Department of Business Administration Master’s Program in Accounting, 120 credits
NON-FINANCIAL REPORTING
What about the internal interest?
A quantitative study on commission in the private sector
Pernilla Danielsson & Sandra Ek
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Acknowledgement
“I’ve been looking for freedom”
- David Hasselhoff
We would like to begin by thanking our supervisor Dennis Sundvik for good guidance and feedback throughout the work process.
We would also like to thank all respondents who took the time to participate in the survey and contributed with valuable insights and thoughts to the study by sharing their opinions.
Umeå 2020-05-25
Pernilla Danielsson Sandra Ek
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Abstract
The topic of sustainability has never been as relevant as it is today. Most recently, we have been following climate activists strike worldwide, the U.S. withdraw from the Paris Agreement and we have seen the world elite leave climate meetings without agreements.
In 2015, to cope with the sustainability issues, the UN adopted the Sustainable Development Goals (SDGs), for global actions to protect the planet and assure a better future for humanity. The 2030 Agenda for Sustainable Development and the 17 SDGs are set to ensure social, economic, and environmental progress at a global level. For a worldwide advance in progress has the private sector a leading role, and to ensure an effective framework of goals and a balance between the three dimensions are the standards adopted in dialogue with the private sector.
The adoption of agendas and regulations has stressed sustainability reporting to become an important business issue for the last two decades. Although sustainability reporting emerged quite recently, the topic has been well researched. Recent research has been focusing on shareholder value and sustainability reporting. However, there is a lack of research focusing on the other stakeholder groups.
This study intends to investigate what internal stakeholders of an organization in the private sector consider as important reporting activities following the Global Reporting Standards (GRI). This study is written on commission, hence does the sample consist of the commissioner’s employees. To fulfill the purpose of the study, a survey was conducted and distributed among the internal stakeholders of the organization. The results of the study found the social sustainability activities to be the most important ones to report, followed by the environmental sustainability activities and the economic sustainability activities. Any possible differences between different subgroups of the population (gender, age, employment, and position at work) were tested by establishing two-sample t-tests and a one-way Analysis of Variance. The gender-, age- and position at work variable showed significance, rejecting the null hypothesis that the mean responses are equal.
Key words: Sustainability reporting, GRI, Non-financial report, Stakeholders, Employees, Internal interest.
Definitions
A brief presentation of the key concepts used in this study:
Non-financial report Here referred to the Global Reporting Initiative’s definition of a sustainability report; A report published by a company about the Economic, Environmental and Social impacts of its operating business activities (GRI, n.d.a.; GRI 101, 2016).
Global Reporting Initiative (GRI)
An independent international organization providing guidelines for sustainability reporting used by companies worldwide (GRI, n.d.a.).
Table of content
1 INTRODUCTION ...1
1.1BACKGROUND ... 1
1.2PROBLEMATIZATION ... 2
1.3RESEARCH GAP AND EXPECTED CONTRIBUTION ... 3
1.4RESEARCH QUESTION ... 3
1.5PURPOSE ... 4
1.6DELIMITATIONS ... 4
2 THEORETICAL METHODOLOGY ...5
2.1PRE- UNDERSTANDINGS ... 5
2.2CHOICE OF SUBJECT ... 5
2.3RESEARCH PHILOSOPHY ... 6
2.3.1 Epistemological considerations ... 6
2.3.2 Ontological considerations... 6
2.4RESEARCH APPROACH ... 7
2.5RESEARCH STRATEGY ... 8
2.6LITERATURE SEARCH ... 9
2.7EVALUATION OF LITERATURE SOURCES... 9
2.8ETHICS ... 9
2.8.1 Harm to participants ... 9
2.8.2 Lack of informed consent ... 10
2.8.3 Invasion of privacy ... 10
2.8.4 Deception ... 10
2.8.5 Data management ... 10
2.9THE STUDY’S TRUTH CRITERIA’S ... 11
2.9.1 Reliability ... 11
2.9.2 Validity ... 11
2.9.3 Generalizability and transferability ... 11
3 THEORETICAL FRAMEWORK ... 13
3.1GRISTANDARDS ... 13
3.1.1 GRI 101 Foundation ... 13
3.1.2 GRI 200 Economic ... 15
3.1.3 GRI 300 Environmental ... 15
3.1.4 GRI 400 Social ... 16
3.1.5 Summary ... 17
3.2STAKEHOLDER THEORY ... 18
3.3LEGITIMACY THEORY ... 19
3.4HETEROGENEITY PREFERENCES ... 20
3.5PREVIOUS RESEARCH ... 21
4 PRACTICAL METHODOLOGY ... 23
4.1WRITING ON COMMISSION ... 23
4.2SAMPLE ... 23
4.2.1 Demographics ... 23
4.3CONSTRUCTION OF SURVEY ... 26
4.3.1 Survey development ... 26
4.3.2 GRI related variables ... 26
4.3.3 Background variables ... 27
4.3.4 Scale ... 28
4.4PILOT TEST ... 28
4.5SURVEY DISTRIBUTION ... 29
4.6LOSS OF DATA ... 29
4.7STATISTICAL TESTING ... 30
4.8ONE-WAY ANALYSIS OF VARIANCE ... 32
4.9TYPE 1 AND TYPE 2 ERROR ... 33
5. EMPIRICAL DATA & RESULTS ... 34
5.1DESCRIPTIVE STATISTICS ... 34
5.1.1. Descriptive statistics of respondents ... 34
5.1.2. Descriptive statistics of GRI-related questions ... 39
5.2RESULTS OF STATISTICAL TESTS ... 42
6. ANALYSIS & DISCUSSION ... 44
6.1ENVIRONMENTAL ASPECTS ... 44
6.2SOCIAL ASPECTS ... 44
6.3ECONOMIC ASPECTS ... 45
6.4CONNECTIONS TO STAKEHOLDER &LEGITIMACY THEORY ... 45
6.5CONNECTIONS TO EARLIER RESEARCH ... 46
6.6FINDINGS RELATED TO THE TESTS OF BACKGROUND VARIABLES ... 46
7 CONCLUSION & RECOMMENDATIONS ... 48
7.1CONCLUSION ... 48
7.2ANSWERING THE RESEARCH QUESTION ... 49
7.3THE STUDY’S CONTRIBUTION ... 49
7.3.1 Theoretical contribution ... 49
7.3.2 Practical contribution ... 50
7.3.3 Social aspects ... 50
7.3.4 Recommendations to the organization ... 50
7.4FUTURE RESEARCH ... 51
REFERENCES... 52
APPENDICES ... 56
APPENDIX 1,GRI STANDARDS EFFECTIVE FROM 2018 ... 56
APPENDIX 2,SURVEY STATEMENTS REFERRED TO GRI STANDARDS ... 57
APPENDIX 3,ACCOMPANYING LETTER IN SWEDISH ... 59
APPENDIX 4,QUESTIONNAIRE IN SWEDISH ... 60
Figures
FIGURE 1.OVERVIEW OF THE DEDUCTIVE RESEARCH STRATEGY. ... 8
FIGURE 2.FRAME OF GRI REFERENCES. ... 13
FIGURE 3.SUMMARY OF ASPECTS PER GRI TOPIC SPECIFIC STANDARDS. ... 17
FIGURE 4.ILLUSTRATION OF THE STAKEHOLDER MODEL. ... 18
FIGURE 5.SAMPLE SIZE PER COMPANY... 24
FIGURE 6.PERCENTAGE OF WOMEN AND MEN PER COMPANY. ... 24
FIGURE 7.QUANTITY OF EMPLOYEES PER AGE AND COMPANY. ... 25
FIGURE 8.QUANTITY OF EMPLOYEES PER EMPLOYMENT... 25
FIGURE 9.QUANTITY OF EMPLOYEES PER POSITION AT WORK. ... 26
FIGURE 10.PERCENT OF RESPONSES AND LOSS OF DATA RELATED TO THE SAMPLE SIZE. ... 29
FIGURE 11.ILLUSTRATION OF TYPE 1 AND TYPE 2 ERROR. ... 33
FIGURE 12.GENDER DISTRIBUTION AMONG THE SURVEY RESPONDENTS. ... 34
FIGURE 13.AGE DISTRIBUTION AMONG THE SURVEY RESPONDENTS, MEASURED IN YEAR OF BIRTH. ... 35
FIGURE 14.EMPLOYMENT DISTRIBUTION AMONG THE SURVEY RESPONDENTS. ... 36
FIGURE 15.DISTRIBUTION OF POSITION AT WORK AMONG SURVEY RESPONDENTS. ... 37
FIGURE 16.COMPANY DISTRIBUTION AMONG THE SURVEY RESPONDENTS. ... 38
Tables TABLE 1.HYPOTHESIS PER SUBGROUP. ... 31
TABLE 2.HYPOTHESIS FOR THE SUBGROUP COMPANY BELONGING. ... 32
TABLE 3.DESCRIPTIVE STATISTICS OF THE GENDER VARIABLE. ... 35
TABLE 4.DESCRIPTIVE STATISTICS OF THE AGE VARIABLE. ... 36
TABLE 5.DESCRIPTIVE STATISTICS OF THE EMPLOYMENT VARIABLE. ... 37
TABLE 6.DESCRIPTIVE STATISTICS OF THE POSITION AT WORK VARIABLE. ... 38
TABLE 7.DESCRIPTIVE STATISTICS OF THE COMPANY VARIABLE. ... 39
TABLE 8.DESCRIPTIVE STATISTICS OF GRI-RELATED QUESTIONS... 40
TABLE 9.DESCRIPTIVE STATISTICS OF SUSTAINABILITY ACTIVITIES. ... 42
TABLE 10.DESCRIPTIVE STATISTICS OF THE RESPONDENT’S GENERAL RESPONSES. ... 42
TABLE 11.TWO-SIDED T-TEST.***,** AND * CORRESPONDS TO 1-,5- AND 10 SIGNIFICANCE LEVELS, RESPECTIVELY. ... 43
TABLE 12.ONE-WAY ANOVA TEST. ... 43
1 Introduction
In this chapter, the reader will be given an understanding of the purpose and objectives of the study. The reader will be presented with a background of the subject followed by the background problematization that describes the challenge of non- financial reporting. Finally, the introduction is concluded with research gap, expected contribution and research question.
1.1 Background
The climate meeting of 2019, also called COP 25, arranged by the United Nations in Madrid, gathered leaders from all around the world in order to discuss the climate issue and agree on a corporate action plan between the countries (UN, 2019). Despite the importance of the issue, the leaders were having difficulties to agree, and many questions were left unanswered (Regeringskansliet, n.d.).
To cope with the sustainability issues, the UN in 2015 adopted Sustainable Development Goals, SDGs, for global actions to protect the planet and assure a better future for humanity by 2030 (UNDP, n.d.). The SDGs, also called the Global Goals, stresses governments, private sector, civil society, and citizens to take action and collaborate to achieve the common goal (UNDP, n.d.). The 2030 Agenda for Sustainable Development and the 17 SDGs are set to ensure social, economic, and environmental progress at a global level (Biba, 2017, p. 1027). For a worldwide advance in progress has the private sector a leading role, and to ensure an effective framework of goals and a balance between the three dimensions are the standards adopted in dialogue with the private sector (Biba, 2017, p. 1027). The SDGs thereby addresses both the market opportunities and strategies to confront the threats and challenges related to sustainability for long- term sustainable business (Biba, 2017, p.
1027). Except for the UN there are also other sustainable initiatives developed by leading international organizations, such as the European Union's initiative to be climate- neutral by 2050 (EU, n.d.).
The adoption of agendas and regulations has stressed sustainability reporting to become an important business issue for the last two decades (Romero et al., 2014, p. 68).
Followed by an increased public awareness has the demand for environmental, social and governance disclosures grown from voluntary to almost obligatory (Romero et al., 2014, p. 68). The stakeholder interest has evolved companies reporting on sustainability into a tool used for marketing their environmental initiatives (Romero et al., 2015, p.
68). According to the KPMG Survey of Corporate Responsibility Reporting in 2017 are 93 percent of the world’s largest 250 corporations reporting their sustainability performance and Sweden is world leading in relating the UN’s SDG’s in their report (KPMG, 2017, pp. 9 & 40). As the initiative for non- financial reporting is increasing, the consulting and assurance services are also expanding (English & Schooley, 2014, p.
27; KPMG, 2017, p. 26).
Reporting sustainability can be preferably for companies of many reasons. It can have an impact on several areas of the business, including financial performance (English &
Schooley, 2014, p. 26). Reporting sustainability could also have non- financial performance impacts, such as employment satisfaction (English & Schooley, 2014, p.
26).
The evolvement of sustainability reporting has emerged several frameworks of use for companies to disclose their environmental, social and governance initiatives (Vuki´c et al., 2017, p. 14). Different frameworks have been developed to provide companies a just and fair guidance when reporting (Vuki´c et al., 2017, p. 19). To the most commonly used frameworks are ISO 26000, which is developed by the International organization for Standardization of social responsible business, the Global Reporting initiative, which is developed to help organizations make sound decisions about the sustainable development of their business, and the Sustainability Accounting Standards Board, which provides industry- based sustainability accounting standards (Vuki´c et al., 2017, pp. 19-23).
For non- financial reporting, the Global Reporting initiative, GRI, is the one which is the most widely used around the world (English & Schooley, 2014, p. 26; KPMG, 2017, p. 28). The GRI is an independent, global, nonprofit organization and a leading provider of guidelines for reporting environmental, social, and economic performance (English
& Schooley, 2014, p. 27; GRI, n.d.b.). The organization was founded by an U.S.
organization in 1997 and have become an international standard used worldwide (English & Schooley, 2014, p. 27; GRI, n.a.b). The GRI helps businesses and governments to understand and communicate their impact on critical sustainability issues and their progress, supporting the public interest and other stakeholders (English
& Schooley, 2014, p. 27; GRI, n.a.b).
1.2 Problematization
The topic sustainability has emerged as a pluralist concept with various definitions (Byrch et al., 2015, p. 672). Thus, it is considered as an ambiguous, complex, and challenged concept to account for (Byrch et al., 2015, pp. 672 & 692). Despite all efforts of initiatives on international level and organizations providing frameworks for non-financial reporting, there is still a lack of unified rules and guidelines regarding the accounting and reporting for sustainability (Romero et al., 2014, p. 69). Even though there are efforts done to unify regulations and frameworks at an international level, there is still a difference in each company's development of non- financial reporting (Romero et al., 2014, p. 68).
Earlier research on sustainability accounting and reporting at macroeconomic level are focused on incorporating sustainability to measure a “green” view of the company's business, which is not reflecting the full environmental and social cost of the business (Romero et al., 2014 p. 69). At microeconomic level there is a lack of unified metrics to measure the environmental and social impacts (Romero et al., 2014, p. 69).
Companies can use GRI standards as a starting point for their sustainability reporting but must adjust it based on the business (English & Schooley, 2014, p. 27). Due to the increasing public awareness and demand from stakeholders is reporting sustainability disclosure turning into mandatory (English & Schooley, 2014, p. 26; Romero et al., 2014, p. 71), hence companies are feeling pressured to present sustainability reports, regardless of the lack of mandatory rules.
There are arguments for sustainability reporting to be integrated in the financial reporting as a strategic decision, since the actions taken in practice are elements already measured and managed (English & Schooley, 2014, p. 28). Hence, the company's sustainability reporting should reflect the operative part of the business (English &
Schooley, 2014, p. 29).
Companies should choose a framework that complies with regulations and meets the stakeholders needs and desires (Vuki´c et al., 2017, p. 13). A financial report is a communication tool toward stakeholders (Vuki´c et al., 2017, p. 15). The identification of stakeholder group is therefore of importance for the company for them to adjust their framework and make sure it provides information of interest (Vuki´c et al., 2017, p. 15).
Frameworks for reporting sustainability issues, such as the GRI Standards, have in general a multi- stakeholder approach (Calabrese et al., 2019, p. 1019). Sustainability issues suggested in the frameworks therefore must be analyzed and prioritized in terms of the company’s business potential and degree of the stakeholder’s interest (Calabrese et al., 2019, p. 1020).
1.3 Research gap and expected contribution
Earlier research on the topic non- financial reporting could be divided in two;
macroeconomic- and microeconomic research (Romero et al., 2014, p. 69). Even though sustainability reporting emerged just a few decades ago, the topic is well researched (Romero et al., 2014, p. 69). The research started at how companies incorporated sustainability to achieve green products or a green view of the company, and how sustainability is measured to ensure reliable reports of quality (Romero et al., 2014, p.
69). While recent research on the topic is focused on sustainability reporting and shareholder value (Kaspereit & Lopatta, 2016; Leszczynska, 2012), there is still a lack of research focused on the other stakeholder groups. Hence, there is a gap in research between the different stakeholder groups and their interest of sustainability reports.
Bradford et al. (2017) made a study comparing what companies include in their report and what was in the interest of stakeholders to be reported. The study showed that there is a disconnection between what is reported and what is considered as important sustainability activities for the stakeholders (Bradford et al., 2017, p. 96). By dividing the Global Reporting Initiative’s (GRI’s) nearly 80 sustainability activities into seven different categories; environment, labor and decent work, economic, society, human rights, product responsibility, risk and compliance, the researchers found that economic objectives of a business sustainability are not considered relevant by the respondents, but was one of the most frequently presented by companies (Bradford et al., 2017, p.
96). Furthermore, risk and compliance were considered relevant and of high interest but not disclosed in the company’s sustainability report to the same extent as the interest of the stakeholders would like (Bradford et al., 2017, p. 96). Hence, there is a research gap comparing what is reported and what is of interest of the stakeholders who are reading and using the disclosed information. While Bradford et al. (2017) focused on customers, we will focus on the perceptions of another primary stakeholder group, the employees.
1.4 Research question
What activities to include in a non- financial report according to internal stakeholders?
1.5 Purpose
The purpose of this study is to investigate what internal stakeholders of an organization in the private sector consider as important reporting activities following the Global Reporting Standards, GRI.
1.6 Delimitations
In this study the aim is to investigate the view of internal stakeholders, which will be in the terms of employees from a private organization working within the car testing sector. Due to access of data and the limited timeframe, the geographical delimitation will be the Swedish car testing industry. Further, this study will be based on the GRI standards required for sustainability reports effective from 2018. Since this study is written on commission, it will also be limited to the framework of such a study, see chapter 4.1.
2 Theoretical methodology
In this chapter, the reader is presented to the authors experience and knowledge within the subject that the study aims to examine. This is to assist the reader’s critical review of the study and its results. Further, the choice of subject, research philosophy, research approach and research strategy are declared. Additionally, the literature search and the evaluation of the literature are put on display. Finally, the ethical considerations and the truth criterions of the study will be given.
2.1 Pre- understandings
Pre- understandings is referred to the authors achieved knowledge and experience (Bryman & Bell, 2011, p. 414). These knowledges and experiences could affect the data gathered and result of research (Bryman & Bell, 2011, p. 414). The pre- understandings of the authors of this study are therefore further disclosed.
Both authors are master students with a major in accounting at Umeå school of business, economics, and statistics. Hence, have both studied the advanced courses in business administration with focus on accounting. The courses included in the program has given the authors some academic insights in the areas of financial statement analysis and valuation, financial accounting, management accounting and auditing. Further has one of the authors in this study been participating in a program called Sustainergies, which is a cooperation between Umeå university and some local companies. The participation in the program have given the participant some practical insights of developing sustainable solutions in companies' operational business.
The academic pre- understandings together with practical experience has given us as authors a solid base for the research. However, there is a discrepancy whether pre- understandings are an advantage or disadvantage (Bryman & Bell, 2011, p. 29) since pre- understandings could influence the research. Examples of such are impacts of personal values in terms of beliefs or feelings combined with the researchers subjective, causing validate biases (Bryman & Bell, 2011, p. 29). Hence, shall preconceptions be considered (Bryman & Bell, 2011, p. 29). However, it is impossible for a research to be free of values since pre- understandings affects how and what the researcher sees (Bryman & Bell, 2011, p. 30). Comparing quantitative and qualitative studies, quantitative studies are however presenting a more objective view (Mies, 1993, cited in Bryman & Bell, 2011, p. 31).
2.2 Choice of subject
This study is done on commission of a mid- sized organization in the private sector. The organization have recently started working on reorganizing their business toward sustainable solutions in the areas possible according to their operating business. They have recently started to annually present projects carried out during the year but lack a framework for their non- financial reporting. Further, the organization lack insights of what should be disclosed in the report according to their stakeholders. The commission of this study is thereby to suggest a framework for their sustainability reporting according to their internal interests.
2.3 Research philosophy
Methodological choices where assumptions are made about how knowledge is both perceived and made are of importance when conducting research (Saunders et al., 2007, p. 101). Epistemology and ontology are two different research philosophies which are distinguished by Saunders et al. (2007, p. 102).
2.3.1 Epistemological considerations
Epistemology is about what is to be regarded as acceptable knowledge in a field of study (Saunders et al., 2007, p. 102), and where one should try to understand the meaning that respondents ascribe to different phenomena (Saunders et al., 2007, p. 315).
Whether or not the social world should and can be studied according to the same procedures, principles and ethos as the natural science are considered to be one of the most crucial aspects in this context (Bryman & Bell, 2011, p. 15). The key epistemological question is explained to be if the approach of studying the natural sciences can be the same as the approach of the study of the social world, counting that of business and management (Saunders et al., 2007, p. 108). Epistemology can be classified into different positions, such as positivism, realism and interpretivism (Saunders et al., 2007, pp. 103-107).
Positivism supports the principles of the natural sciences when studying conditions of the social reality (Bryman & Bell, 2011, p. 717). According to positivism, credible data will only be collected through phenomena which one can observe (Saunders et al., 2007, p. 103). It is further expected that already existing theories will be used to develop hypotheses, which in turn will be tested and then confirmed or refuted (Saunders et al., 2007, p. 103). This in turn will generate a further development of theory, which can be investigated by further research (Saunders et al., 2007, p. 103).
According to Saunders et al. (2007, p. 104), realism is linked with scientific enquiry, where the essence is that, independent of the human mind, the objects do have an existence. Hence, the reality is independent of the senses that are reachable to the tools and theoretical speculations of the researcher (Bryman & Bell. 2011, p. 718). Put in other words: the truth is what the senses shows us as reality (Saunders et al., 2007, p.
104). The categories which are constructed by scientists hence deals with real objects in the social or natural world (Bryman & Bell, 2011, p. 718).
The third epistemological position is interpretivism, where the social scientists are expected to understand the abstract meaning of social action (Bryman & Bell, 2011, p.
715). The view of an interpretivist is usually that if complexity is diminished into law- like generalizations, as in positivism, deep insights of the complex world will be lost (Saunders et al., 2007, p. 106).
The aim of this study is to examine what factors of the GRI standards that are of interest for employees, by the development of a theoretical framework, and test it using data collected via surveys. Just as described by Saunders et al. (2007, p. 103), this will generate a further development of the theory which can be of interest for further research. Hence, positivism is viewed as the most suitable epistemological alignment for this study.
2.3.2 Ontological considerations
Ontology is a theory which is concerned with nature of reality, which brings into question the commitment held to views and the presumptions researchers have about the
way the world is running (Saunders et al., 2007, p. 108). Ontology is described through two different aspects: objectivism and subjectivism (Saunders et al., 2007, p. 108).
According to the objectivism aspect, social phenomena, and the meaning of them have an existence that is liberated of social actors, hence social actors are not able to affect the social phenomenon’s (Bryman & Bell, 2011, p. 21). The social reality is further described as external to social actors (Saunders et al., 2007, p. 108). Subjectivism on the other hand, views that the social actors create social phenomena through their consequent actions and perceptions (Saunders et al., 2007, p. 108). These social phenomena are though constantly in need of revision (Saunders et al., 2007, p. 108).
By collecting and analyzing data through surveys, the goal is to find out what factors of the GRI standards that are of interest for employees. Both ontological views are applicable to the study since the respondents of the survey consists of employees with subjective views. However, the aim of this study is not to analyze the motives behind the views of the employees but simply to investigate what factors of the GRI standards that are of interest. Hence, objectivism is viewed as the suitable aspect for this study.
2.4 Research approach
There are two types of research approaches: the inductive research approach and the deductive research approach (Saunders et al., 2007, p. 117).
For the inductive research approach the data is firstly collected, and after that are theories developed (Saunders et al., 2007, p. 38). The inductive approach is commonly associated with qualitative research (Bryman & Bell, 2011, p. 620) and aims to develop an understanding of the nature of the problem (Saunders et al., 2007, p. 118).
Developing a conceptual or theoretical framework which is tested through the use of data is known as the deductive approach, where literature will help to identify the ideas and theories which will be tested (Saunders et al., 2007, p. 57). The survey strategy is most aligned with the deductive approach, and in research it is usually used to answer questions such as how, where, what, how much and how many (Saunders et al., 2007, p.
138).
This research will hence have a deductive approach, since the aim of this research is to examine what factors of the GRI standards that are of interest for employees, by developing a theoretical framework and test it through the use of data collected via surveys. Figure 1 illustrates the deductive research strategy.
Figure 1. Overview of the deductive research strategy.
Source: Bryman & Bell (2011, p. 11).
2.5 Research strategy
A research strategy is a general plan about how the researcher will approach the study in order to answer the research question (Saunders et al., 2007, p. 610) and is normally divided into qualitative research and quantitative research (Bryman & Bell, 2011, p.
718). Typically, the qualitative research is associated with an inductive strategy, while the quantitative research is associated with a deductive strategy (Bryman & Bell, 2011, p. 13). Qualitative research is necessary to conduct when the purpose of the research is to understand the reasons for the opinions, attitudes and decisions taken by the participants of the research (Saunders et al., 2007, p. 315). Quantitative research on the other hand has a thinner description or abstraction (Saunders et al., 2007, p. 472) and emphasizes quantification when collecting and analyzing data (Bryman & Bell, 2011, p.
26).
The purpose of this study is to investigate what internal stakeholders of an organization in the private sector consider as important reporting activities following the Global Reporting Standards, GRI. As previously described, this study will obtain a deductive research approach. Further on, the aim is not to gather an understanding of the employee’s opinions about the standards but to simply investigate what they consider to be of importance. Hence, this study will use a quantitative research strategy and collect data through surveys.
2.6 Literature search
The literature review is important since it helps the author to define and refine the research question and its objectives (Saunders et al., 2007, p. 57).When searching for literature the advice is to continue searching for literature during the whole research process and not just in the initial stage (Saunders et al., 2007, p. 56). Therefore, has the search for research papers continued even after the data collection for the analysis of empiric material.
For a literature search should some suitable keywords for identifying suitable references related to the research question and its objectives be used (Bryman & Bell, 2011, p.
108). For the literature research defining the objectives in the initial stage was the key words: Sustainability, non- financial reporting, EU directives and global reporting initiative. These were later revised with: stakeholder interest and legitimacy theory for more specific hits related to the research question. Other words such as: reporting strategies, content analysis, discrepancy and inequality were also used for finding earlier research.
Further, a literature research is important since it helps the author to discover a research gap and summarize conclusion of earlier research (Saunders et al., 2007, p. 58). This study’s research gap was primarily discovered by the earlier studies by Bradford et al.
(2017).
2.7 Evaluation of literature sources
An evaluation of literature sources includes a critical review of the literature in the form of a sceptic mind when reading (Saunders et al., 2007, p. 59). Being skeptical when reading means being critical and questioning the literatures methods (Saunders et al., 2007, p. 59).
To ensure quality of the literature has the search been defined with articles which are peer reviewed through approved databases available at the institution for academic journals. Such journals which have been used are Emerald journals that cover the major management disciplines and EBSCO Business Source premier, covering economics, finance, accounting, and international business areas. These journals are also recommended for business research by Bryman & Bell (2011, p. 104). The journals have been available through the library of Umeå university as e- journals.
2.8 Ethics
Ethical issues are of concern during the whole research process (Bryman & Bell, 2011, p. 128). Therefore, it is crucial for the researcher to be aware of the principles and issues involved to make the right decisions during the process (Bryman & Bell, 2011, p. 128).
The ethical principles are usually divided into four areas: harm to participants, lack of informed consent, invasion of privacy and deception (Diener & Crandall, 1978 cited in Bryman & Bell, 2011, p. 128).
2.8.1 Harm to participants
Harm could be expressed in many forms, such as physical harm, personal relationships, security of employment, stress, and anxiety (Bryman & Bell, 2011, p. 128). It is the researcher’s responsibility to ensure that the respondents are not exposed to any risks for harm and that their anonymity is preserved (Bryman & Bell, 2011, p. 129).
To ensure the issue of confidentiality and anonymity of respondents, the survey is conducted in such a way that the answers cannot be derived back to the respondent.
However, there is a possibility that respondents can be identified dependent on the sample size (Bryman & Bell, 2011, p. 130). To prevent this risk is no single answer presented. Further are only the aggregated results published and reported back to the organization.
To ensure anonymity of the organization in commission is no background information disposed, and the companies of the organization are coded as company A, company B and company C. However, it is almost impossible to conceal an organization's identity completely (Bryman & Bell, 2011, p. 129). We have, as researchers, informed the organization of this issue. Further, was also a confidentiality agreement signed between the commissioner and the researchers of this study.
2.8.2 Lack of informed consent
Informed consent means explaining to potential respondents as much information as possible of the purpose of the research so that the respondent can freely choose whether to participate in the research or not (Bryman & Bell, 2011, p. 133).
The distribution of survey was therefore followed by an accompanying letter, including a brief background of the purpose for the study followed by the research question, see appendix 3. It was then up to the participant to freely choose whether to participate or not.
2.8.3 Invasion of privacy
A research shall not interfere the participants privacy (Bryman & Bell, 2011, p. 136). If a respondent feels that a survey is violating their privacy, they should have the right to cancel the participation (Bryman & Bell, 2011, p. 136).
To ensure that the questions could not be perceived as sensitive fort the respondent, the survey was sent out on a pilot test. Further, using a web- based survey made it possible for the participant to abandon the participation at any time.
2.8.4 Deception
A researcher should not present their research as something other than it is (Bryman &
Bell, 2011, p. 136). Deception thereby means that the participant should not be led to believing that they are participating in something else then they really are (Bryman &
Bell, 2011, p. 137). It is thereby important that the participants are provided with any information of importance before their participation and afterwards also has the opportunity to take part of the result (Bryman & Bell, 2011, p. 137).
In the accompanying letter were the participants thereby, in addition to information of the study’s purpose, also provided with information on how to take part of the final results of the study, see appendix 3. The participants were provided with a link to the web page where the thesis will be published, together with the authors contact information if questions arise.
2.8.5 Data management
As researcher it could be encouraging to share the data material collected with other researchers for maximum potential benefit from it (Bryman & Bell, 2011, p. 139). This issue is related to who the owner of the data is (Bryman & Bell, 2011, p. 139). As
researcher, it is a responsibility to ensure that the data collected is secured and protected from unauthorized access or usage (Bryman & Bell, 2011, p. 139). This is particularly of importance if the data includes personal information (Bryman & Bell, 2011, p. 139).
The data collected from the survey is stored for this research only. Hence, will the data collected be deleted after the research is done and not shared with others.
To ensure the respondent and organization of this issue, they have been informed through the accompanying letter that all individual responses will be treated confidentially in accordance with GDPR and no individual or company will be identified from the final product (Umeå University, n.d.). Also, that all data that could identify individuals is protected in accordance with the University’s privacy policy and according to the survey tool’s privacy policy (Umeå University, n.d.).
2.9 The study’s truth criteria’s
To reduce the probability of getting the answers wrong, the researcher must pay attention to two specific emphasis on research designs: reliability and validity (Saunders et al., 2007, p. 149). There is a relationship between the reliability and the validity of a study, where the study cannot be valid if not reliable (Bryman & Bell, 2011, p. 161).
2.9.1 Reliability
A study's reliability refers to the consistency of a measure of a concept (Bryman & Bell, 2011, p. 158). Hence, reliability is interested in whether the results of the study are repeatable or not (Bryman & Bell, 2011, p. 41). The reliability of a study is usually affected by the choice of research strategy, where the quantitative approach generally tends to have a higher reliability than the qualitative approach because of the subjective interpretations and the lower prioritization of reliability in qualitative studies (Collis &
Hussey, 2014, pp. 52-53).
The procedure of this study's research including the construction of the survey, the pilot test and the survey distribution have been carefully recorded (Chapter 4.3, 4.4 and 4.5) to increase the reliability of the study. The data collected through the surveys have further been gathered automatically through the survey tool Google forms, which reduces the risks of human errors and hence makes it easier to replicate.
2.9.2 Validity
Validity refers to whether the indicators used are really measuring the concepts (Bryman & Bell, 2011, p. 159). Hence, for the study to be valid, the questions and statements must reflect the theoretical concept that is intended to be measured and not any other phenomenon (Collis & Hussey, 2014, pp. 196-197).
The surveys statements are formed from the theoretical framework following the GRI framework (Chapter 3.1). Also, the statements are compared and evaluated with an earlier study in the subject (Bradford et al., 2017, p. 94). Further, the survey was pilot tested to assure that the indicators represented the concepts in a comprehensible matter.
Considering these aspects, we argue the indicators measuring the concept to be valid.
2.9.3 Generalizability and transferability
When conducting a quantitative research, the researches concern is usually whether the findings are generalizable (Bryman & Bell, 2011, p. 163). Hence, if the results are applicable to other respondents then the ones representing the study (Collis & Hussey, 2014, p. 54). Since this is a study on commission, the sample is not representing a
population as in a probability sample of random selection (Bryman & Bell, 2011, p.
166). Hence, the result is not generalizable to other respondents.
Research on commissions is criticized for its lack of repeatability and focus on the organization at the expense of the research findings (Bryman & Bell, 2011, p. 415).
However, research on commissions is also defended by the argument that involvement with practitioners gives insights that cannot be achieved in other ways (Bryman & Bell, 2011, p. 415). During the research process has the commissioner just been participating in the initial stage and in the distribution of the survey. Hence, there has been a distance between the commissioner and the researchers during the processing of data and result.
3 Theoretical framework
In this chapter, the reader will be given an understanding of the Global Reporting Initiative's framework for non- financial reporting, stakeholder theory, legitimacy theory and heterogeneity preferences. The theoretical framework ends with a discussion of earlier research findings.
3.1 GRI Standards
All organizations make positive and negative sustainable contributions through their business activities (GRI 101, 2016, p. 3). These contributions should be presented to enable sustainable goals that are both individual and global (GRI 101, 2016, p. 7).
Sustainability reporting according to the GRI standards is the organizations impact and contributions on economic, environmental, and social issues (GRI 101, 2016, p. 3). In summary is the GRI standard a framework for organizations to report their sustainability impact and contribution in a common language (GRI 101, 2016, p. 7). It is in use for both internal and external stakeholders to form opinion, make comparisons and take decisions depending on the organization's sustainable development (GRI 101, 2016, p. 7).
The literature framework includes the GRI standards effective from 1st of July 2018 issued by the Global Sustainability Board, GSSB (Appendix 1). The GRI standards represent global best practice for reporting economic, environmental, and social impacts (English & Schooley, 2014, p. 27). The GRI standards are the most used for non- financial reporting (English & Schooley, 2014, p. 27), hence the standards chosen to represent this study.
The standards are divided into universal standards including GRI 101 foundation, GRI 102 general disclosures, GRI 103 Management approach and topic- specific standards including GRI 200 Economic, GRI 300 Environmental, GRI 400 Social. The standards chosen to represent this study’s framework are presented below in figure 2. GRI 102 that is used to report contextual information about an organization and its sustainability reporting practices and GRI 103 that is used to report information about how an organization manages material topics have been left out. The reasons are because the purpose of the study is to analyze what should be included in the report, not how it should be integrated and thereby not referring to the research question.
GRI 101 Foundation Universal standard
Starting point for using the standards GRI 200 Economic
Topic specific standards For specific disclosures
GRI 300 Environmental Topic specific standards
For specific disclosures
GRI 400 Social Topic specific standards
For specific disclosures Figure 2. Frame of GRI references.
3.1.1 GRI 101 Foundation
This section is covering the foundation of GRI, presenting the reporting principles for defining report content and quality, which is fundamental to help an organization decide what information to include in a sustainability report.
For reporting according to the GRI standards the company is required to follow the reporting principles that are fundamental for achieving quality of the sustainability report (GRI 101, 2016, p. 7). Further, the reporting principles are divided in two;
principles for defining report content and principles for defining report quality (GRI 101, 2016, p. 7). These principles are intended to be of use for the organization to decide which content to include in the report (GRI 101, 2016, p. 7).
Report content
This section is covering stakeholder inclusiveness, sustainability context, materiality, and completeness of the GRI fundamental principles.
When reporting the organization shall identify the stakeholders expected to be users of the report and the organizations activities, products, or services (GRI 101, 2016, p. 8).
This includes both individuals such as employees or other workers, shareholders, suppliers, local communities, and different entities or organizations to inform those who are in concern (GRI 101, 2016, p. 8). Further, the organization shall present the reporting performance placed in context (GRI 101, 2016, p. 9). That means how the organization contributes to the future and improves the economic, environmental, and social conditions at local, regional, and global level (GRI 101, 2016, p. 9). This shall include the organization’s performance from a broader perspective, but also its limitations (GRI 101, 2016, p. 9). However, the organization shall just report topics that are of relevance for their business and of material relevance for the stakeholders (GRI 101, 2016, p. 10). This includes both internal and external topics that could be of material for decision taking (GRI 101, 2016, p. 10). Further, the report shall cover boundaries of the material topics to the economic, environmental and social impacts to confirm that the topics presented are reasonable, appropriate and sufficient (GRI 101, 2016, p. 12), both for the stakeholders and for the broader perspective of society (GRI 101, 2016, p. 12). This includes boundaries that have both direct and indirect impact through the business activities (GRI 101, 2016, p. 12).
Report quality
This section is covering accuracy, balance, clarity, comparability, reliability, and timeliness of the GRI fundamental principles.
When reporting, the organization shall report information accurate for the stakeholders related to the organizations reported performance (GRI 101, 2016, p. 13). However, the definition of accuracy can vary, depending on the information and user of information (GRI 101, 2016, p. 13). Anyhow, the report shall reflect both positive and negative aspects of the organization's performance (GRI 101, 2016, p. 13). Hence, the content presented shall provide an unbiased picture (GRI 101, 2016, p. 13). Also, the information presented shall be available, understandable, and accessible to the stakeholders using the report (GRI 101, 2016, p. 14). Hence, the information shall be presented in a matter that is understandable, accessible, and usable reflecting a comprehensive picture of the organization's activities (GRI 101, 2016, p. 14).
Further, the information shall be presented in a matter that enables the stakeholders to analyze and compare the organization’s performance over time relative to others, allowing both internal and external interests to compare and benchmark performance (GRI 101, 2016, p. 14). Hence, the reported information shall be processed in such a way that it can be subject for examination as assurance for the stakeholders that the information is presented according to the reporting principles (GRI 101, 2016, p. 15).
Also, the organization shall report on a regular schedule so that the information is available in time for stakeholders to integrate it in their decisions (GRI 101, 2016, p.
16). The schedule of sustainability reporting should therefore be aligned with the financial reporting of the organization to enable comparability for the stakeholders (GRI 101, 2016, p. 16).
3.1.2 GRI 200 Economic
The economic standards of GRI concerns the economic impacts of the organization and stakeholders at local, national, and global level.
Reporting economic impacts involves disclosures of economic value generated and distributed direct or indirect by the organization, including financial risks and opportunities related to climate change, such as direct financial support acquired from government in form of grants for investment or research & development (GRI 201). The organization shall disclose direct and indirect economic issues associated to the geographical location such as significant wage deviations from standard entry level by gender and age (GRI 202), investments in infrastructure and other supported services for the community (GRI 203), percentage of local and external suppliers followed by positive and negative impacts occurred or/and expected due to the organizations operations (GRI 204).
If the organization is operating in a location where there are significant risks for corruption shall also policies, procedures and preventive actions taken be disclosed (GRI 205). Followed by anti- competitive, antitrust and monopoly practices according to laws and regulations initiated in the organization (GRI 206). Further, the organization shall also disclose tax regulations country- by- country that affects the business operations and governmental risks that could affect the organization or stakeholders if operating in several countries (GRI 207).
3.1.3 GRI 300 Environmental
The environmental standards of GRI concerns the organizations impacts on the biological system from a global perspective, such as the operations impact on land, air, and water.
Reporting the environmental impacts concerns the operational part of the organizations business such as percentage of recycled materials used in production, including renewable and non- renewable material used for package and management of reclaimed products (GRI 301). Related to the business operations the organization shall also disclose energy consumed from renewable and non- renewable sources together with efficiency initiatives to reduce the consumption of energy (GRI 302).
Related to the biological system the organization shall report their consumption of water including sources of water such as ground water, produced water or/and salt water (GRI 303). Source of water should also comprehend effluent management, local impacts, and reduction initiatives (GRI 303). Related to the biological system the organization shall disclose strategies to maintain biodiversity such as remediation of damage caused by the organization's activities, including strategies to protect and restore habitat areas at the business geographical location and redemption costs (GRI 304). Also, the organization shall report direct and indirect emissions of global warming potential such as greenhouse gas, also called GHG, among other emissions significant to pollute the air
