Organized hypocrisy, organizational façades, and sustainability reporting

Abstract

Sustainability discourse is becoming ubiquitous. Still, a significant gap persists between corporate sustainability talk and practice. Prior research on corporate sustainability reporting has relied primarily on two competing theoretical framings, signaling theory and legitimacy theory, which often produce contradictory results regarding the significance and effects of such disclosures. Thus, despite this substantial body of research, the role that sustainability disclosures can play in any transition toward a less unsustainable society remains unclear. In an effort to advance our collective understanding of voluntary corporate sustainability reporting, we propose a richer and more nuanced theoretical lens by drawing on prior work in organized hypocrisy (Brunsson, 1989) and organizational façades (Abrahamson & Baumard, 2008; Nystrom & Strabuck, 1984). We argue that contradictory societal and institutional pressures, in essence, require organizations to engage in hypocrisy and develop façades, thereby severely limiting the prospects that sustainability reports will ever evolve into substantive disclosures. To illustrate the use of these theoretical concepts, we employ them to examine the talk, decisions, and actions of two highly visible U.S.-based multinational oil and gas corporations during the time period of significant national debate over oil exploration in the Alaskan National Wildlife Refuge. We conclude that the concepts of organizational façade and organized hypocrisy are beneficial to the sustainability disclosure literature because they provide theoretical space to more formally acknowledge and incorporate how the prevailing economic system and conflicting stakeholder demands constrain the action choices of individual corporations.

Introduction

The expansion of human societies and economic activities is exceeding the ecological boundaries of our planet (IPCC, 2014, Rockstrom et al., 2009). Sustainability is, for instance, now a regular feature in high profile business meetings and global leader summits. Simultaneously, however, an interlinked debate exists concerning the role global business can play in the aspired transition toward a less unsustainable future (e.g., Bansal and Hoffman, 2012, Bebbington and Larrinaga, 2014, Bebbington et al., 2014, Jackson, 2009). The spread of social and environmental issues into the corporate boardrooms is perhaps most noticeable through corporate sustainability reporting practices, which have in recent years diffused swiftly and become institutionalized as one element of the information stream produced by commercial organizations. Despite the influx of sustainability talk, the global environmental indicators show a constant decline in the state of the natural environment (Milne & Gray, 2013). A significant gap between corporate sustainability discourse and its practice continues to persist (Malsch, 2013, Spar and LaMure, 2003).

This tension between sustainability discourse and practice spawned extensive analyses of corporate voluntary sustainability disclosure and reporting, often generating contradictory conclusions (e.g., Archel et al., 2011, Dhaliwal et al., 2012, Milne and Gray, 2013, Unerman and Chapman, 2014). Proponents of sustainability reporting support its potential to make corporations more accountable and transparent about their social and environmental impacts (see Bebbington, Unerman, & O’Dwyer, 2014). The claims expressed in sustainability reports are viewed, at the very least, as credible voluntary signals to the market that these corporations are proactively managing social and environmental risks (Malsch, 2013). Critics question voluntary sustainability reporting because it tends to be limited in scope (Jupe, 2007, O’Dwyer et al., 2005), disingenuous (Aras & Crowther, 2008), and utilized as a legitimacy tool (Cho et al., 2012, Milne and Gray, 2007). Moreover, the argument exists that corporations do not walk the sustainability talk, resulting in sustainability reports consisting largely of spurious claims and unmet commitments rather than signaling rational plans and actions that address substantive concerns (e.g., Adams, 2004, Boiral, 2013, Patten, 2012). A significant body of research suggests that companies engage in social and environmental reporting mainly to secure their own position and private interests (e.g., Cho, 2009, Milne and Gray, 2013, Tinker and Neimark, 1987). Accordingly, legitimacy or reputational threats tend to drive sustainability reporting decisions, with corporate management being most concerned with deflecting, obfuscating, or rationalizing their relatively poor social and environmental performance (Cho, Roberts, & Patten, 2010).

In this paper, we argue that while sustainability reporting research can continue to glean new insights from the broad theoretical lenses of signaling theory and legitimacy theory,¹ our collective attempts to understand voluntary corporate sustainability reporting can be moved forward by examining sustainability reporting through a richer and more nuanced theoretical lens. Richer by acknowledging the likelihood that sustainability reports overreach in their claims, yet also may report honestly on the implementation of corporate social responsibility plans that differentiate them from other corporations in their industry. More nuanced by acknowledging the significant limitations of market reforms and the potential for regulatory capture by corporate interests (Archel et al., 2011, Malsch, 2013), and by allowing space for corporate maneuvers which could ultimately improve corporate social and environmental stewardship. For example, Christensen, Morsing, and Thyssen (2013) argue that discrepancies between corporate talk and actions might actually be beneficial and should therefore be tolerated. They maintain that such aspirational talk can serve as an avenue through which organizations stay motivated in their explorations of a less unsustainable future.

Our paper’s overarching purpose concerns the significance that corporate voluntary sustainability reporting can have in attempts to solve contemporary social and environmental problems (IPCC, 2014, Raworth, 2012, Rockstrom et al., 2009). More specifically, our interest is in discussing the broader role structural factors have on the content of sustainability disclosures, particularly as they relate to expectations regarding the congruence between corporate talk and corporate action. In order to explore this issue systematically, we draw on Brunsson, 1989, Brunsson, 1990, Brunsson, 1993, Brunsson, 2002, Brunsson, 2007 and related research (e.g., Christensen et al., 2013, Lipson, 2007), as well as on prior research on organizational façades (Abrahamson and Baumard, 2008, Nystrom and Strabuck, 1984). Organized hypocrisy attempts to explain the discrepancies between a corporation’s talk, decisions, and actions, and how these discrepancies may allow corporations flexibility in their management of conflicting stakeholder demands. Research on organizational façades moves beyond a model of a unitary façade, setting forth the notion that rational, progressive, or reputation façades might serve organizational purposes beyond societal legitimacy (Abrahamson & Baumard, 2008). By utilizing the concepts of organizational façade and organized hypocrisy, the sustainability disclosure literature moves beyond its usual focus on signaling, or legitimacy and impression management by more formally acknowledging and incorporating constraints on an individual corporation’s action choices given the current economic system. Further, these two concepts, when taken together, raise the possibility that incongruence between a corporation’s talk and its actions may generate beneficial consequences for a broad set of organizational stakeholders.

To illustrate the use of these theoretical concepts, we present an empirical example of the application of these two concepts. To achieve this, we explore the talk, decisions, and actions of two highly visible U.S.-based multinational oil and gas corporations during the time period of significant national debates over allowing oil exploration and drilling in the Alaskan National Wildlife Refuge (ANWR). This study qualitatively analyzes the annual reports, stand-alone sustainability reports, website disclosures and shareholder resolutions during the deliberation period of the ANWR Bill.² The ANWR provides us a suitable research setting as the debate juxtaposes incommensurable issues such as protecting the biodiversity in fragile environments, respecting the human rights of Alaskan Aboriginals, and developing commercial energy resources and energy independence. Our empirical analysis revealed that these corporations’ messages and activities appear to be generally consistent within each façade. However, in line with Brunsson’s idea of organized hypocrisy, we show how differences between corporate talk and actions become evident when exploring across façades—while rational and progressive façades have more common features and fewer contradictions, we identified more incompatibilities between the rational and reputation façades in our case firm disclosures.

The remainder of the paper is organized as follows. The role of sustainability disclosures in society is discussed next. The third section offers insights about the relation between hypocrisy and façades and their role in managing legitimacy and conflicting stakeholder interests. The fourth section provides an empirical illustration of how the ideas of organized hypocrisy and façades can be fruitful in corporate sustainability reporting research. The paper ends with a discussion and conclusions.