainability framework serves to illustrate how sustainability,
when not rmly grounded on principles, could lose sight of a normative sustainability narrative, and become subsumed
within the prot goals of the rm. Thus, the paper asserts that a systemic view is the starting point to provide a basis to
visualize accounting for sustainability, in order for key accounting components, concepts and semantics, measurement and
corporate governance, to serve the goals of sustainability.
To address the above objectives, the next section of the paper provides the theoretical base for understanding and
implementing sustainability. Recognizing the ambiguity and constraints surrounding sustainability, this section proposes
moral, ethical and legal principles underlying the normative stakeholder theory (Reed, 1999, 2002) as the framework to
provide a systemic view of the issues underlying sustainability, and to form the basis for sustainability accounting. The third
section rst provides a succinct description of sustainability efforts of the Global Reporting Initiative (GRI) in integrating
the accounting components that make accounting a discipline that lends credibility and direction, namely, concepts and
semantics, measurement and corporate governance. To explore further the reality of sustainability, the section critically
reviews sustainability efforts of GRI in the light of the normative sustainability principles. In comparison to traditional
accounting, GRI appears to gravitate to greater stakeholder inclusiveness. On closer examination, however, sustainability
principles are widely dispersed. Entrenched ambiguities remain, allowing rms to continue along the path of impression
management (Cho et al., 2010; Neu et al., 1998). The fourth section prescribes an emphasis on alignment of the framework,
emphasizing a principles based approach to anchor the rm in the presence of ambiguities underlying the implementation
of a transparent form of sustainability. Finally, the paper discusses the future and limitations, drawing on preceding analyses
to show how the continued developments and future growth in sustainability depend on the convergence of factors that
support its development.
2. Theoretical foundations for sustainability

To explore concepts underlying sustainability, it is useful to begin with the widely used denition of sustainability of the
UN Commission on Environment and Development, (commonly referred to as the Brundtland Commission), that sustainable
development (SD) meets the needs of the present without compromising the ability of future generations to meet their
own needs (World Commission on Environment and Development, 1987). The implications of the denition on corporate
activity particularly in the widely prevalent capitalist forms are signicant. Specically, the denition highlights the messy
nature of the impacts of the ow of capital guided by an invisible hand that gives scarce consideration of such impacts
95
beyond the market dynamics. Harvey (1982), for example, captures the complexity of issues that arise with the development
of organized structures at the local, regional, national and global levels, consequent to the ow of global capital:
Between the particular and the universal lies a whole mess of untidy organizational arrangements which mediate the
dynamics of capital ow within the space economy of capitalism and provide multiple and diverse forums in which
class and factional struggle can unfold (p. 424).
Gray (2010) further highlights this complexity from the sustainability perspective, pointing out that any simple assessment of the relationship between a single organization and planetary sustainability is virtually impossible. The relationships
and interrelationships are simply too complex. . .. (p. 48). The growth of two signicant drivers of social change that are
shaping our modern world, technology and globalization, serves to compound the problem. While conferring many apparent
benets, they are also the source of much of the uncertainty about outcomes that underlie sustainability.
The complexity and lack of clarity of objectives give rise to ambiguities, the conicting views and opinions on what the
outcomes are or ought to be. Such conicts arise most often between stakeholders who may have opposing, yet apparently
legitimate viewpoints on desirable outcomes based on their underlying assumptions. This ambiguity can be articulated
from two perspectives, one narrow and localized, and the other wider and universal. To illustrate, one source of intergenerational and environmental inequity is the implication of development today, as opposed to preservation for the
future. Take the dam, an important technological development that, while seen from the narrow or localized perspective,
serves to supplement livelihoods of community, harness energy and even control natural phenomena (oods etc.), but could
also result in displaced populations. From the broader and universal perspective, despite overall potential of job creation, a
loss of natural habitat and species endangers the environment, leading to divided arguments and opinions on the implications
of the building of the dam on future generations.
The global environment and the rise of international consumer societies also serve to illustrate this conict. Globalization spawns a global culture of consumerism creating increasing aspirations of a growing global middle-class, particularly
from developing countries. Their habits of consumption, having barely begun, are expected to grow to emulate the living
standards set in developed countries and the elite in their own societies (e.g., Greider, 1997). From the local perspective,
therefore, this increase in standards of living and lifestyles, economic growth, technology and consumption has positive
connotations, while the increased inequalities of living are also a reality. From the wider perspective, the increased strain
on resources in emerging countries and the possible impact on the environment are also relevant factors to consider (e.g.,
Ehrenfeld, 2008). These perceptions will also lead to divided opinions on the inter-generational equity in how environmental
exploitation has beneted societies, and about who shoulders the burden for environmental remediation, the developed or
developing world, leading to regional differences in the application of the Kyoto protocol. Should those regions that have
attained the developed status (with the various infrastructure such as bridges etc.) not be held to a different standard than
those whose infrastructure needs are more urgent and necessary for coming to that developed stage? It is therefore, not
difcult to perceive how ambiguities are inherent to sustainability, whether regional, institutional, or inter-generational,
such ambiguities stemming from a conict of opinion from the localized view or between that of the global and localized view
of the issue. The different perspectives with conicting outcomes and preferences also highlight the need for transparency,
given the tangible and intangible costs and related issues that affect multiple stakeholders.
Corporate activities critically affect all aspects of sustainability, social, environmental and economic. Even as societies
and governments adopt policies to foster sustainability, corporations guided by the prot motive ingrained in the capitalistic model combined with the global reach of capital, have the capability to adapt uidly to changes (Harvey, 1982). Thus,
corporations have incorporated the language of sustainability and developed the stakeholder based management systems.
However, the logic underlying traditional forms of capitalism remains unchanged; corporations now perceive a business
case for considering stakeholder interests and, therefore, sustainability concerns, particularly given the power of different
stakeholders to inuence the destiny of the rm (Salzmann et al., 2005). The business case approach to stakeholder management (also called the managerial stakeholder approach) prioritizes the individual stakeholders based on how important
they are to the overall goals of the rm prots, seeing the goals of growth and protability as the core public interest
issues. As Gray (2010) points out, business assumes that its success is predicated on the approval of its stakeholders as to
social and environmental responsibility; there is, consequently an unexamined presupposition that the business is indeed
so responsible (p. 49). In this adaptation of sustainability, all ambiguity is removed and outcomes are now articially aligned
with the business case so that conicts can be resolved with reference to that all-encompassing goal.
The ambiguity inherent in sustainability, particularly the non-transparent stakeholder conict issues, may provide rms
the option to adopt different approaches, one internal for strategy, and the other external for public consumption. Thus, rms
can now use the inherent ambiguity in sustainability opportunistically to adapt the tone of the debate to suit personal ends.
Maintaining the need for prot maximization, the rm naturally progresses to a stakeholder approach that hinges on the
business case for internal purposes, with voluntary external reports that fall in line with social expectations. Specically,
social responsibility reports would now reect the power structure within society and the need to operate in a state of
legitimacy (Deegan, 2002). As Gray (2010) points out, sustainability can be used in ways that present no threat to corporate
attitudes and activity. This has the effect of presenting a suite of increasingly pervasive narratives/accounts of sustainability
comprising some relatively benign cocktail of economic achievement, managerial excellence, environmental probity and
social responsibility (Gray, 2010; p. 49). Thus, rms are able to evade stakeholder conicts and the ambiguity inherent in
sustainability through the business case stakeholder approach that enables them to avoid accountability to stakeholders
96
who do not fall under the preview of the business case. Alternatively, the selective choice of words, including technical
accounting terms can serve to manage public perceptions (Cho et al., 2010; Neu et al., 1998). Effectively, opportunistic
behavior would take the form of either avoidance or manipulation of the ambiguity underlying sustainability such that
arguments prevail not from an understanding of the true nature underlying sustainability, or on the merit of reason but
from power over access to resources and outcomes.
This narrative forms a backdrop to the theoretical basis for sustainability, where stakeholder conicts and ambiguous
situations are inherent to the concept. Underlying the basis for sustainability is the normative stakeholder view. Unlike the
managerial stakeholder view where goals of stakeholders (other than stockholders) are a means to the ends of prots of the
shareholder, under the normative approach, the goals of stakeholders are ends in themselves (Goodpaster, 1991; Joseph,
2007). The concepts underlying the normative stakeholder management (Reed, 1999, 2002) provide the basis for evaluating
stakes in the presence of ambiguities and conicts as the social and organizational intersect in the context of sustainability.
Specically, (Reed, 1999) provides the basis for the integration of a particular or localized view with that of a generalized
or universal view to highlight the impact of the rm vis--vis the stakes of the stakeholder. To accomplish this goal, Reed
(1999) distinguishes between the three normative principles, moral, ethics, and legitimacy. The moral principle highlights
those moral questions that apply to the wider context. For example, all members of society have an interest in the economic
structures and practices of the society in which they live, and have a stake in the activities of the rm to the extent that the rm
can undermine such fair opportunity. In this sense, they are stakeholders who have an equitable stake in the functioning of
the rm as it creates the economic structures that promote employment and opportunity, while also availing of the resources
of the region. The ethical principle addresses the distinctive nature of issues in relation to their specic local context. This
consists of the shared values and norms of the communities that one lives in. The rm, as part of the larger community, either
maintains the communal norms or can violate them by prescribing a different set of norms inconsistent with the communal
norms. The legal perspective derives from acceptable behavior determined through legislation or general acceptance that
establishes the legitimacy of the rm. Such legal principles, formed in the interactive environment of democratized or
free societies that allow for divergent viewpoints, draw on a consensus from an understanding of individual freedoms that
form the basis for actions in the wider system. Thus, the legal perspective confers rights to stakeholders as participants in a
system where legal principles confer legitimacy to their stakes or rights.
Within this principles based theoretical framework, management responsibility includes understanding the role of business in its interaction with the society based on principles, without the assumption that their right to do business has the
consent of the people or that the goals of stakeholders can satisfactorily be subsumed within the goals of the rm. With
respect to the moral principle, managements responsibility is to seek equity in the functioning of the rm and the equitable
distribution of efciency gains. Firms abide by the ethical principle when they conform to the norms and values of the society
in which they operate. In the legal sphere, management responsibility is to work within legal structures, without unduly
inuencing them, to try to promote the legitimate development of equitable political systems and rights that can provide
for societal order.
The principles apply in situations of ambiguity and conict through the complementary views ingrained in them. While
legitimacy means maintaining law and regulations, it would also mean seeking to provide the means to create legislation that
can be suitable and meet global moral and universal standards. Thus, when rms operate in regions where practices such as
child labor may appear to be part of the norms and not violate the values in that particular society, such localized practices
nevertheless violate the legitimacy principles derived from the global view of the issue. Thus, in the light of globalization,
legitimacy principles derived from the global perspective gain acceptance and precede localized practices that may constitute
norms but are opposed to global legitimacy principles derived from a consensus based on a wider application in free societies
that do not put constraints on public opinion. In areas of the world where there are no strong laws protecting employees, the
rm abides by the moral principle when it preserves autonomy rights in such areas as privacy issues, surveillance, right to
unpaid leave to run for political ofce, and preserves the rights of citizens in general by not seeking undue inuence through
bribery or personal relationships.
The moral principle would also apply in examining the nature of corporate wealth accumulation and the extension
of equitable economic opportunities, particularly in nations where extreme wealth inequalities exist alongside widespread
poverty, indicating a form of malfunctioning of the resource allocation role within the capitalist model. Such moral principles
entail the rm to address the problem of marginalized social groups and bring under control the colonizing tendencies of
capitalism. Management must take an increasing role in determining the demands of equitable economic opportunity, such
as minimum wage, environmental standards, and health and safety as well as addressing historic injustices where differences
in economic opportunity resulted in differences in competencies. In the case of non-democratic countries, the imposition of
systems or regulation (legal strictures) that may not be favorable to social groups or that increase marginalization also places
greater responsibility on all agents, particularly management. Firms gain legitimacy by abiding by wider laws that provide
equitable treatment for different stakeholders, particularly those that have less power and may be classied as dependent
(Mitchell et al., 1997).
In sum, the broad and localized perspective with conicting outcomes and preferences indicates the need to consider
tangible and intangible costs and related issues in evaluating the options. Importantly, the multiplicity of perspectives
may require that decision-makers recognize the issues and conicts in evaluating costs and benets and deciding on a
course of action. Without principles that can highlight the ambiguities and develop means to resolve them, corporations
will circumvent and seek loopholes to continue the status quo while managing perceptions of sustainability. The principles
97
based approach based on normative stakeholder principles values stakeholder rights as ends in their own right, rather
than as means to the goal of stockholder prots while seeking transparency in corporate activities. The objective of the
normative stakeholder approach postulates a broader wealth creation from multi-stakeholder perspective: to minimize the
adverse impact of the rm, while increasing wealth, tangible and intangible, at the stakeholder level to optimize overall
wealth creation (e.g., Blair, 1995; Joseph, 2007). The view has implications on the ordering of priorities and the use of funds,
managerial focus, and generation of accounting information, as well as increased scope for stakeholder engagement. It is
rooted in change at the very core of the corporate culture and norms, making it an intrinsic component of the rm and
enabling them to be consistent with their cultural and espoused values.
3. Sustainability and accounting dilemmas
Accounting, with its long history, has stood as the arbiter in the economic system, providing the objectivity and reliability that grounded arguments and decisions. Specically, accounting has developed a language based on the assumptions
of its role in the overall capitalistic economic system, a reection of the widespread perception that resource allocation based
on rm prots are aligned with societal and national goals. When this assumption is arbitrarily applied, the complex relationships of organizations and society can be largely ignored. As Burchell et al. (1980) has pointed out, what is accounted for
can shape organizational participants views of what is important (p. 5). Sustainability shifts the focus to the larger system
in which the rm operates (Gray, 2002). We explore how accounting concepts, including principles or concepts, measures
and corporate governance processes, can be extended to sustainability considering the ambiguous nature of the concept, to
facilitate development of the semantics and acceptable bottom line expressions of its goal. Specically, are systems and
corporate actions sufciently tethered such that measures and assurance enable subjection to stakeholder based corporate
governance?
3.1. Sustainability reporting: the Global Reporting Initiative
Global Reporting Initiative (GRI), widely used by a signicant proportion of companies providing voluntary sustainability
reports (e.g., Morhardt et al., 2002),1 is used to understand the application of accounting to sustainability. In comparison to
other similar bodies, GRI provides detailed guidelines that provide guidance on how to report, dening overall goal and
content using principles and guidance, and what to report or determining content using standard disclosures and sector
supplements. Additionally, the disclosures also provide guidance on stakeholder-based governance, including assurance.
The source of information on sustainability reporting is online documents from the GRI website, particularly the Sustainability Reporting Guidelines Version 3.0 (or G3 Guidelines) and information on rms from CorporateRegister.com.2 While
the total available reports exceeded 18,000, only about 3176 complied with GRI reporting principles.3 Almost all the rms
were global rms such as Nike, Matshusita, Philips, Shell and BP among others.4 Tables 1 and 2 present descriptive analyses
of the diversity of rms providing voluntary sustainability reports by industry and country of origin respectively. While the
total rms reporting on sustainability and the nature of the reports continue to evolve, the statistics serve to provide an
indication of the diversity of sustainability reporting trends.5
Specically, they include different industries with an array of technologies and sustainability impacts that continues to
grow with the potential to introduce new challenges to environment and society. This has implications on the measurement
focus of sustainability, particularly the sector supplement developments, as elaborated later. Second, the rms are mostly
large MNEs that operate globally, with operations in developing and non-democratic countries, with implications on social
and environmental justice and political equality. Thus, GRI is representative of the sustainability reporting, having a wide
global application of rms from a variety of industries and of global (multi-national) nature.
The main focus of the analysis is on the key documented guidelines on concepts, measures and assurance, which, according to G3 Sustainability Reporting Guidelines, was developed through a unique multi-stakeholder consultative process
involving representatives from reporting organizations and report information users from around the world (p. 44). These
are briey described in the sections below from the conceptual and measurement/assurance perspectives. More emphasis
is placed in this discussion on the fundamental character of sustainability concepts, as these concepts form the basis or sub-
1
The GRI was created in 1997 through a joint project between the Coalition for Environmentally Responsible Economies (CERES) and UN Environment
Program (UNEP). GRI reporting principles have undergone a transition, with the earlier guidelines issued in 2002, which was followed by a new set in 2006
(which are referred to as G3).
2
Available on www.Globalreporting.org (as of November 8, 2008). CorporateRegister.com provides access to Corporate Social Responsibility (CSR) reports
of reporting rms.
3
These gures are relevant as of November 2008. They continue to be in transition as new rms adopt the guidelines. However, the gures provide an
indication of the nature and extent of GRI reporting for our purposes.
4
GreenBiz Group reports that more than 50% of S&P rms report non-nancial reports and about 40% of these use GRI guidelines
(http://www.greenbiz.com/news/2010/10/13/gri-steps-up-efforts-improve-reporting-us-rms). GRI has indicated the need for more participation from
smaller regional rms. A few such rms who were primarily involved in environmental activities did report on sustainability.
5
This was updated as of November 2008, and more companies are added to this database regularly. However, the overview presented is sufcient to
gain an understanding of the global and industrial diversity. While the total countries exceeded 60, about three-fourths of the reports were from only 20
countries, as presented in Table 2.
98
Table 1
GRI sustainability reports by industry.
Industry
GRI
Aerospace and defense

Automobiles and parts
Banks
Beverages
Chemicals
Construction and building materials
Distributor
Diversied industrials
Education
Electricity
Electronic and electrical equipment
Engineering and machinery
Food and drug retailers
Food producers and processors
Forestry and paper
Gas distribution
General retailers
Government, authorities and agencies
Health
Household goods and textiles
Information technology hardware
Insurance
Investment companies
Leisure, entertainment and hotels
Life assurance
Media and photography
Mining
Multi-utilities
Oil and Gas
Other
Packaging
Personal care and household products
Pharmaceuticals and Biotechnology
Real estate
Software and computer services
Specialty and other nance
Steel and other metals
Support services
Telecommunication services
Tobacco
Transport
Water
G3 reports
9
71
349
91
96
167
8
90
22
232
96
51
33
83
94
22
76
35
31
65
94
70
9
35
13
28
191
52
126
23
5
35
65
36
13
72
64
156
117
71
119
61
5
24
167
33
43
87
4
30
13
108
33
16
14
32
35
9
29
16
15
27
29
31
5
24
6
13
77
30
61
9
2
16
27
23
7
30
23
78
45
12
47
25
3176
1360
Compiled from: www.corporateregister.com (as of November 2008).
stance from which the qualitative aspects in preparing the report and choosing measures follow. The goal of each section
is to provide an overview of the intent of GRI disclosure documents, rather than an exhaustive treatment of the contents of
the documents, which is beyond the scope of this paper.
3.1.1. Accounting concepts and semantics
The Sustainability Reporting (G3) Guidelines denes sustainability reporting as the practice of measuring, disclosing,
and being accountable to internal and external stakeholders for organizational performance towards the goal of sustainable
development (p. 3). The goal of sustainable development reiterated the denition of sustainability, i.e., to meet the needs of
the present without compromising the ability of future generations to meet their own needs. The GRI guidelines specically
indicate that the basic goal of the principles was to achieve transparency, which was dened as the complete disclosure of
information on the topics and indicators required to reect impacts and enable stakeholders to make decisions. . .. Further,
this goal was accomplished through providing guidance and principles for dening content, quality of reports and performance indicators or measures. Signicant differences in dening content that integrated sustainability concepts included
stakeholder inclusiveness and sustainability context. Stakeholder inclusiveness reects the inclusion of entities that have
a legitimate claim vis--vis the organization under law or international conventions. The rm is to indicate how they have
responded to the reasonable expectations and interests of such stakeholders, including those that are unable to articulate their views on a report and are represented by proxies. The sustainability context extends the reporting context of
sustainability to include how an organization contributes, or aims to contribute in the future, to the improvement or deterioration of economic, environmental, or social conditions, developments, and trends at the local, regional, or global level
99
Table 2
GRI sustainability reporting by countries (top 20).
Country
Companies
UK
USA
Japan
Germany
Australia
Canada
Italy
Spain
The Netherlands
France
Switzerland
Sweden
Finland
Norway
Denmark
South Africa
Brazil
Belgium
Austria
New Zealand
Total
1054
1126
635
427
373
267
250
247
197
204
168
139
95
122
76
112
140
81
107
59
5879
Reports
2710
2133
1946
1329
1298
937
931
721
671
653
573
537
429
388
341
365
348
265
241
204
17,020
GRI reports
G3
196
300
215
102
168
123
124
436
135
130
64
56
101
37
18
160
125
26
65
48
2629
75
129
41
43
78
47
61
196
60
43
37
29
30
19
9
41
77
17
31
13
1076
(G3, p. 11). Within this sustainability context, particularly signicant was the completeness principle that encompassed the
dimensions of scope, boundary and time (G3, p. 12). Scope referred to the sufciency of topics covered with reference to
stakeholder and related engagement processes. Boundary included both upstream and downstream entities over whom
rms exercised control or inuence and whose performance was represented in the report, while time referred to the
need to include activities and events in the reporting period in which they occurred. Further, the GRI represented qualitative aspects of information drawing on accounting principles and including such aspects as balance, clarity, reliability,
comparability, timeliness, and accuracy. These concepts are understood from the perspective of the stakeholder and their
decision-making.
3.1.2. Measurement and corporate governance

After identifying stakeholders and determining their concerns, rms determine the relevant indicators that would correspond to the stakeholders and their needs. Disclosures consist of the Standard Disclosure, where the rms CEO has
to provide an overall strategy and analysis that includes an overview of the strategy and risk factors. In addition, a
statement of the management approach is to precede each of the three categories of indicators, i.e., economic, social,
and environmental.6 Further, the GRI also specically provides sector guidance supplements for different industries that
address unique issues related to that industry. The sector supplements provide specic guidance to sectors such as Financial
Services, Metals, Telecommunications, Apparel and Footwear, Tour Operators, Public Service and others (GRI continues to
develop and update sector supplements). The G3 Standard Disclosures outline the performance indicators in each category,
while the sector supplements provide the measures, along with indicators that are specic to the industry. Performance indicators are categorized into core and additional. According to the G3 guidelines, core indicators are developed through
the multi-stakeholder process and are assumed to apply to all rms. Additional indicators address emerging topics and may
be material for some rms and not for others. GRI provides 9 economic indicators, 30 environmental indicators, and about 40
social indicators that have been further categorized into labor practices and decent work, human rights, society, and product
responsibility. Recognizing that rms are at different stages in their reporting, GRI also has categories of reporting, where
the B category is for those rms that have reported at least 20 measures and the A category for those who have addressed all
measures (either reporting the indicators or indicating that they are not applicable).7 Thus, there is considerable exibility
for rms in complying with the measurement criteria using GRI guidelines.
6
The management approach contextualizes each area to indicate management policies and strategy, constraints, initiatives (such as training, awareness
and monitoring) and goals for performance. GRI guidelines for Standard Disclosure include a Governance, Commitment and Engagement section, which
requires rms to indicate the governance structure, particularly through committees entrusted with the sustainability endeavors in the economic, social
and environmental areas.
7
For example, Norsk Hydro ASA and Alcan Inc. use the GRI G3 reporting guidelines and indicate the specic indicators numbered for each category (e.g.,
EC1EC9 for Economic Indicators) and the extent of their reporting (Full, Partial or Not Reported), thereby complying with the GRI guidelines.
100
Table 3
Break-up of sustainability reporting by guidelines used.
Companies
Total
Total GRI reports
Steel and other metal industry
GRI guidelines
G3
2002
Global compact
Other guidelines
4748
1468
167
28
19
9
6
133
Reports
18,752
3176
549
64
23
41
9
476
G3 = GRI 2006 guidelines.

2002 = GRI 2002 guidelines.
GC = global compact guidelines.
3.1.3. Assurance and corporate governance

The GRI has not instituted specic guidelines for assurance statements, or specic recommendations for qualications
of assurance providers or the reports, but provide some general recommendations, for example, that the service providers
be professional and competent, that they use professional standards of assurance, including systematic evidence based and
documented approaches to the assurance activity.8 Additionally, the group should not be constrained by their relationship
with the organization so that they are in a position to provide an impartial assessment of the sustainability endeavors of the
rm. GRI also includes some general recommendations on what the report should contain, such as the extent to which the
report preparer has applied the GRI Reporting Framework (including the Reporting Principles) in the course of reaching its
conclusions. Recognizing that different rms are at different levels with regard to assurance, they also have created the added
Plus category of sustainability reports (i.e., B+ or A+) to indicate that external assurance was completed. The assurance
reports were to be in written form and include a statement from the assurance provider on their relationship to the report
preparer. However, GRI did not specify the contents of the report, but allowed for variations in the elements to include in the
assurance statements to comply with the initiatives. The AA1000 Assurance Standard (AA1000AS) and ISAE 3000 (published
by the International Auditing and Assurance Standards Board) provided guidance on assurance statements that rms could
use to comply with the GRI.9 The specic criteria for AA1000AS, developed by the London-based Institute of Social and
Ethical Accountability (commonly called AccountAbility) provides principles that focus on learning aspects of addressing
sustainability. Thus, the assurance statements should address the credibility of the CSR report, and the underlying systems,
processes and competencies that deliver relevant information.
To understand the nature of sustainability reporting and use of guidelines, the break-up of sustainability reporting by
guidelines used for rms in a specic industry (the steel and metal industry) is shown in Table 3. The number of rms that
adapted the 2002 or G3 guidelines was only a small component of the total rms (about 16% of the rms and 12% of the
reports) reporting on sustainability. The rms were also larger ones, indicating not just greater concerns for reputation, but
also availability of resources to be able to implement the systems and develop the reports. Review of the sample of rms (29
rms from the steel and metals industry that used GRI reporting) indicated that most rms did not specify any reporting
format for the assurance statement. Among those that did, the most frequently used formats were those recommended either
by the ISAE 3000 or AA1000 AS (and in some cases, no specic format except a reference to the GRI reporting guidelines).10
3.2. GRI sustainability reporting: an exploratory analysis
The preceding overview of the GRI highlights its application across a wide range of industries and large multi-national
rms. While the G3 documents suggested an emulation of accounting aspects including principles, measurement and
assurance, an exploratory analysis serves to assess whether and to what extent this framework captures the essence of
sustainability. The GRI concepts appeared to highlight transparency and sustainable development, with inter-generation
equity forming the preferred theme underlying sustainability. Transparency from the sustainability perspective, as discussed earlier, involves confronting ambiguity that stems from stakeholder conicts and the implication of sustainable
development across regions and stakeholders. Therefore, the rst issue to explore was the specic focus of the presence of
principles that would address the ambiguity underlying sustainability.
The G3 guidelines were scrutinized to determine the presence of principles that could provide guidance in determining stakes of stakeholders. Several concepts were found dispersed in the guidelines but not in a cohesive form.
8
More information on this area is included in the GRI guidelines for provisions for such assurance engagement (p. 9), overarching policies, and
management systems (p. 19).
9
Assure View: The CSR Assurance Statement Report. CorporateRegister.com (2008).
10
The ISAE 3000 does provide some guidance in the performance of non-nancial audits, including different levels of assurance, reasonable and
limited, the rst involving more detailed work resulting in a positive statement of conclusions and the second, with less work, including a negative
statement of conclusions.
101
The sustainability context, for example, contained distinctions between the global and local view, indicating that
the underlying question of sustainability reporting was how organizations contribute to sustainability trends at the
local, regional and global contexts (p. 11 of G3 guidelines). There were distinctions made between ethical and moral
issues, for example, in the consideration of reporting employee wages in the context of nation-wide minimum and
median levels. Organizations would also need to consider their locations, sizes and sectors in framing their performance in the broader context of sustainability that may require distinguishing between topics or factors that
drive global impacts (such as climate change) and those that have more regional or local impacts (such as community development) (G3; p. 11). Legitimacy derived from the legal principle was also addressed, for example, in
the setting of benchmarks that addressed such aspects as respect to laws, norms, codes, performance standards and
voluntary initiatives (G3; p. 3). Again, legality is considered, for example, as a test of an external factor of materiality (G3; p. 9), and under stakeholder inclusiveness, in determining entities or individuals whose rights under
law or international conventions provide them legitimate claims vis--vis the organization included in stakeholder
inclusiveness (p. 10). The guidelines also provide that legal aspects of such stakeholder rights infringed by national
laws and agreed international standards should be part of the strategy and analysis report of the senior manager of
the rm. The scrutiny did not add any insights, however, into how these principles served to address the ambiguous nature of sustainability. For example, while the legal principle and its extension to legitimacy were repeatedly
referred to, there was no extension of the principle to the ambiguous situations that are often encountered in different areas of the world, particularly where it may conict with the local norms. Thus, for those willing to search
carefully, there were nuggets of gold to be mined, but to be used at the discretion of the miner, given the wide
room for interpretation that enabled the user to retain the perspective that may be more suitable to their specic
situation.
The discussions also led to the question of whether the principles espoused by the GRI made provisions for the goals of
stakeholders leading to a normative perspective of stakeholders. Despite the calls for transparency in the GRI principles, it
was not evident that they either address the ambiguities underlying sustainability or put forward a basis for the normative
stakeholder view. The guidelines mention reasonable expectations of stakeholders (G3; p. 7) but no elaboration of such
expectations. The stakeholder inclusiveness section also highlights the need to make provisions for stakeholders who are
unable to express their views on a report and whose concerns are represented by proxies (G3; p. 10). Such stakeholders are
in line with dependent stakeholders (Mitchell et al., 1997), who have legitimate stakes in the activities of the rm, but lack
the power to exercise their stakes, requiring the aid of more powerful stakeholders. The absence of norms and criteria for
identifying stakes of such dependent stakeholders, limits the extent to which rms will disclose such stakes or specically
address the reasonable expectations of such stakeholders. In addition, the GRI does indicate the goal of completeness,
particularly when integrated with boundary setting. Specically, the completeness section provides a range of entities
for sustainability reporting, that includes sustainability impacts of those entities the rm can inuence in upstream (supply
chain) and downstream (distributors and users of products) activities. A lack of direction on the nature of that inuence,
with discrete references to moral, legal and ethical imperatives does not provide for this completeness. Specically, a lack
of cohesion in the principles to determine the nature of inuence and reasonable expectations of stakeholders, leaves
discretion to management that could inuence the different aspects of completeness, as dened in the GRI, and consequently, efforts at completeness in reporting. Thus, when the substance is not adequately articulated nor integrated with
concepts and principles, it does not necessitate introspection nor highlight the need for such rms to endeavor to specic
goals other than that which fullls their traditional task of prot-maximization (albeit from a stakeholder business case
perspective).
The analysis above leads to the corresponding question of the extent to which the goals of sustainability were met
through corporate governance. The overall discretionary nature of the application of principles extends to measurement
contained in the standard disclosure that sought to disclose management approach to risks and strategies through
the measurement. Measures are now widespread and extensive, related to all parts of the Triple Bottom Line (TBL or the
economic, social and environmental areas). The goal of such measurement system is an increased number of measures
used, which may well ignore the reality that relationship between the activities of the rm and the nature of sustainability is not constant. Firms that operate in some regions will nd that their activities need to be more focused on social as
opposed to economic or even environmental, and may necessitate measures that meet these specic goals, which may
be fewer in number but greater in impact. Additionally, the choices for measures and use of different types of indicators will differ based on the country and social/legal structure. Corporate governance for sustainability, particularly in the
light of transparency goals, required stakeholder engagement and interaction. This was not adequately addressed, nor was
the connection between transparency and such engagement highlighted. Given the importance that GRI places on measurement and accounting orientation, one would have expected greater development of the assurance services that could
provide more objective feedback on the authenticity of the systems of measurement. The KPMG report for Hillside Aluminum, for example, highlights this weakness, specically indicating the lack of a generally accepted auditing or accounting
standards for the reporting of sustainability performance information. The suggestions provided by some reports also indicate the need for more credibility in order that the reports reect goals of sustainability. For example, the Umicore group
report (issued by ERMCVS) included recommendations encouraging the business groups to integrate the management of
the sustainability objectives alongside effective processes used to deliver other key business goals, and including more
information on its corporate level approach to stakeholder engagement to fully demonstrate how information is collected
102
and considered by Umicore.11 Under the prevailing systems, it appears that stakeholder presence on boards remain largely
superuous, which may account for little presence of external stakeholder presence in internal corporate governance
mechanisms (Cooper and Owen, 2007; p. 658).
Despite a serious effort to understand and describe the roots of sustainability, the principles are not integrated in a
cohesive manner as to address the challenges of sustainability and to consider its various dimensions. GRI extends the
traditional accounting lens into the stakeholder theory, though the view is now murky, with more latitude and an onus
on the development of measures, without seriously examining areas of ambiguities or the necessity for sustainability to
provide rms a new vision of their role in society. Sustainable development or the goal of inter-generational equity is open to
interpretation, and the relationship of such a goal to that of the rm is not addressed. Consistent with Moneva et al. (2006),
the simplistic perception of sustainable development leads to GRI obscuring the long-term perspective of sustainability,
contributing to a reductionist approach that focuses on the construction of a set of indicators rather than considering all
aspects of sustainability in its entirety. With little guidance on how this could lead to a comprehensive alternative worldview
where the role of prots are a parallel and not subsuming goal, the ordering of stakes now could be interpreted as a means
to the end of prots and not an end in themselves. The questions culminate on the application of the stakeholder theory
and its ability to address stakeholder concerns: are conicts to be addressed or avoided, and how are reasonable stakes or
expectations identied, particularly in the presence of conicting views?
4. Aligning sustainability accounting using normative principles
The analysis above suggests that GRI efforts, while commendable, are disjointed in their lack of cohesion and alignment.
While key concepts appear to be addressed through the principles, this lack of cohesion is evident in that they fail to
accentuate and disclose the ambiguities underlying sustainability. As a result, GRI sustainability reporting now appears
as two disjointed peaks, one for sustainability principles, and the other for measurement, with no bridge to align them.
Alignment begins with and is driven by principles that capture the essence of sustainability. Without such strong guiding
principles, the substance is prone to be lost in details, thereby allowing continuation of the business case approach combined
with impression management (Neu et al., 1998). As evident from nancial accounting traditions, an emphasis on rules results
in efforts at legitimation and the increased efforts at nding loopholes rather than objectively reporting the measures. In
sustainability reporting, rule making would constitute a more arduous process, with unlimited potential to increase in
complexity and volume.
Thus, the basic goals of sustainability are rst integrated through the principles that apply to a variety of scenarios,
particularly in the presence of ambiguity. Recognizing conict and the nature of conict is a starting point in applying the
principles. Conict resolution is based on the nature of claims, the universality versus the particularity (or specic nonuniversal nature) of the claims. Local norms and practices based on the ethical principle allow stakeholders to continue to
benet from the local practices. When conicts between stakes and goals arise, the guiding principle is to provide precedence
to universal principles over local ones or those that relate to the personality/character of the organization or region (Reed,
1999, 2002). Thus, claims based on the morality and legitimacy principles gain precedence over the ethical principle, for
example, when the local issue such as child labor conicts with the universal human rights principle. This includes
extending the global character or attested values locally. The legal principle extends to promoting laws or universal norms
to regions where such laws are not developed or where existing laws may contradict those universal norms that protect
stakeholders. Given that these situations can be extended to different political regimes, the principles make it feasible to
develop consistent sustainability systems in different environments. In the case of non-democratic countries, management
needs to consider the implications of universal norms of moral and/or legal principles where existing systems marginalize
or curtail freedoms, particularly of specic social groups.12 Management cannot assume that their right to do business has
the consent of the people; rather, it is incumbent on management to apply universal principles and discern their obligations
to stakeholders in their country of operation. Thus, under a principles based approach, managers are able to assess strategy
and determine how these are consistent with the overall goals of sustainability.
Applying the principles based approach also implies that stakeholders impacted by the rm and their stakes be identied,
a key aspect of transparency, particularly given that the dominant theme is not the management approach but the principles
basis. Thus, the concept of completeness emerges. This concept of completeness can be contrasted with that of FASBs
Concepts Statement 2, particularly in relation to the FASB example of a map that is 99% reliable but fails to show a bridge
across a river where one exists can do much harm (FASB Statement 2; paragraph 79). In sustainability, the in-completeness
example could arise from a variety of scenarios. For example, the map may display a bridge where none exists. Specically,
measures and detailed narratives may highlight the rms concerns for stakes and stakeholders, but an absence of clarity of
11
This diversity of reporting is further illustrated in the results of Simnett et al. (2009) who show that rms are selective in the choice of auditors based
on legitimacy expectations of their specic environments.
12
The universal approach does not purport to address or resolve cultural differences, say between Western and Eastern cultures. Rather, it assumes that
questions of humanity transcend differences in cultures. Specically, human needs and aspirations are most often better expressed in a democratic system
enabled by the relative freedoms of expression in comparison to others, for example, dictatorial systems. However, the premise rests on the freedoms and
not systems, as democratic systems can also lose sight of the basic principle and adopt autocratic approaches to dealing with their citizens, particularly
minorities.
103
the stakes based on principles and stakeholder engagement may in effect, be the absence of any true sustainability efforts on
the part of the rm. Such absence of sustainability may endanger the rm, but more importantly, the lives and/or livelihoods
of stakeholders who may be more dependent in their inability to confront powerful corporations (Mitchell et al., 1997).
To consider another scenario, the map may show the bridge constructed according to standards, but fail to indicate an
absence of walkways. Such exclusion may not appear relevant to the more powerful stakeholders who own automobiles,
but could effectively exclude a substantial proportion of the population in the area (another stakeholder group who may
not own automobiles) from beneting from the construction. Specically, stakes need to be identied based on principles
that not only prevent deception through camouaging, but also prevent exclusion through concealment. Disadvantaged
groups, whose stakes may fail to fall in the reasonable expectations criteria based on localized norms, nevertheless require
attention based on the broader moral principles. Thus, regardless of such failures in completeness reporting, reports based
on the management approach and grounded on the prot motive, may meet the criteria of stakeholder inclusiveness.
Completeness in sustainability, therefore, becomes the goal of transparency, to address the widely prevalent practice of
impression management (Cho et al., 2010; Neu et al., 1998). Specically, the goal is to highlight ambiguities and reveal
reality rather than settle for the deniteness and credibility that comes with the proliferation of measures and narratives.
The emphasis on principles provides for the alignment with measurement such that measures result from principles,
rather than sustainability being measurement-driven. Measurement, therefore, is subsidiary to and consequent from the
disclosure of transparent sustainability. Alignment of measurement then becomes a reality as the measures are selected to
indicate meeting or seeking to attain the goals of sustainability properly dened based on normative principles. A principlesbased approach removes the need for an exacting procedural perspective, rather emphasizing intent to provide direction.
A portrayal of the realism of the tensions between societal and organizational goals in the measurement process, results
in a transparency that can prove of greater value than a myopic focus on a pre-determined set of measures with accuracy
as the nal goal. In addition to measurement selection, principle orientation allows for better integration of measurement
with sustainability, the need for which is illustrated in the criticisms of measurement-driven sustainability. For example, the
absence of a standard unit of measure within a single account or across all three bottom lines (Robins, 2006), the confusion
over choices between trends, averages, or absolutes (Norman and MacDonald, 2004), and the challenge of objectivity of soft
measures versus hard measures (Clarkson et al., 2008) call for the need to integrate measures with sustainability concepts.
Robins (2006) points out that the triple bottom line (i.e., social, environmental and economic), by replacing the single
account of nancial performance with three different objectives that do not have a universally appropriate unit of account,
has the potential to cause the business to lose focus and pursue plural and possibly inconsistent objectives. While this
diversity of objectives supports the contention (as indicated often in the GRI) that one size ts all was not appropriate for
sustainability, it also leads to the increased importance of a cohesive means of articulating goals. GRIs efforts at integrating
such measurements under the management approach effectively enables rms to apply the business case approach.
Normative principles, in contrast, provide the wider lens through which activities of management are evaluated, and would
serve as a means to determine how the rm has understood and applied concepts underlying sustainability, including the
ambiguity therein, in developing an approach to sustainability. This integration also enables rms to offset inadequacies
of different measurement categories and approaches considered in isolation by integrating and triangulating sustainability
goals to provide direction to the principles based approach.
When combined with stakeholder engagement, this view also facilitates rms to display the application of principles
through measures that extend beyond allocation of assets to indicators of measurable outcomes, such as efciency in use of
resources allocated. Thus, rms could well be motivated to new ways of thinking and innovative approaches in accomplishing
stakeholder goals. The nature of the measure therefore, may be exible and integrative: nancial, where applicable, integrated with non-nancial, and qualitative. For example, the resources allocated to a specic stake (e.g., environmental) may
indicate a nancial commitment and measure. However, the effectiveness of such resource allocation is a management question, which may be conveyed through non-nancial/qualitative measures, not unlike the balanced scorecard system.13 Thus,
breakthrough achievements may be supported by measures that indicate that goals of stakeholders have been achieved. This
is congruent with the model in Henri and Journeault (2010) that integrates external factors (environmental concerns, environmental exposure and other facts) and internal eco-control (management control systems of environmental performance)
to lead to economic performance. In this model, the economic and environmental performance goals are independently valid
goals for the rm, with environmental performance acting as a mediating goal leading to the nal economic performance of
the rm. Such integration may be signicantly more valuable to stakeholders than merely meeting procedural dictates and
reporting more measures to attain a higher sustainability grade. In addition, given the unique circumstances under which
sustainability applies to individual rms, stakeholder relationships identied based on principles would be more likely to
have the continuity and consistency that would evade management approaches that could change as management strategy
or management personnel within the rms change.
Alignment of sustainability reaches its completion in meaningful stakeholder engagement and empowerment through
involvement in establishing and authenticating sustainability goals of the rms. As already indicated, the more relevant
the rm measurement process, the more meaningful such engagement as they address the questions of legitimate use of
13
Such an approach of a system of measures is suggested, for example, in Dias-Sardinha et al. (2002).
104
resources that can be used not just in supercial engagement but also in developing deeper stakeholder relationships. When
reports indicate how principles are applied to conicts and ambiguities in consideration of the goals of the stakeholder,
such reports enable stakeholders to view the objectivity and value of such engagement. Sustainability reporting gains value
when optimal sustainability is recognized, specically that normative stakeholder interests are not just means to an end
(of prots). Such a report would convey the essence of sustainability to rms and stakeholders, providing a benchmark that
guides rms to sustainability goals. Additionally, the increased dissemination of legal principle extends application of the
legal criteria where such legitimate laws representing the general population do not exist. This should lead to encouraging NGO empowerment, and increased diversity of board membership, with representation that is more diverse and that
includes the active participation of NGOs (e.g., Brennan and Solomon, 2008). Some stakeholders, formerly dependent (e.g.,
Mitchell et al., 1997) may now have found a voice through empowerment of NGOs knowledgeable about the stakes. Stakeholder engagement, when guided by self-interest alone, would neglect those stakeholders, and leave few options regarding
information for NGOs that are representing such stakeholders. Overall, this engagement and dialogue is necessary for the
change process (Bebbington, 2007), and the means of such engagement is stronger when there is clarity on organizational
motives for such dialogue (Unerman, 2007).
Undergirding the application of sustainability is the need for change, particularly in view of the inherently inconsistent
attempts to assimilate long-term sustainability objectives with shortsighted capitalistic goals (e.g., Gray, 2010). In this
regard, the principles based approach, which stresses the rationale underlying sustainability, provides the means to not
only implement sustainability, but to also evaluate existing cognitive patterns of perception. Adams and Whelan (2009)
point out that change requires instilling a new realization that leads to a dissonance from the existing cognitive status quo.
Specically, they assert that out that sustainability reporting can be inuenced through the alternative arguments presented
by stakeholder groups, including the government, academics, and NGOs among others that will enable management to see
the differing perspective, leading to fundamental changes in thinking and perceiving the nature of the rms wealth and
value creation. In contrast to the trickle down basis for public interest in the purely capitalistic model, wealth creation
becomes a holistic endeavor that considers tangible and intangible costs and benets (e.g., Blair, 1995; Joseph, 2008) in
an effort to capture the totality of social wealth creation. The desirable form of sustainability serves to develop standards
and examples that provide recognition when strategies align principles with measures and stakeholder ends, furthering
creativity and use of resources to make a difference in communities.
In sum, the exibility afforded the rm integrates stakeholder goals through a realization of the sustainability issues
and rms specic circumstances and internal strengths, consistent with a dualism expressed in Burritt and Schaltegger
(2010). Specically, the substance of sustainability is captured in the principles that form part of organizational thinking and
can be further distilled through measures or bottom lines that integrate with stakeholder goals. The goals of alignment
will be further accomplished when the dualism potentially draws from the principles to direct use of resources to meet
stakeholders concerns driven by the transparency that comes from the visibility of moral and legal principles. Thus, the
essence of principles-based sustainability endeavors that begins with stakeholder engagement and measurement in the
recognition that true wealth creation includes concerns for societal well-being, could well lead to innovative endeavors of
societal wealth creation that is as transparent as economic and nancial prots.
5. Discussion and conclusions
As the analysis above indicates, the GRI has made inroads into dening and promoting sustainability from a multistakeholder perspective. However, despite the elaborate preamble that holds promise for a revised view of sustainability, the
outcome gravitates to a familiar version that makes objectivity from measurement an overwhelming focus, largely avoiding
the ambiguity and conict underlying sustainability, and allowing for the business case approach to sustainability which
is no sustainability (Gray, 2010). The need for a reformation of capitalism that is built on a purely prot motive is at the
core of sustainability, if business is to consider the responsibilities of operating in a multi-stakeholder environment from the
normative perspective. Such reformation must be distinguished from the adaptation that capital has been adept at, often
using a public interest canopy to disguise the true motives that hinge on a self-centered prot-orientation. The idea of
the continuity of the rm in the context of legal entity is often at odds with the short- term perspectives of those who
reside behind the veil. The challenge then lies in motivating goal congruence between the identity of the corporation
as one in perpetuity, and its role in society that considers inter-generational equity in the spheres of economic, social and
environment.
This paper asserts that an inherent tension between the rms goals of prot and the normative stakeholder perspective
that views the goals of stakeholders as ends in themselves results in much of the ambiguity underlying sustainability.
Further, the paper postulates that a principle-based approach, in contrast to the rule-based approach has the potential
to bridge this gap such that the goals of a normative stakeholder perspective are aligned with that of the rm, where
interests of stakeholders are not subsumed within the corporate pursuit of prot. Fundamental to this effort is clarity in
understanding the nature of sustainability, with the wider and more localized views that help organizations see the issues
not as leading to inevitable conict, but rather as prioritization based on principles, leading to an increased transparency
that leaves fewer avenues for adaptations to continue the status quo. While the larger content of the paper addressed the
issues surrounding the substance of normative sustainability, accounting concepts provides the objectivity to such a system
through meaningful measures, stakeholder engagement and governance processes that can be legitimately regulated and
105
implemented. It is through this tether that normative sustainability, with the inherent ambiguities that could well gravitate
to a tool for impression management goals of the rm, may be integrated into a component of business reporting where
such rm achievements may be more objectively viewed from the perspective of social wealth creation.
As has been emphasized, sustainability in a competitive environment driven by the prot motive exists on tenuous ground.
While the discussions above are based on the premise of voluntarism and the general impression that rms may seek to
increase legitimacy and emulate leaders in social responsibility when the guidelines are clearly set, such self-motivation
may not occur naturally or become widespread without external stimulation. Specically, while long-term benets from
sustainability may appear signicant from a rational systemic perspective, short- term costs tend to be an impediment to
the pursuit of that alternative. In fact, rms may not see the benets or consider the benets as sufciently warranting the
costs involved. Porter and van der Linde (1995) assert that organizational inertia may keep organizations from voluntarily
adapting environmental sustainability goals. Further, Owen et al. (2001) in contrast, see the power differentials between
rms and economically weak stakeholders as another factor that may restrict change. Thus, change may require harnessing
external factors in addition to the internal voluntarism to bring about the necessary cohesion to bear on the implementation
of sustainability necessary for any form of reformation of capitalism. Hopwood (1983), for example, point out that wider
social agencies, including those of the State, media and the professional institutions of the accounting craft could play
a signicant role in establishing a view of both the prevailing technical state of the accounting art and those of managerial practices which are regarded as legitimate and in order (p. 301). Thus, while some form of regulation helps initiate
implementation of sustainability on a wider scale, the inclusion of increased education and communication through the
professional agencies adds another important element to aid in implementation, particularly in enabling NGOs and other
stakeholders to understand and express the rationale of the sustainability framework that could drive motivation for change.
To conclude, sustainability reporting, with the emphasis on voluntarism, is in a transition stage. Several factors could
inuence the outcomes as has been enumerated above. The premise of this paper is that alignment of accounting from a
principles-based perspective can bring about deeper introspection and possible transparency in the internal workings of
rms that may lead to individual rms increasing their sustainability endeavors with more effective and equitable outcomes.
However, given that current forms of corporate behavior lie deeply entrenched, many would remain unconvinced and
skeptical about outcomes. This paper postulates that continued debate and understanding of underlying issues are necessary
for initiating change. Perhaps crucial to these endeavors is the retention of the most appealing of capitalisms traits, creativity
and innovation, which when directed to increasing the congruence between social and business goals, could lead to greater
optimism. In sum, where different disciplines and worldviews converge, this paper stands as another perspective among
many to speak on a subject so nebulous, yet so critical for our times.
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Critical Perspectives on Accounting 23 (2012) 93106

Contents lists available at SciVerse ScienceDirect

Critical Perspectives on Accounting

Ambiguous but tethered: An accounting basis for sustainability

Tel.: +1 978 934 2842.

G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106

2. Theoretical foundations for sustainability

G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106

G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106

G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106

G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106

Aerospace and defense

Compiled from: www.corporateregister.com (as of November 2008).

G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106

Compiled from: www.corporateregister.com (as of November 2008).

3.1.2. Measurement and corporate governance

G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106

G3 = GRI 2006 guidelines.

3.1.3. Assurance and corporate governance

G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106

G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106

G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106

G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106

G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106

G. Joseph / Critical Perspectives on Accounting 23 (2012) 93106

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