Accounting Theories and Sustainability: A Research Project (ACC3005)

This report explores the application of accounting theories to sustainability, focusing on legitimacy, stakeholder, and institutional theories. It examines how these theories influence a company's non-financial performance and sustainable development. The research paper aims to find how the non-financial accounting theories affect the company’s performance and whether the non-financial accounting theories assist the sustainable development of the company. The report utilizes a deductive research method, incorporating both primary and secondary research styles, and includes a comprehensive literature review. The report highlights the importance of sustainability accounting, its role in disclosing non-financial information, and its impact on stakeholders. The report also discusses the relationships between these theories and their implications for corporate social responsibility and environmental performance. The study concludes with a discussion on the research methodology and the objectives of the research.

Running head: ACCOUNTING THEORIES FOR SUSTAINABILITY
ACCOUNTING THEORIES FOR SUSTAINABILITY
Name of Student
Name of University
Author’s Note

1ACCOUNTING THEORIES FOR SUSTAINABILITY
Table of Contents
SUSTAINABILITY ACCOUNTING..................................................................................2
AIM OF THE RESEARCH..................................................................................................4
RESEARCH METHODOLOGY.........................................................................................4
REFERENCE:......................................................................................................................5

2ACCOUNTING THEORIES FOR SUSTAINABILITY
SUSTAINABILITY ACCOUNTING
Sustainability Accounting is considered as the subcategory of financial accounting that focuses on
the disclosure of non-financial information about a company. Sustainability accounting mainly showcases
about the company’s non-financial performance. This information assists the stakeholders, creditors and
authorities to gain both financial and non-financial condition of the company (Fernandez-Feijoo, Romero
and Ruiz 2014). Sustainability accounting is considered is a tool that is utilized by the companies around
the world to become more sustainable. There are many sustainable accounting theories that assist the
companies to their non-financial performance for a single period.
Among all theories legitimacy accounting theories explains the behaviour of the organizations by
implementing and developing social and environmental factors that enables the company to fulfill the
objective of the sustainability. The legitimacy accounting theories also measures whether the company is
able to meet the expectations regarding the corporate social responsibility. In short legitimacy accounting
theory explains environmental and social behavior of the companies (Fernando and Lawrence 2014).
Legitimacy accounting assists the companies to deal with increasing number of environmental laws and
pressures from a variety of shareholders regarding environmental performance. Legitimacy accounting
theories also assists the stakeholders to have better information about the impact of environmental laws
and policies on the company. The use of legitimacy accounting theories is in use since 1980. As per
Hogner (1982), states that social disclosure will represent the behaviour of the corporate companies
towards the society. On the contrary, many scholars argued that legitimacy accounting theories forces the
companies to fulfill the social needs and this have considerable effect on the financial performance of the
company. The only advantage that can be analysed is that the companies who are involved in corporate
social responsibility have a very clean image infront of the stakeholders of the company. The image
provides a competitive advantage to the companies.
The concept of legitimacy is one of the integral parts that assists the company to analyses the
relationship between environment and the company. As per Preston (1995), the relationships between
institutional and social actions are being legitimized using the legitimacy accounting theory. As per
Bansal and Roth (2000), the legitimacy accounting theories assists the company to create or establish an
environmental committee. Legitimacy accounting theories mainly concentrates on the concept of a social
contract that implies on the sustainability of the company that depends on the extent to which the
company operates within the boundary and norms of society. The Legitimacy Accounting theory assists
the company to establish the relationship between the social values and the companies. This assists the
company to get accepted in larger social systems and hence the customer base of the company also
increases by considerable means (Mousa and Hassan 2015). If the company does not follow any boundary
then the company bound to loose many customers. This not only affects the financial performance of the
company but it also affects the non-financial performance of the company.
There is a huge relationship between the stakeholder theory and the sustainability management
theory. One of the most notable relationships between the sustainability management and stakeholder
theory is that both the theories want the scope of the business and also the purpose of the business. The
terminology for the sustainability management and stakeholder theory may different, but the core area is
similar in all cases. The stakeholder theory creates a real value for the sustainable development that are
made by the company to enrich the society and environment (Cornelissen et al 2015). Thus, the
stakeholder theory interlinks the operations of the company and the sustainability development of the
company.
Institutional theory is a theory that assists in the research work. This theory assists the user to
trace the origin of the organization and also explains how the foundation of the organization changes the
functional consideration of the company. The theory also assists to oversee whether the symbolic actions
of the company and external influence of the company determines the performance of the company or not.

3ACCOUNTING THEORIES FOR SUSTAINABILITY
The institutional theory also assists the company to determine the sustainable development of the
company (Jones, Wicks and Freeman 2017). In this aspect the institutional theory assists the management
of the company to review the company’s employee’s performance and all other non-financial
performance. The institutional theory assists the management of the company to review the policies
regarding the safety precaution of the employees in the company. Thus it assists the company to make
better decisions regarding the policies of the company (Keohane and Martin 2014). This increases the
retention ratio of the employees in the company and the company can have some faithful employees.
AIM OF THE RESEARCH
This research paper aims to find how the non-financial accounting theories affect the company’s
performance. The research paper also wants to find whether the non-financial accounting theories assist
the sustainable development of the company.
RESEARCH METHODOLOGY
Research Methodology is one of the integral parts of the research paper that assists the researcher
to select a pathway to conduct the research and finally meet the research objectives. In this research paper,
deductive method will be adopted to foresee the effects of the non-financial accounting theories on the
company’s performance. The optimism will also be adopted while performing the research. To conduct
this research the researcher also adopts both primary and secondary research style.

4ACCOUNTING THEORIES FOR SUSTAINABILITY
REFERENCE:
Fernando, S. and Lawrence, S., 2014. A theoretical framework for CSR practices: integrating legitimacy
theory, stakeholder theory and institutional theory. Journal of Theoretical Accounting Research, 10(1),
pp.149-178.
Mousa, G. and Hassan, N.T., 2015. Legitimacy theory and environmental practices: Short
notes. International Journal of Business and Statistical Analysis, 2(01).
Bridoux, F. and Stoelhorst, J.W., 2014. Microfoundations for stakeholder theory: Managing stakeholders
with heterogeneous motives. Strategic management journal, 35(1), pp.107-125.
Jones, T.M., Wicks, A.C. and Freeman, R.E., 2017. Stakeholder theory: The state of the art. The Blackwell
guide to business ethics, pp.17-37.
Keohane, R.O. and Martin, L.L., 2014. Institutional theory as a research program. The Realism
Reader, 320.
Cornelissen, J.P., Durand, R., Fiss, P.C., Lammers, J.C. and Vaara, E., 2015. Putting communication front
and center in institutional theory and analysis.
Fernandez-Feijoo, B., Romero, S. and Ruiz, S., 2014. Effect of stakeholders’ pressure on transparency of
sustainability reports within the GRI framework. Journal of business ethics, 122(1), pp.53-63.