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Why Do Companies Struggle for Voluntary Reporting on Their Non-Financial Performance - Term Paper Example

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The paper "Why Do Companies Struggle for Voluntary Reporting on Their Non-Financial Performance?" argues such a flexible approach is part of firms' communication with their stakeholders. As opposed to it, the prescriptive approach would be counter-productive discouraging сompanies to develop manageable reporting practices.     
 
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Why Do Companies Struggle for Voluntary Reporting on Their Non-Financial Performance
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Download file to see previous pages The triple bottom line approach theory to sustainability stipulates that profit is not the only parameter, based on which performance of a company need to be evaluated and judged. This is a narrow way of performance evaluation. There other “bottom lines “which should be taken into consideration for effectively measuring the performance of a company. These are economic, social and environmental performance. John Elkington first coined the term triple bottom line approach in 1997 (Elkington, 1997). The most important question that comes to mind is why do companies provide information about their role in preserving the environment and social responsibility? According to the Committee for Economic Development (1971), it is important for an organization to take care of the demands of its stakeholders which consists of its employees, customers, and other sundry shareholders. These demands should be met by the organizations, within the acceptable limit of a legal framework and the one which is socially acceptable in the society. One has to examine whether the provisions of non – financial information is compatible with the view that the social responsibility of a business is to increase profits. This needs to be examined in terms of specific theories. The corporate social reporting is done on the basis of two theories that are Stakeholder theory and Legitimacy theory. According to Stakeholder theory, any group which is part of the organization can influence its decision. The organization and the stakeholders are interconnected and are accountable for their actions to society. Organization and the stakeholders are also interconnected to take care of the interests of the organization (Villiers, 2006). The legitimacy theory has a different view on the reporting of social responsibility. According to this theory, organizations continuously make attempts to make sure that they work within the parameters of and customs lay down by the society they work in. In other words, their focus is on carrying out those activities which are perceived as legitimate by forces existing in the external environment. ...Download file to see next pagesRead More
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