CHINHOYI UNIVERSITY OF TECHNOLOGY

SCHOOL OF ENTERPRENEURSHIP AND BUSINESS SCIENCES

DEPARTMENT OF ACCOUNTING SCIENCE AND FINANCE

Do manufacturing industries care about social and environmental disclosures? Case of

Intercrete Zimbabwe Ruwa.

BY

CEPHAS GASURA

(C15125870A)

Supervisor: Doctor Matowanyika

A Research project submitted to the School of Entrepreneurship and Business Sciences

in Partial fulfilment of the Requirements for the Award of the Bachelor of Science
Honours Degree in Accountancy

Chinhoyi, Zimbabwe

2019
RELEASE FORM

NAME OF STUDENT: CEPHAS GASURA

PROJECT TITLE: DO MANUFACTURING INDUSTRIES CARE

ABOUT
SOCIAL AND ENVIRONMENTAL DISCLOSURES?
: A CASE STUDY OF INTERCRETE ZIMBABWE
PVT LTD RUWA
DEGREE TITLE: BACHELORS OF SCIENCE HONOURS DEGREE IN
ACCOUNTANCY

YEAR GRANTED: 2018

Permission is granted to the Chinhoyi University of

Technology Library to produce single copies of this
project and to lend or sell such copies for private,
scholarly or scientific research purposes only. The
author reserves other publication rights; neither the
project nor extensive extracts from it may be printed
or otherwise reproduced without the author’s written
permission.
PERMANENT ADDRESS: 1576 CROWHILL ROAD BORROWDALE
HARARE

ZIMBABWE

Student’s signature: ……….……………..

Date: ……………………

DECLARATION

I, Gasura Cephas, do hereby declare that this research report is the result of my own work,
except to the extent indicated in the acknowledgements, references and by comments
included in the body of the report, and that it has not been submitted in part or in full for any
other degree to any other university.

………………………………………
Name of student

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Date
APPROVAL FORM

The undersigned certify that they have read and recommended to the Department of
Accounting Science and Finance, School of Business Sciences & Entrepreneurship, Chinhoyi
University of Technology, for acceptance; a project titled, “DO MANUFACTURING
COMPANY CARE ABOUT SOCIAL AND ENVIRONMENTAL DISCLOSURES. A
CASE OF INTERCRETE ZIMBABWE PVT LTD RUWA”, submitted by GASURA
CEPHAS in partial fulfilment of the requirements for the Bachelor of Science Honours
Degree in Accountancy.

NAME OF SUPERVISOR: DR K MATOWANYIKA

SIGNATURE: ………………………..

DATE: …………………………………
DEDICATION

This examination venture is committed to my dearest guardians for establishing the solid
structure to my life. My exceptional commitment will likewise go to my companion
(Simbarashe Makanza otherwise known as Boss MK), who dependably remained my
wellspring of happiness just as moving me to exceed expectations in the voyage of
scholastics.
ACKNOWLEDGEMENTS

“The voyage of a thousand miles starts with a solitary advance". Glancing back at the day I
chose to embrace a college degree, the street appeared to be so dim and shadowy I valued that
now I have cruised through this extraordinary voyage. A voyage loaded up with difficulties,
learning, work, joy, distress and above all companionships.

Right off the bat, I might want to acknowledge to my Lord Jesus Christ for his elegance and
benevolence just as managing me through this epic scholarly adventure. I might want to
stretch out my appreciation to the Almighty God for conceding me intelligence, boldness,
great wellbeing and motivation that was fundamental to this examination.

My most noteworthy appreciation goes to my supervisor Doctor Matowanyika for his helpful
reactions, time, tolerance and ability to shape my thoughts into this bit of work displayed
thus. I am profoundly obliged to pass my thankfulness to Salvation Army family for every
one of the supplications, love and backing and BSCAC family for their consistent help amid
this tiring and passionate procedure. I would likewise need to offer warm thanks to my folks
for their money related help to take care of all the expense brought about in doing this
examination, May God richly favour all of you.

“Thus far my Lord has taken me”

ABSTRACT

The hypothetical system of this article coordinates quality-flagging hypothesis and the asset
based perspective on the firm to test the differential impacts of the quality and amount of
natural exposure on the association's notoriety. A company's notoriety is an impalpable
resource that is identified with advertising and money related execution. The social, financial
and worldwide condition has turned into an intriguing issue inside firms and has brought
about natural execution turning into an inexorably significant segment of an organization's
notoriety. The examination took a gander at the noteworthiness of ecological exposure to firm
notoriety, approaches to improve nature of natural revelation just as the rationale behind
natural divulgence by corporates. A ton of studies were given to investigate how ecological
execution improves corporate notoriety and gives creative advertising openings. The
examination additionally utilized speculations like partner hypothesis and authenticity
hypothesis as the hidden hypothetical viewpoints to the investigation. This examination
pursues a progression of nearby investigations, for example, that of Jere F et al (2014),
Nyahunzvi D.K (2013) just to make reference to a rare sorts of people who assessed the
dimension of natural divulgence by firms recorded on Zimbabwe stock trade and presumed
that there is little take-up of non-monetary issues in yearly reports consequently the
requirement for this sort of study which went further to take a gander at ecological revelation
and their effect on firm notoriety. The exploration pursued blended research structure and an
aggregate of 4 departments of Intercrete Zimbabwe Pvt Ltd.

Discoveries were dissected and displayed in tables and diagrams utilizing SPSS V16 and
Microsoft Excel. Likewise, it checked on that absence of arrangement ordering in ESG
revelations is restricting reception in Zimbabwe. The exploration reasoned that
Manufacturing Industries care less much about social and environmental disclosures, yet any
activity about its consideration on social and environmental disclosures is still low in
Zimbabwe. It thusly prescribes further investigation around there focusing on hazard and
rewards related with social and environmental disclosures in the assembling enterprises.
TABLE OF CONTENTS

2.4 Theoretical literature review.......................................................................................38

2.4.1 Stakeholder theory.............................................................................................................38
CHAPTER THREE...............................................................................................................61
RESEARCH METHODOLOGY.........................................................................................61
3.1 Introduction..................................................................................................................61
3.2 Research design............................................................................................................61
3.2.1 Descriptive research design................................................................................................61
3.3 Population and sampling.............................................................................................62
3.3.1 Population size....................................................................................................................62
3.3.2 Sample size.........................................................................................................................62
3.4 Sampling procedure.....................................................................................................62
3.4.1 Purposive sampling.............................................................................................................62
3.5 Research Instrument....................................................................................................62
3.5.1 Questionnaires....................................................................................................................62
3.6 Data collection procedures..........................................................................................63
3.6.1 Primary data.......................................................................................................................63
3.7 Data analysis and presentation...................................................................................63
3.8 Validity and reliability.................................................................................................63
3.8.1 Validity................................................................................................................................63
3.9 Ethical Consideration..................................................................................................64
3.10 Chapter Summary......................................................................................................65
CHAPTER FOUR..................................................................................................................67
DATA PRESENTATION, ANALYSIS AND DISCUSSION.............................................67
4.0 Introduction..................................................................................................................67
4.1 Presentation, analysis and interpretation of findings...............................................67
4.1.1 Response rate analysis..............................................................................................67
4.1.2 Demographic analysis...............................................................................................68
4.2 Primary data analysis..................................................................................................71
4.2.1 Significance of environmental societal and disclosure of the reputation a firm.................71
4.2.2 Motivations leading to environmental disclosure by firms.................................................73
4.2.3 Strategies in place to improve the quality of environmental disclosures...........................75
4.2.4 The relationship between environmental disclosure and firm performance......................79
CHAPTER FIVE....................................................................................................................81
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS........................................81
5.0 Introduction..................................................................................................................81
 5.1 Summary of findings....................................................................................................81
5.2 Conclusion.....................................................................................................................82
5.3 Recommendations........................................................................................................82
5.4 Recommendation for Further Studies........................................................................83

LIST OF FIGURES

Figure 1.1 Governance & Accountability Institute Research Results........................................5

Figure 1.2 Delta's new product and its implications to the environment...................................6
Figure 2.1 Developments in sustainability reporting from single issue reports ......................15
Figure 2.2 Sustainability reporting and activities in South Africa (1994-2012)......................16
Figure 4.1 Participants gender..................................................................................................40
Figure 4.2 Environmental disclosure by your institution is guided by IAS, IFRS, GRI,........49
Figure 4.3 Sustainability Reporting should be mandatory.......................................................51
LIST OF TABLES

Table 2.1:Factors influencing financing institutions financing decisions................................25

Table 2.2: Stakeholder framework...........................................................................................28
Table 4.1: Response rate..........................................................................................................39
Table 4.2: Gender of respondents............................................................................................40
Table 4.3: Age of respondents in years....................................................................................41
Table 4.4: Respondents level of experience in years...............................................................41
Table 4.5: Level of education of the respondents....................................................................42
Table 4.6:Position of respondents in the firm..........................................................................43
Table 4.7: Respondents of question 1 from section B.............................................................44
Table 4.8: Environmental disclosure creates good customer loyalty.......................................45
Table 4.9: Environmental disclosure in financing and investing decisions.............................45
Table 4.10: Results of KMO and Bartlett's Test......................................................................46
Table 4.11: Total variance explained.......................................................................................46
Table 4.12: Component Matrix................................................................................................47
Table 4.13: Environmental disclosure by your institutions guided by IAS............................48
Table 4.14: Environmental disclosure by your institution is guided by IFRS........................48
Table 4.15: Environmental disclosure by your institution is guided by GRI...........................49
Table 4.16: Sustainability reporting should be mandatory......................................................50
Table 4.17:Regression analysis of environmental disclosure and firm performance..............52
Table 4.18: Significance of environmental disclosure: Anova analysis..................................52

LIST OF ACRONYMS

ACCA Association of Certified Chartered Accountants

ESG Environmental, Social and Governance

GRI Global reporting initiative

CRISA South Africa code of responsible investment

ZSE Zimbabwe stock exchange

JSE Johannesburg stock exchange

SRI Socially responsible investment

UNPRI United Nations Principles for Responsible Investment

UN United Nations

UNEP United Nations Environmental Programme

OECD Organisation for Economic Co-operation and Development

EMAN Environmental and Sustainability Management Accounting

Network

WGEA Work group for Environmental Auditing

CHAPTER ONE

INTRODUCTION

1.0 Introduction
The idea of an open system in the theory of organization provides a useful framework to
understand the complex relationship between business and society. As the company's
environment, society presents certain constraints on business operations. The Research is
going to forecast on the social and environmental disclosures and the extent to which
Intercrete Zimbabwe care about such disclosures. The researcher will establish the impact of
social and environmental disclosures on the profitability of the business. Also, to find out if
social and environmental disclosures could be of benefit to Intercrete Zimbabwe. The
organization is one of the few manufacturing businesses in Zimbabwe that has made a mark
in the production of quality roofing materials. The Company is currently operating under
severe economic hardships and tense competition from other manufacturing business such as
Zimtile, Turnhall, and Beta Bricks. Hence a holistic approach to be intensified in the
disclosures social and environments so as to be most competitive.

1.1 Background of the study

It is difficult for firms to operate in today’s business world where consumers have, and also
require more knowledge regarding company’s products and services, their ways of operating
and about the firm itself. Consumers in today’s world are more aware and wider awake when
it comes to their society and environment’s prosperity and how it is been treated by the firms
Khuntia (2014). It is a huge responsibility for organizations to carry out their operations in a
socially responsible manner. Companies are obliged to provide the community with a
proper assessment of the measurements that they are taking towards preventing the
destruction of the environment that they work in. It is likely for the society to lower their
demand for the firms’ services. Failure to provide such information it will result in lowered
firm productivity and profitability Lindgreen, Kotler, Vanhamme and Maon (2012).
Social and environmental disclosure information of one hundred and eighty-two (182)
Brazilian companies of the high-, medium-, and low-polluting potential sectors were
collected. Data were analyzed through content analysis of documents. Results indicate that
the company’s size, profitability, internationalization and sustainability report are explanatory
factors of the disclosure of environmental information. In Brazil, Miranda and Malaquias
(2013) observed that the size of the company exerts influence on the level of disclosure. In
addition, companies from regulated sectors disclosed more environmental information when
compared with those from non- regulated sectors. Fernandes (2013) verified that the size of
the company positively influences the level of environmental disclosing and that the
participation of Brazilian companies at the New Market governance level, as well as the
degree of indebtedness (INDEBT), present negative relationship with environmental
disclosure.

Consequently, in a survey of fifty-four (54) largest oil companies in the world. It was found
that the presence of an environmental commission on corporate governance explains social
and environmental the increased disclosure of environmental information, as the structure of
the board of directors, from a sufficient number of independent members of the Council
(Popa, and Lenciu 2012). In China it was found that companies in which the chief executive
is not part of the board of directors had a higher rate of voluntary disclosure (Cheung, Jiang,
and Tan 2010). In Thailand it was discovered that variables such as the type of industry,
status of the property, and type of audit are explanatory of the environmental disclosure in
corporate sites (Suttipun and Stanton 2012). Lu and Abeysekera (2014) verified that the size
of the company and industry classification are significant for greater social and
environmental disclosure in Chinese companies.

Social and environmental and issues were not seriously considered in management objectives
because they were deemed not to have any significant financial impact (Pereira Eugénio et al.
2013). In a collective effort to gain legitimacy, majority of organizations have recognized the
importance of their environment to their businesses and the need to safeguard it. Number of
organizations have failed dismally not as a result of resources scarcity or because of faulty
products, but due to a complete deterioration of their legitimacy (Díez-Martín et al. 2013).
Consequently, research on environmental disclosures has gained prominence in recent times.
The growth in research focus on Social and environmental disclosure issues has been borne
out of the growing concern. In particular, major stakeholders have expressed concern in
diverse ways over how the environment could be preserved for the generations to come (Gray
et al. 2001; Jenkins and Yakovleva 2006).

The natural and social ramifications of the financial exercises of organizations have in this
way elevated the requests on associations for data on their manageability conduct (Ingley
2008). In light of these requests, endeavors have been made by certain chiefs of organizations
to represent their activities and inactions on the earth in a manner to guarantee partners of
their readiness and readiness to defend nature in which they work. Without a doubt, it is
progressively turning into a typical practice to see organizations go the additional mile to
educate and clarify the effect of a portion of their natural exercises and activities to real
partner bunches Wilmshurst and Frost (2000). While these activities may have direct cost
suggestion to these associations, the importance of joining societal necessities into an
association's exercises has been perceived to be essential to the very presence and survival of
the association Deegan et al. (2002). As Chelli et al. (2014) set, authoritative presence relies
upon its ability to deal with the requests of its condition, as nature holds the assets for its
survival. In the field of bookkeeping, various examinations have surveyed natural execution
of firms ordinarily by inspecting their ecological revelation rehearses Sumiani et al. (2007);
Deegan et al. (2002); de Villiers and Barnard (2000); Tilling and Tilt (2010). Others have set
up the connection between environmental.

For a situation where natural exposure is willful, the investigation diagrams which ecological
data recorded firms in Ghana are for the most part concentrating on over a 10-year time span.
A few examinations were done to survey whether the affectability of an organization's
industry impacts its dimension of ecological exposures Díez-Martín et al. (2013). The
examination is supported by the authenticity hypothesis which hypothesizes that
organizations unveil ecological data primarily to keep up the certain implicit understanding,
improve their consistent presence in nature and avoid authenticity emergencies. In view of a
substance examination, a word hunt of the ecological exposure markers from the GRI (Global
Reporting Initiative) was directed to determine the measure of natural divulgences in
corporate yearly reports of recorded firms in Ghana. An expressive examination of the natural
data of the organizations demonstrates that recorded firms in Ghana are unveiling some
ecological data, however low. They are unveiling more item and administration related data;
with for all intents and purposes non-existent data on biodiversity, discharges and gushing.
Utilizing the irregular impact relapse model, the impact of gainfulness, firm size, reviewer
type, industry type, outside affiliation and age on firms' natural divulgence was assessed. The
consequences of the examination show that industry affectability, firm size and age are
significant indicators of firms' natural revelation practice. By suggestion, greater firms, more
seasoned firms and ecologically delicate firms unveil more data on the earth than their
partners.

In the course of recent years, social and environmental disclosures has frightened a lot of
consideration among a few monetary dissident Barako and Brown (2008); Blacconiere and
Patten (1994); Hackston and Milne (1996); Hughes et al..(2001); Khan (2010); Patten (1992);
Ponnu and Okoth (2009). As per Khan (2010) social and natural revelation has achieved an
expanded consideration in the field of accounting writing in the course of the most recent two
decades. Inside a rising number of assembling businesses, social and ecological issues are
picking up a vital job and vital significance, organizations are attempting to create systems
that would ensure long haul execution. The expanded mindfulness on social and natural
exercises has put more weights on Manufacturing Industries to impart data with respect to
such exercises and react to a few prerequisites forced by partners. Thus, corporate social and
natural detailing approach turns into an essential issue for organizations to set up and upgrade
their authenticity to work with a few entertainers including clients, representatives, social and
ecological associations.

Given the importance of the issue and following some environmental disasters (e.g. Union
Carbide’s chemical leak in Bhopal, India during December 1984; oil gulf spill in the Gulf of
Mexico during June 2010), empirical studies dealing with either the determinants or the
consequences of social and environmental reporting practices have proliferated (Richardson
and Welker (2001), Déjean and Martinez (2009), Halme and Huse (1997), Blacconiere and
Patten (1994), Patten (1992), Becchetti et al. (2008). Nevertheless, the existing empirical
literature has generally focused on developed and developing countries and emergent markets
remain under-researched although they become the center of attention of international
corporate responsibility initiatives. An illustrative example here is the survey conducted by
the Social and Investment Forum (SIF, 2009), namely, Emergent Markets Disclosure Project,
which has examined the state of sustainability in several emergent markets. In this regard,
Maier (SIF report, 2009, p. 2), Head of Research at Ethical Investment Research Services
(EIRIS), states that increasingly, responsible investors are focusing on emerging markets as
they seek to diversify their equity investments. Similarly, Voorhes (SIF report, 2009, p. 2),
Research Director of the SIF, states that “the demand for corporate responsibility and
disclosure is truly global, and companies in emerging markets are beginning to respond and,
in some cases, leading the way”.

At the time of writing, empirical studies in African countries have generally focused on the
level of social and environmental information in specific industries and firms (e.g. mining
industry in South Africa, Villiers and Van Staden, 2006; Coetzee and Van Staden, 2011;
listed Keynan companies, Ponnu and Okoth, 2009; multi-national companies in Nigeria, Ite,
2004), and the determinants of social and environmental disclosure (Kenya, Barako and
Brown, 2008). Few attempts, however, have been made to identify the effect of social and
environmental disclosure on corporate performance in emergent economies such as African
countries.

No studies have been conducted to assess the effect of social and environmental information
on firm value and corporate performance in African countries. Besides, studies in emergent
economies have generally considered only one context. There have been some studies in two
African countries namely, Morocco and South Africa. The choice was mainly justified by
two reasons: on the one hand, mining industry represents a crucial sector in these two
settings, on the other hand, these two countries belong to two legal systems (common law for
South Africa vs civil law for Morocco) with divergent features. The study represents
therefore, an attempt to extend previous empirical studies in Africa that have dealt with social
and environmental disclosure trends (e.g. Villiers and Van Staden, 2006; Coetzee and Van
Staden, 2011). The determinants of this type of disclosure (for example, Barako and Brown,
2008) by investigating the economic consequence of this kind of information on corporate
financial performance. Furthermore, the study considers also two countries with divergent
institutional features and different levels of stakeholders.

Accordingly, earlier studies constitute an attempt to examine the relationship between social
and environmental disclosure and firm value in two African markets. The research tries to
assess the empirical relationship between corporate performance proxied by Tobin’s Q and
social and environmental disclosure. According to Richardson et al. (1999) firms that engage
in corporate social and environmental projects can be more competitive and profitable. As a
result, they can reduce future regulatory costs imposed by government officials. It also
enhances the need for firm’s products through customer tolerance of environmentally
products.
Conceptual framework

Social Environmental
actions actions

Social & Environmental Disclosures

Increased Lower
Increased product’s Increased adverse
employees acceptance equities’ effects of
motivation among marketability future
customers regulations

Corporate financial performance

Fig 1. 1 Selcuk University At 03:18 22 January 2015 (PT)

Fig 1.1 shows the expected benefits of social and environmental disclosures. This may
largely exceed their costs implying higher corporate financial performance. Figure 1
summarizes the theoretical predictions and proposes a conceptual framework linking social
and environmental information to corporate financial performance. Empirical literature has
generally considered corporate profitability as explanatory variable of social environmental
disclosure with mixed evidence in several empirical works (Hackston and Milne, 1996;
Cormier and Magnan, 1999; Branco and Rodriguez,2008). However, others consider
corporate performance as a consequence of social and environmental disclosure. Prior
empirical studies, in this regard, have reported inconclusive evidence on the relationship
between social disclosure and economic performance (Bowman and Haire, 1975; Abbott and
Monsen, 1979; Freedman and Jaggi, 1982; Klassen and McLaughlin, 1996; Al-Tuwaijri et
al., 2004).

Wu et al. (2010) examine the relationship between corporate performance and social and
environmental disclosure for a sample of 100 Standard & Poors’ companies. They document
that more environmental disclosure by firms may indicate potential environmental problems
and thus lower firms’ financial performance.

Table I.1 Sample description in Morocco

Morocco
Years/sectors Mining Construction Retail Chemicals Total
2005 2 3 5 4 14
2005 2 3 5 4 14
2006 2 3 5 4 14
2007 2 3 5 4 14
2008 2 3 5 4 14
2009 2 3 5 4 14

Downloaded by SELCUK UNIVERSITY At 03:18 22 January 2015 (PT)

The data collected for the purpose of the study involves the examination of annual reports for
the years 2004-2009 of listed companies on the Casablanca stock exchange and Johannesburg
stock exchange. Overall sample includes 168 firm-year observations that yield two sub-
samples of 84 observations from Casablanca stock exchange and 84 from Johannesburg stock
exchange. Industries represented in the sample are the following (mining, retail, industrial,
construction and chemicals). Table I provides further details about the sample of companies
included in our analysis
Notes: Mining, construction, industrial and chemicals are considered as polluting industries
and coded 1. We note here that industrial sectors in Morocco are linked to metals and
phosphate transformation.

A basic and fundamental question is whether social and environmental disclosure influences
corporate performance especially in developing countries where managers and investors are
less concerned by social and environmental issues. Given this importance, this study was
devoted to examine the empirical relationship between these variables in two African markets
namely Morocco and South Africa. Results show that social and environmental information
improves corporate performance in South Africa. Nevertheless, such type of disclosure has a
significant negative effect on financial performance in Morocco. Our empirical findings
highlight the importance of the contextual characteristics of these two African settings. Our
results emphasize the need to consider legal origin and the importance attributed to the
stakeholder in one country when one examines the relationship between social and
environmental reporting policy and corporate performance. In this regard, the level of
stakeholders’ power in Morocco, where social and environmental organizations enjoy less
power to influence managers and investors, plays an important role in determining the effect
of such type of disclosure on corporate performance. Furthermore, we provide support for
stakeholder and legitimacy theories in South African context.

Determining the relationship between corporate social and environmental disclosure and firm
financial performance will have some policy implications. For instance, if social and
environmental information has a positive effect on corporate financial performance,
companies should focus more on the existing social and environmental activities and improve
disclosure policy concerning them. Therefore, our results are relevant for managers,
researchers and standard setters. With respect to managers, our results shed light on the
importance of social and environmental disclosure as an opportunity to legitimize company’s
products and equities in the eyes of consumers and investors. With respect to researchers, our
study contributes to the scarce body of the literature exploring the effect of social and
environmental disclosure in emergent and developing African countries where there is a
substantial lack of evidence.
Finally, my findings may be of interest also to regulators who are currently investigating the
establishment of social and environmental reporting guidelines in manufacturing industries.
The study provides evidence that social and environmental disclosure practices remain under-
developed in Zimbabwe case of Intercrete Zimbabwe. Therefore, regulators need to impose
some norms and standards to enhance such practices and reduce uncertainty among
stakeholders concerning social and environmental issues.

Moreover, according to Ulusan and Ag (n.d.), Environmental Reporting has been a rising
concern in today’s business era as it not only keeps the society aware of the ongoing social
activities, but also works as a competitive advantage for today’s companies. Thereby, in this
business world where companies are buried with neck to neck competition, it is highly
important for firms to draw Environmental Reports for not only to track down their social
performance, but also to attract more consumers towards them and survive in the market
(Battaglia, Testa, Bianchi, Iraldo and Frey, 2014; Madueno, Jorge, Conesa and Martinez-
Martinez, 2015).

The common and major variables that were implied in order to assess the firms’
performances are ROI(Return On Investment), Leverage, ROE(Return On Equity),
ROA(Return On Assets), Net Profit Margin, Current Ratio and ROCE(Return On Capital
Employed); while variables such as recycling, proactive waste reduction, environmental
design, greenhouse emission control and waste management has been used to assess the
environmental reporting (Delmas and Blass, 2009; Dozier, 2016; Koehler, 2009).
Moreover, majority of the researches have been conducted in the African countries,
especially Nigeria (Che-Ahmad and Osazuwa and Mgbame, 2012; Marfo, Xuhua, Antway
and Yiranbon, 2014); the second highest number of researches done on this concept is
Pakistan (Mujaheed and Abdullah, 2014; Awan and Akhtar, 2014); following by Malaysia at
the third highest (Mustafa, Othman and Perumal, 2012; Saleh, Zulkifli and Muhamad, n.d.).
The problem of Social and Environmental disclosure was noted as the researcher worked
with Manufacturing Diligence during his induction program at Intercrete Zimbabwe. The idea
of such disclosure has not been disclosed properly from since the organization was formed
and it has adversely affected the degree of customer loyalty thereby affecting the trend of
their sales and profits. The researcher also noted that the company could have gain corporate
image by taking care of such social and environmental disclosures. Also, the practice of
Social and Environmental disclosure will be more like acting socially responsible thereby
cementing the goal of achieving Corporate Social Responsibility.

Intercrete Zimbabwe is one of the few manufacturing businesses in Zimbabwe that has made
a mark in the production of quality roofing materials. Formed in 2002 Intercrete Zimbabwe
has managed to grow opening a branch in Mutare, Masvingo and Sales Office at Harare
Showground the, they set very high standards of service delivery to complement the growth
of the company. However, the Company is currently operating under severe economic, social
and political conditions and has to implement other factors such as environmental disclosure
so as to curb the looming competition from other manufacturing business such as Zimtile,
Turnhall, Better Bricks. Also, such disclosures have been facilitated by government
legislation where it is now obligatory for manufacturing companies to disclose their impact
from the environment they are operating from. It is on the backdrop of this that every
customer demand quality product, regardless of what the Company is going through.

1.2 Statement of the Problem

From the background information given above it can be evidenced that environmental
disclosures have taken urge in the current business environment. Disclosure of environmental
issues is said to have quite a number of benefits which include ensuring good corporate
governance, good reputation and transparency to society amongst other.

According ACCA article 2018 poor environmental behaviour may have a real adverse impact
on the business and its finances. Punishment includes fines, increased liability to
environmental taxes, loss in value of land, destruction of brand values, and loss of sales,
consumer boycotts, and inability to secure finance, loss of insurance cover, contingent
liabilities, law suits, and damage to corporate image therefore organisations need to focus on
their behaviour towards the environmental.

Looking at manufacturing companies for instances Intercrete Zimbabwe Pvt Ltd it has a
great environment impact from the production of its product up to end of its consumption
such as air pollution, litter from manufacturing of concrete roofing tiles, bricks and heavy
trucks. Therefore, for it to enhance its corporate image and run away from the fines it has to
focus of its environmental behaviour as well as to disclose its environmental reports. The
researcher’s interest therefore lays on the care on social and environmental disclosures by
manufacturing companies in Zimbabwe focusing on Intercrete Zimbabwe Pvt Ltd.
1.3 Research objectives

1. To evaluate the importance of environmental and societal disclosures on the

reputation of Intercrete Zimbabwe Pvt Ltd
2. To find out if social and environmental disclosures could be of benefit to Intercrete
Zimbabwe Ruwa.
3. To establish the effect of social and environmental disclosures on Intercrete
Zimbabwe’s market share.

1.4 Research questions

1. What kind of relationship that maybe found between profitability and social and
environmental disclosures?
2. What are the motivations behind social and environmental disclosure by Intercrete
Zimbabwe Pvt Ltd?
3. What are the strategies in place to improve the quality of environmental disclosures
so as to enhance reputation
1.5 Research Hypothesis
H0: There is positive relationship between social and environmental disclosures and care of a
firm

H1: There is a negative relationship between social and environmental disclosures and care of
a firm

1. 6 Significance of the study

The results of the research would reinforce the need to implement social and environmental
disclosures. The decisions of acting socially responsible will have a long-term benefit to the
organisation.

The study will help Intercrete Zimbabwe to understand the effect of social and environment
disclosure on overall performance of the business. The study will explore possible credits of
social and environmental disclosures to Intercrete Zimbabwe.
1.6.1 To Intercrete Zimbabwe Owners
 By providing a point of reference about environmental disclosures, this research will
provide the owners of Intercrete Zimbabwe with significance of disclosing its social
and environmental reports.
 It will also provide the importance of conducting social and environmental disclosure
in a business
 The personnel especially management will be well vested with ideas on improving the
social and environmental disclosures so as to enhance corporate reputation

1.6.2 To other manufacturing industries

 Provide a point of reference for planning set of accepted rules and setting social and
environmental disclosures.
 It will help in creating systems that will be valuable in improving the nature of social
and environmental disclosures to upgrade notoriety.
 Modelling of client items which are socially and ecologically and amicable.

1.6.3 The University

 The university will gain wealth in literature on environmental accounting and
environmental disclosure.
 They will also gain credit for producing graduates with hands on experience for the
industry as well as approach to learning.

1.6.4 The researcher

 The study will expand the information of the scientist in social and environmental
disclosures.
 The analyst will pick up a comprehension of the Manufacturing firms in Zimbabwe
essentially Intercrete Zimbabwe Pvt Ltd.
 It will help in creating propelled scholarly aptitudes, for example, assessment,
examination and combination just as the board abilities and the significance of
notoriety to association.

1.7 Scope of the study

This examination is going to more accentuation on the impacts of social and environmental
disclosures to the reputation of manufacturing enterprises inside the setting of Zimbabwe
chiefly focusing on Intercrete Zimbabwe. Accentuation is progressively put on experimental
proof that exist in the field despite the fact that surveys will be directed. The populace is
constrained to Intercrete Zimbabwe Pvt Ltd just as the examination is focusing on assembling
organization.

1.8 Limitation
 Accessing information

The researcher was looked with a test of getting to data since a great part of the data was
considered to private because of the association's strategy. Be that as it may, the reseacher
mentioned for consent from ranking staff individuals with power and ensured all out
mystery of the information given. In addition, data from different nations was utilized to
help the specialist to think of a considerable archive.

 Time constraints

Another limiting factor for the researcher was time given to do the research as there were
also some obstacles which were need to be attended by the researcher. To cover for the
time, gap the researcher utilized a questionnaire to gather some data as it was possible for
it to be attended to in his absence. This allowed the researcher to progress in the short
space of time available. Moreover, the researcher also makes use of all the available time
to come up with the best results possible by working during weekends and at night.

 Finance and Resources

Much printing was needed for the supervisor to do the marking and corrections on the
research thus a lot of a funds were needed to cover this. Also, there was need for
travelling expenses for the research to gather primary and secondary data relevant and
adequate for the study. However, the researcher makes use of internet for acquiring data
and newspapers also so they were help of funds from parents and sisters.

 Lack of experience

The researcher did not possess the skills and experience which was much needed to carry
out an informed research which would have affected the quality of the research. However,
by continuous support and supervision from the supervisor, the researcher was able to
carry a successful and informed research.
1.9 Definition of terms
Environmental Disclosure is a means of communicating to the stakeholders about the
impact of the organisation’s actions on the environment and is done in the form of financial
or non-financial reporting.

ESG disclosure is the reporting of three factors of measuring sustainability and ethical
impact of an investment in a company’s annual reports.

Sustainability accounting alludes to a bookkeeping framework which consolidates

gathering, the executives, checking and control of ecological issues in its bookkeeping
procedure and is considered as subcategory of budgetary bookkeeping that emphasis on the
divulgence of such non-monetary data about an association's exhibition to outside gatherings.

1.10 Organisation of the research

This exploration will be considered as a total with five chapters. Chapter 1 will comprise of
preface to the exploration subject that is the underlining background and establishment of the
examination, the issue articulation and target of the investigation. Chapter 1 will be trailed by
Chapter 2 which will concentrate on the literature review and empirical evidence on
environmental disclosures and reputation of firms given by various writers. Chapter 3 will
offer consideration regarding the approach of the research that is, the manner by which the
important information is to be gathered and broke down additionally legitimizing with certain
reasons the value of these strategies. Also, Chapter 4 will framework the information
introduction, dialog and examination of the gathered information. The last part that is Chapter
5 quickly shows the discoveries, proposals and ends.

1.11 Chapter summary

The chapter has highlighted the background to social and environmental disclosure. Section
two reviews the literature for the relevant theoretical and empirical work on corporate social
responsibility disclosure. Section three presents the methodology and framework which
includes sample and the variables used in the empirical analysis. Chapter four portrays and
discusses the data analysis, discussion and statistical results. Chapter five presents the
conclusion.
 CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction
This chapter save to highlight the review of existing theoretical literature and empirical
literature on related studies that have been done in areas of environmental and social
disclosure in different nations in order to have a greater understanding of what has been done
and to review gaps that are available in previous literature.

2.1 Empirical Review

2.1.1 Historical development of Environmental disclosure accounting
As indicated by Milne and Patten (2001), Kuk et al (2005), the utilization of environmental
data is to support the general public and the firm to perceive the effect of their exercises on
the earth just as nature of business choices. Data frameworks as Carlson et al, (2001)
contend: "By utilizing current business data innovation, for example, Internet-open devices,
and modern ecological administration devices, principles, approaches and enactment a data
framework for EI the board has been structured". The steady need of data from the EI
framework help administrators to recognize natural dangers, structure of expenses and
speculations which need a test to be looked by firms. . In fact, environmental disclosures
accounting and its revealing are, for the most part, made by a wilful character, particularly
when they concern the indigenous habitat. The prerequisites of natural guidelines, issued by
International Organization for Standardization (ISO) have been the premise to numerous
investigates on ecological obligation. To satisfy these needs (Fernando et al., 2010) the
corporate yearly report (AR) and bookkeeping data framework have been considered as one
of the significant data frameworks to speak with stakeholders.
Juhmani (2014) completed an examination in Bahrain on the assurance of corporate social
and ecological divulgence on site and his discoveries demonstrates that 57.57% of the
examples recorded organizations gave social and natural data in their 2012 yearly reports and
their sites. Business banks and insurance agencies made the most revelation of social and
ecological bookkeeping, while the least exposure was made by organizations in the inns and
the travel industry area and mechanical part. Akrouth and Othman (2013);Conducted an
investigation on the assurance of corporate natural exposure in MENA developing markets
and thinks of the accompanying discoveries that demonstrates a negative and noteworthy
connection between ecological divulgence and family proprietorship and it is steady with
earlier work that dimension of natural revelation is generously influenced by organization
size and execution.
2.1.1.1 Global development of Environmental Disclosures
Environmental Disclosure accounting developed in more advanced economies in the 1960s
primary focus placed on the social aspect (human rights and equal employment
opportunities). In addition, Early literature also reviews that the first environmental accounts
were kept in Norway in 1970s with companies like Norsk Hydro leading the initiative and the
government pushed the efforts by the industry further by greening their national accounts, as
reviewed by Financial Gazette (3 September 2010). In 1972 a world conference was held in
Stockholm which gave birth to a special UN agency known as UN environmental program
(UNEP) with a task to deal with environmental issues as explained by Pramanik K. A et al
(2008).

According to Milazi M.A (2015), incidents of 1980, the nuclear plant Russian, United States
Exxon Valdez oil spill and the Bhopal gas disaster India led to the development of laws that
encouraged companies to disclose a specific set of data on environment issues. Muhammad
N, et al (2004) highlighted that developed nations in the 1980s and 1990s received some
developments in environmental reports which focused on a more broader aspect, placing
concern on how the business relate to its operating environmental issues, since then
environmental, social and governance (ESG) issues became the area of concern in modern
accounting.

2.1.1.2 Regional developmental of Environmental Disclosures

South Africa was the only African country giving early attention to sustainability accounting
that is issue dealing with the environmental as most African countries lag behind in
environmental accounting. According to Karen H (2005), environmental accounting started in
South Africa in the early 1960s due to green and peace movement which prohibited
investment in non-social responsible South African firms. South Africa was therefore
regarded as a regional leader in terms of environmental accounting. To promote incorporation
of environmental, social issues in companies operating in apartheid South Africa Sullivian
Principles were launched in 1985.According to De Villiers (2000) cited in Kamala et al,
(2015) ESG reporting in South Africa emerged during the post-apartheid period between
1994 and 1999.

2.1.1.3 National advancement of ESG bookkeeping

Broadly not a lot has been done on the issue of supportability announcing rehearses by
corporate in Zimbabwe as appeared by the aftereffects of different looks into performed
trying to survey the dimension of maintainability in Zimbabwean corporates. An examination
by Maphosa F, (1997) recognizes that issues to do with an association's effect on the natural
and social effect appeared with the presentation of Economic Structural Adjustment Program
(ESAP) while an investigation by Ndamba R, (2009) demonstrated that just 2 organizations
which represented 3% of the all-out example revealed on their supportability in yearly
proclamations. In addition, results from an examination directed four years after the fact by
Nyahunzvi D.K (2013) which was centered around the lodging segment demonstrated
comparable outcomes as it discovered that just 2 inns were giving an account of their ESG
sway which accounted just 2% of the complete inclusion of the report, with 98% being
budgetary data. Additionally, an investigation by Jere F, Ndamba R and Mupambireyi F.P
(2014), looked into that 86% of the report inclusion of yearly reports of 2014 was budgetary
data which implies that just 14% represented non-money related data. An examination of
these outcomes demonstrates that ESG bookkeeping is still continuously discovering its way
into Zimbabwe and at current administration issues are the ones with a created arrangement
corporate administration code of 2015.

2.2 Hugeness of Environmental Disclosure on Company Reputation

Since the second 50% of the twentieth century noteworthy worldwide consideration has been
paid to the issue of ecological exposure. Numerous examinations were led so as to respond to
the accompanying inquiry: for what reason do organizations unveil ecological data? Albeit
significant, these examinations have not given decisive proof, and there is still contradiction
about issues, for example, companies‟ reasons and supports for unveiling natural data. Some
of these examinations found that the intention was to improve organizations' picture and
notoriety before the general population, particularly to organizations whose notoriety has
been harmed because of a mishap or a natural calamity.

Organizations that join natural exposure in their criteria are seen to have great corporate
administration frameworks which prompts a decent notoriety that are basic to pull in potential
financial specialists just as various clients. Dorasamy N (2013), completed an examination
which recommended that ecologically cognizant firms emphatically impart to speculators,
lenders and clients that they are less dangerous ventures just as progressively solid providers
by issuing their natural or supportability reports. The examination went on declared that, such
a correspondence influences the speculator's decision of venture since financial specialists are
reasonable and try to decrease hazard however much as could reasonably be expected. For
this situation determination of a manageable firm lessens the danger of the ventures making it
alluring to financial specialists. It likewise draws in more clients as clients are additionally
the balanced, they will jump at the chance to purchase for organization which is worried
about their natural additionally which is a going concern. Clients will be guaranteed that this
organization is a going concern if there observe most speculators putting resources into it.
Dorasamy N (2013), additionally featured that natural exposure builds up great corporate
brand, henceforth the great notoriety of an organization will rise and this will prompt more
financial specialists, more clients consequently more incomes and capitals.

Markus Renner (2012), states that one of the proportions of good organization notoriety is
great nature of items and administrations. For organization to be said it has great notoriety it
ought to be seen by the nature of merchandise and enterprises they offer for example an
organization like Delta its notoriety ought to be raised by its nature of items. In research done
by Husted and Allen (2007), it shows that great corporate notoriety has a noteworthy
potential for esteem creation and is hard to recreate along these lines why an organization
should attempt all conceivable, for example, unveiling their ecological reports. Organization
notoriety is a key upper hand in business sectors advantage in business sectors where item
separation is troublesome. As indicated by Melo& Galan (2015), this upper hand is
reinforced using natural bookkeeping and CSR. Bayoud and Kavanagh (2012), concurs that
natural exposure is centrality to corporate notoriety and money related execution as it can
draw in remote financial specialists and, more noteworthy consumer loyalty and worker
responsibility.
Castaldo et al. (2009), highlighted that customers are influenced by the corporate social
responsibility (CSR) activities of the organisation which include environmental disclosures.
Furthermore, Park, Lee, & Kim (2014) carried a study which suggested that ethical and
philanthropic CSR practices may create and foster customer beliefs that organization adheres
to high ethical standards and cares about society’s wellbeing, which, in turn, positively
impacts consumer assessment of corporate reputation. Lamberti&Lettieri (2009) agree that if
customers become aware of the ethical implications of the organization’s behaviour, they
assure that the organization will maintain certain quality standards and maintain, or improve,
its corporate reputation.

Furthermore, according to Adediran and Atu 2010, environmental accounting is a new

concept that tries to recognize the side effects of production and consumption on the physical
environmental of the products being produced by an organisation. Nowadays organisations
are facing growing expectations from various stakeholder groups about the environment.
They are attracting great attention and pressure on social and environmental issues. Being
socially and environmentally responsible is very important to organisations of all types and
sizes as voluntary environmental reporting is one way to communicate effectively with
stakeholders and also in building trust and loyalty and thereby contributing to business
performance. However, organisations must look for ways to make use of these CSR. Thus,
translating good causes into strategic benefit of good corporate reputation is of tremendous
value.

More so, investors are increasingly becoming more concerned with environmental and social
impact of organization operations to community which can only be shared through
sustainability disclosures. Graymore L.M.M, (2014) identified that good ESG disclosure by
local authorities reduced the time spent by investors in navigating potential investments
opportunities since it directs investors and financiers to areas which need funding. Thus,
detailed sustainability reports map potential investment areas for investors to quickly identify
areas which need focus; hence they will be bound to make direct investments to these specific
areas.

Deloitte (2016), highlighted that environmental disclosures creates value for the business and
increases its good reputation, as it will be showing commitment to a sustainable future by
disclosing its sustainability information. It went further and states that, by doing so a firm
builds a good relationship which include trust and credibility with a wider group of
stakeholders. Thus the firm will be in a better position to attract a lot of customers as well as
investors since they are highly interested in companies with a significant value in an economy
since it will give them better values and good quality of products as it is one of the measure
of good reputation of a firm.

According to, firms with bad long-term environmental reputations are prone to disclose more
environmental information in their annual reports than other firms to enhance and improve
their image and reputation before the public opinion. Society’s expectations have been shown
to be the best motive for companies to disclose environmental information. On the other
hand, other studies argue that the expectations of society are largely insignificant. Other
investigations have examined the correlation between environmental disclosure and legal
requirements. The findings indicate that companies that have been prosecuted are more likely
to practise environmental disclosure in order to comply with environmental laws and
regulations

It can bring about increased turnover for the companies due to enhanced company and
product image. According to Zuraida Z et al, (2015) greater environmental disclosures
increases investors’ trust and customer loyalty by eliminating the insecurity concerning the
firm’s worth. Customers, the government, financiers and investors seek information when
making buying decisions, economic decisions, financing and investment decisions. For an
organisational management to make powerful decisions they need adequate information
about the organisational on its day to day activities. The availability of information such as
environmental issues information makes decision process for customer, investors and the
organisation very vital.

Agency theory suggests that there is need to align interest of management and shareholders to
reduce conflict. Zuraida Z et al, (2015) highlighted that through environmental disclosures a
firm increases its visibility as to how it is running, this results in shareholder-manager trust.
Since investors prefer to invest in more transparent business investment since they have
lower risk they will attach a higher value to a firm with higher environmental disclosure.
Zuraida Z et al, (2015) further noted that “…. market participants will value companies
higher with a higher level of NFI disclosure”. This makes companies with high sustainability
disclosures more attractive to investors.

These effects of production and consumption should be recognized in the financial statements
of organizations. Environmental costs are one of the many different types of costs businesses
incur as they provide goods and services to their customers, and environmental performance
is one of the many important measures of business success. Many environmental costs can be
significantly reduced or eliminated as a result of business decisions, ranging from operational
and housekeeping changes, to investment in “greener” process technology, to redesign of
processes/products.

Furthermore, drawing on legitimacy theory, it was discussed that a company’s reputation is a

determinant of sustainability disclosure. The concept of reputation was specifically
considered into three dimensions for analysis that is the stakeholder’s commitment, financial
performance and media exposure. According to legitimacy and stakeholder theories, Adams
and Larrinaga-Gonzalez, (2015) the disclosure of environmental, social as well as financial
information is part of the dialogue between a company and its stakeholders and it also
provide information on a company’s activities that help legitimise its behaviour, educate,
inform and change perceptions and expectations.

Bebbinton et al (2015), has recently pointed that companies may use environmental
disclosure as a way to manage their reputation risk. Gray et al 2012 assert that among the
challenges of environmental reporting, the disclosure sustainability information serves to
facilitate the projection of a socially accountable image to the firm. Environmental disclosure
therefore according to Bebbington 2015 and Fombrun 2014 will lead to increased legitimacy
and will allow the company to manage reputational risks. Deephouse and Caerter, 2016 went
on and viewed that the literature has not considered the determinant of environmental
disclosure being the concept of reputation, even though legitimacy and reputation are
somewhat overlapping concepts.

Friedman and Miles 2015, stated that environmental disclosure can be considered as a
determinant of good reputation of a firm since firms will be showing externally that they are
aware of what is needed in order to manage a wider range of social and environmental issues.
Following signalling theory, other authors argued that other firms are engaging in
environment and sustainability reporting as a way to signal their reputation to its
stakeholders. According to et al

2.3 Motives leading to social and environmental disclosures

Disclosure of non-financial statements such environmental issues has become a more vibrant
aspect around companies operating in both developed and developing economies. A lot of
studies have implicated different motives regarding the disclosure of environmental and
social issues by companies. Some of these motives which are leading to firms increasing
disclosure of their sustainability performance are seen as purely monetary but however other
authors seem to argue on the basis that environmental disclosure is actually an act of good
faith to the various stakeholder and the general users of organisational information. Below are
some of the motives why firms are disclosing environmental issues:

2.3.1 Access and attractiveness to consumer markets

The need to gain access in certain consumer markets since most of them are now
characterized with more environmental conscious consumers, has driven some companies to
disclose their environmental issues therefore disclosure of these items is important since it
shows that the business is aware of the impact of environmental issues. According to OECD
(2014), environmental disclosure improves the appeal and variation of company goods
amongst customers whose taste follow more of environmental, social governance aspects,
therefore companies which disclose more of their environmental issues are likely to attract
more customers. Such conduct has proven to be more powerful in countries where buyer
lobbies are dominant.

2.3.2 Low wage bill and attracting new employees

A report by OECD (2014), states that environmental disclosure have a positive effect of
raising the desirability of a corporate on the labour market hence most of the corporates are
increasingly disclosing their sustainability information to attract and return high quality
workforce. Mort et al, (2016) & Story et al, (2106) in Bruns A.S (2017), highlighted that
workers are an important resource in every organisation, hence it is important for a firm to
hire and maintain high quality workforce. Raising the attractiveness of the business within the
labour market allows the company to enjoy a lower wage bill since it attracts highly skilled
and more motivated employees.

INTOSAI Working Group on Environmental Auditing (WGEA) (2013) report concurs with
OECD (2014), that sustainability reporting has potential of raising employee satisfaction and
increasing the marketability of the organisation to new employees by raising its appeal on the
labour market through environmental disclosure. Prior to engaging with organisation workers
require comprehensive and precise information of the organisation before signing a contract,
this was an argument by the signalling theory as noted by Backhaus et al, (2002) cited in
Bruns A.S, (2017) hence disclosure by companies performs a signalling function to attract
and retain quality employees. The researcher is of the view that by disclosing information
like (for example number of work related accidents in a year, number of workers on HIV&
AIDS treatment, employee remuneration and packages) an organisation will be portraying to
the surrounding environment and to the workers themselves that there are a responsible
organisation and they consider their workers as important to them and the business they are
undertaking.

2.3.3 Access to finance

EY and Boston College Centre for Corporate citizenship, (2013) did a study which showed
that firms that disclose their environmental, social and governance issues are more likely to
attain opportunities to new and low-cost sources of capital. Results from a study by Clark et
al (2015) as cited in OECD (2017) are in agreement since they review that good
environmental results especially good corporate governance practises have a positive impact
of lowering both the cost of equity and the cost of debt. E1 Ghoul et al (2011) cited in Bruns
A.S (2017) confirms in his study that a good social practise has an impact of lowering the
organisations mean cost of equity. By disclosing organisational environmental issues, it
provides evidence that they are competitive and a low-risk investment hence they will lure
potential investors as it will have a good reputation therefore due to this organisation are
motivated to publicly disclose their environmental issues. According to Eccles et al (2011),
disclosures of sustainability issues performs a signalling function to investors and due to the
changing investors attitude more sustainable firms are gaining access to long-term
investments. Bruns A.S (2017), highlighted that new investors and customers to an
organisation can help to increase firm’s finances, environmental disclosure increases firms’
potential to invite new investments, which in turn, improves the firm’s capital base. This
research determined that disclosures of such aspects have potential to open doors cheap
finance and debt hence firms are interested to do so.

2.3.4 Accountability and Transparency to stakeholders

Firms are driven to disclose their environmental issues due to the fact that they are highly
acknowledging the need to be more accountable and open to its stakeholders. Besada H et al
(2010) recognises the need to communicate significant issues to stakeholders in a more open
manner and one way of doing so is the production of environmental disclosure that display to
the stakeholders the long-term environmental impacts of a company’s activities. According to
Deloitte (2016), a firm can build trust and integrity with various stakeholders by only
disclosing their environmental issues. Kyle S et al in EMAN (2016), highlighted that the
transparency which is being offered by environmental reports is significant in making an
assessment of organisational management therefore more organisations tend to disclose
reports to show how efficiency and responsible management is regarding to environmental
issues. Furthermore, Kyle S et al recognises that organisations should not shift their focus
from business strategy so as to encompass environmental issues but however should be a
truthful presentation of organisational performance and their plans thus integrated reporting is
all about being transparent to stakeholders.

2.3.5 Brand name and reputation

According to Bruns A.S (2017), a firm’s operations can negatively be affected by a bad brand
name, a good name for company creates value in everything the company does. To avoid
scepticism and criticism of business conduct by various stakeholders mainly customers drives
a company to disclose its environmental performance and this also helps it to maintain a good
brand name and a good reputation of the firm. A study by Brammer & Millington (2008)
cited in Bruns (2017) concluded that a positive correlation between a company’s good name
its financial ability exists. The awareness of positive relationship between the corporate
image and financial performance increases environmental disclosure. Moreover, a study by
Ernest and Young, (2013) suggest that by disclosing a good environmental report, a firm has
a high probability of building a good brand name and a competitive advantage, for example
global companies like BHP Billiton, Veolia Environmental, Vancouver City Saving have
built their brand names and good reputation by simply disclosing their environmental reports.
2.3.6 Factors considered when making financing decisions
As indicated by an examination by Hasnah H et al (2013), for a firm to get to back or to get
advance endorsement there are three factors that are considered to impact the likelihood for
the endorsement. The investigation went on and express that monetary foundations think
about three things before profiting assets or advance endorsement. The variables are the
executives/character, money related/limit and guarantee. As association there is requirement
for credits or fund from account establishments to back certain tasks as a rule while
acquainting an undertaking with the association.
2.3.6.1 Organization money related limit
The likelihood of the business getting an advance is influenced by the accessibility of
relentless money streams to the business. The credit officer's investigations fiscal summaries
of the association to evaluate the monetary capacity of the organization to support the
obligation. As indicated by OECD (2015;14), "The expansion of credit relies upon the solid
money related condition as reflected in the monetary proportions determined from these
announcements, for example, current proportion (current resources over current liabilities),
obligation to value proportion, net benefit rate (benefit over gross deals), return on resources
(total compensation over all out resources), and profit for value (net gain over total assets)".
Credit officers assess past money related records breaking down the association's past money
streams and making future projections of these money streams coordinating them to the
advance reimbursements to check in the event that they will almost certainly sell the
obligation in time. In this example, absence of reviewed fiscal summaries restricts the
business capacity to get to an advance since monetary organizations demand for them
preceding giving the advance, Kwaning O.C et al, (2015). Consequently for this situation
accessibility of a reliable positive income builds the business odds of getting the credit
endorsed by the money related organizations.
2.4 Theoretical literature review
There are theories which seek to explain the values of stakeholders and the reason behind the
environmental disclosures by organisation therefore to substantiate this research, the
researcher is going to look at these theories.

2.4.1 Stakeholder theory

Ecological divulgence structure some portion of a more extensive classification of corporate
social obligation. The exploration is relied on the partner esteem hypothesis sent by Freeman
E, (19874). Partner hypothesis comes from the reason that administration and specialty units
have a more extensive commitment to serve societal enthusiasm past benefit augmentation
and financial esteem creation for the investors alone. This view was bolstered by Schneider
(2002), by expressing that partner hypothesis protracts the idea of company's proprietorship
far from the customary legitimate and monetary proprietors of a firm, who become a partner
by commitment of capital or different methods which results in value possession. Along these
lines, it delivers the supposition that organizations have a commitment to its partners of
telling them how they sway the social orders and condition in which they work in both
emphatically and contrarily through revealing in their yearly on their ecological issues.

Over the previous years researchers have propelled the partners’ hypothesis and contentions
have grown with respect to the pertinence of partner notability. As indicated by Frynas and
Stephens, (2015) as referred to in Bruns A.S, (2017), two wide points of view inside the
partner hypothesis exuded from the contentions and that is the regularizing and engaging
viewpoint. Since authentic interests of all gatherings ought to be represented, regularizing
point of view of the partner hypothesis sees to partner remarkable quality as less significant
while the graphic viewpoint expect that there is requirement for recognizable proof of
significant enthusiasm of partners in this manner partner's notability is transparently
applicable. As it has increasingly informative power and helpful in clarifying the drivers,
procedure and consequences of ecological revealing, most researchers will in general be
following enlightening point of view as appeared past ESG announcing considers.

Helmig et al (2016) refered to by Bruns A.S (2017) orders partners into two classes essential
and auxiliary partners. Essential partners were said to have an immediate impact to the
association's activities and imperative to the organization and these incorporates investors,
financial specialists, representatives, clients and government. Optional partners which
comprises of media, rivalry and exchange affiliations, indirectly affect the organization and
are of less significance for the well running of the business. In any case, in a similar report,
Thijssens et al, (2015) built up a difference see since it found that essential partners, yet in
addition optional partners which are natural partners are persuasive with respect to the
executives’ basic leadership.
The gathering of who prevails to be a partner is free and far from being obviously true,
Wheeler and Sillanpaa (1997) offer an expansive structure of partner delegated essential
social, auxiliary social, essential non-social and optional non-social. In this methodology
essential partners where viewed as progressively persuasive rather than the auxiliary partners
who were viewed as less significant. The bodies’ electorate of the partners are postponed
underneath.

Table 1.2: Stakeholder framework

Primary Social Stakeholders Secondary Social Stakeholders

 Shareholders and
speculators
 Employees and supervisors
 Customers
 Local Communities
 Suppliers and colleagues
 Government and controllers
Primary Non-social Stakeholders
 The natural environment
 Future generations
 Nonhuman species
Source: Source: Research on the investor and partner hypothesis of corporate reason,
(2002).
different  Government and regulators
 Civic institutions
 Social pressure groups
 Media and academic commentator
 Trade bodies
 Competitors
Secondary Non-social Stakeholders
 Environmental interest groups
 Animal welfare organizations

In any case, as cited in Ramdhony (2015), Deegan (2006) contends that the partner
hypothesis must be subdivided into two noteworthy branches that is moral (responsibility
model) and the administrative. He declares that the moral branch perceives the significance of
every single player in the business working condition since it infers that partners are to be
dealt with similarly. As indicated by King III (2009), this methodology involves that even the
investors don't have priority over different partners. Then again, to accomplish
maintainability, administrative branch infers how the executives ought to oversee partners. It
subsequently prognosticates that business respond to the worries of various partners basing
on the dimension of intensity and impact they apply on the association, O'Dwyer B, (2002).

Experimental proof from late investigations on the ecological revelation by organizations

demonstrates that the vast majority of the reports produces are on a willful premise which
clarifies the organizations' acknowledgment of their commitment to different partners.
O'Dwyer B, (2003) and Weil et al, (2006) cited in Menzies M (2015; 32) says that "giving
revelation through supportability reports sets up another agreement with the partners and can
change corporate conduct through partner commitment". In a similar report, Jensen J.C and
Berg N, (2012) concurred with the thought that organizations owes the network henceforth
the need to both perform great to society and furthermore to report this back to the network to
demonstrate the satisfaction of the agreement. Such conviction as per the analyst clarifies that
the partner hypothesis perceives the way that organizations don't work in segregation yet it's a
nexus of agreement.

Akinpelu et al, (2013) in Lipunga M.A, (2013) bolsters that business firms have the
obligation to wide range of society which incorporate customers, network and the
administration just to make reference to a couple and not just investors. In light of the
researchers see natural detailing can be utilized as a view that specialty units mirror that they
are great corporate residents in this manner being socially and ecological cognizant.

Menzies M (2015), provided a suggestion that the addition of environmental data to a firm’s
reports will be of more significance as the firm will begin to recognise the impacts of its
actions to their stakeholders that may not be directly connected to the company’s return on
investment. The suggestion states that, a firm with an aim to produce and publish
sustainability reports will track and consolidated environmental impact data which will help it
to have an insight of its sustainability performance.

In accordance with the above theory, the researcher is of the view that businesses have a
broader responsible which is over that of its owners and serves as the basis for the move into
more sustainable reporting as it encompasses the human social aspect and the environmental
aspect. According Eccles R and Krzus M, (20100 as quoted by Melissa M, (2015) the
stakeholder theory and its implications for agency theory underlie environmental reporting, as
financial reporting is currently struggling to understand how matters around degrading the
planet can become incorporated into reports primarily written within the principal agent
relationship.

2.4.3 Value enhancing theory

There is little argument that corporations have some responsibility to society. However, there
is considerable debate as to whether firms’ socially responsible behaviour is consistent with
the wealth-maximizing interests of stockholders. One group of scholars has argued that CSR
generates additional costs which could place firms at an economic disadvantage (Aupperle et
al., 2016). Another group of researchers has demonstrated that these costs are relatively small
compared to the potential benefits (Alexander & Buchholz, 1978; McWilliams & Siegel,
2014). Corporate Social Responsibity benefits may take different forms, such as product
market advantages, enhanced employee productivity, improved stock market returns,
increased operating efficiency, corporate branding, and improved relations with regulators,
society, and other stakeholders.

Firms can develop a business model with basic value propositions designed for different
stakeholders, such as employees, customers, suppliers, regulators, the community, and
investors. Protecting different stakeholder interests results in different benefits, such as
product market benefits (loyal customers, product diversification, extended market share, the
creation of brand equity), capital market benefits (increased market returns, lowered cost of
capital, decreased information asymmetry and risk), employee benefits (increased employee
morale, job satisfaction and employee productivity), regulatory benefits (reduced litigation
costs, positive media coverage and favourable treatment from regulators), operational
benefits (better managerial skills, enhanced operating efficiency, enhanced profitability,
improved corporate branding and reputation).

A useful contribution to this debate is Bowman & Ambrosini’s (2000) distinction between
‘perceived use value’ (the subjective value perceived by customers) and ‘exchange value’
(the bargained price that is paid). The distinction is useful because it emphasizes that the use
value of a product/service is a perceived value and that this perceived value may differ from
the price that is paid.

The creation of use value is a necessity for firms to sustain. Without it, firms would have no
added value whatsoever and there would be no reason for them to exist. The fact that use
value is a subjectively recognized attribute implies that the resources and products of a firm
are not valuable in themselves, but only if someone perceives them as valuable. It also
implies that people may perceive value differently and thus that resources and products may
have a different value to different people. The implication is that value creation is, by
definition, a directional activity targeted towards someone specific. This means that one
cannot speak of value creation in general without indicating for whom this value is created.
Furthermore, value creation is not limited to customers alone. As emphasized in stakeholder
theory, firms have value for other actors as well. By buying products, firms have value for
their suppliers, by paying wages they provide value to their employees, and so forth. This
implies that the creation of use value is not only a directional activity; it is a multidirectional
activity.

There is a general belief that various stakeholders require information from companies
regarding their environmental performance. According to Deegan and Rankin (1997), annual
report users have been found to believe that environmental information is important for their
decision making and that they seek such information in annual reports. However, Deegan and
Rankin (1997) also claim that the quality of environmental performance disclosures by
companies themselves is low and biased.

Current debate on how environmental performance impacts the market value of firms is
basically divided into two schools (The Assabet Group, 2000). The cost-concerned school
argues that environmental investments and high environmental performance represent only
increased costs, resulting in decreased earnings and lower market values. Consequently, the
relationship between environmental performance and market value of a firm is expected to be
negative Jaggi and Freedman (2016), Walley and Whitehead, 1994). The value creation
school regards environmental efforts as a way to increase competitive advantage and improve
financial returns to the investors. The relationship between environmental performance and
market value is expected to be positive according to this view as stated by Konar and Cohen
(2000); Dowell et al. (2000).

Linking Environmental Performance to the Market Value of the Firm is based on three main
assumptions. First, the value of equity equals the present value of all future dividends.
Second, the accounting system satisfies a clean surplus relationship. Finally, abnormal
earnings evolve as a modified first-order, auto-regressive process and other information, not,
as a simple first-order, auto-regressive process. Based on these assumptions, Ohlson (1995)
derives the following valuation model:

MVt= ¼BVt þa1AEt þa2vt,

Where,

MVt is equal to market value of equity at time “t”.

BVt is equal to book value of equity at the end of the year “t”.

AEt is equal to abnormal earnings (defined as the difference between net income and opening
book value of equity multiplied by the required rate of return) for period “t”.
Vt is other non-accounting value-relevant information.

Some of this non-accounting information consists of information regarding companies’

environmental performance. In the sequel our concern is limited to information regarding
companies’ environmental performance. The model emphasizes the use of both accounting
and non-accounting information in the valuation process. Furthermore, the valuation
framework allows the environmental performance (EP) of the firm to be explicitly added in a
regression model through the “Vt” term. Hence, we model environmental performance as a
proxy for other information in the framework.

The value relevance of environmental information in combination with financial statement

information is still an open question that needs to be further addressed. More studies to be
done using different measures of environmental performance for cross-county comparisons
and industry comparisons would be an interesting future research area.

2.2.2 Stakeholder theory

The word "stakeholder", the way we now use it, first appeared in an internal memorandum at
the Stanford Research Institute (now SRI International, Inc.), in 1963. The term was meant to
challenge the notion that stockholders are the only group to whom management need be
responsive. By the late 1970’s and early 1980’s scholars and practitioners were working to
develop management theories to help explain management problems that involved high levels
of uncertainty and change. Much of the management vocabulary that had previously
developed under the influence of Weberian bureaucratic theory assumed that organizations
were in relatively stable environments. In addition, little attention, since Barnard (1938), had
been paid to the ethical aspects of business or management, and management education was
embedded in a search for theories that allowed more certainty, prediction and behavioural
control.

Stakeholder theory suggests that if we adopt as a unit of analysis the relationships between a
business and the groups and individuals who can affect or are affected by it then we have a
better chance to deal effectively with these three problems. First, from a stakeholder
perspective, business can be understood as a set of relationships among groups that have a
stake in the activities that make up the business (Freeman, 1984; Jones, 1995; Walsh, 2005).
It is about how customers, suppliers, employees, financiers (stockholders, bondholders,
banks, etc.), communities and managers interact to jointly create and trade value. To
understand a business is to know how these relationships work and change over time. It is the
executive’s job to manage and shape these relationships to create as much value as possible
for stakeholders and to manage the distribution of that value (Freeman, 1984). Where
stakeholder interests’ conflict, the executive must find a way to re-think problems so that the
needs of a broad group of stakeholders are addressed, and to the extent this is done even more
value may be created for each (Harrison, Bosse, & Phillips, 2010). If trade-offs have to be
made, as sometimes happens, then executives must figure out how to make the trade-offs, and
then work on improving the trade-offs for all sides (Freeman, Harrison, & Wicks, 2008).

Although, effective management of stakeholder relationships helps businesses survive and

thrive in capitalist systems, it is also a moral endeavour because it concerns questions of
values, choice, and potential harms and benefits for a large group of groups and individuals
(Phillips, 2003). Finally, a description of management which focuses attention on the
creation, maintenance, and alignment of stakeholder relationships better equips practitioners
to create value and avoid moral failures (Post, Preston, & Sachs, 2002; Sisodia, Wolfe, &
Sheth, 2007). There has been a great deal of discussion about what kind of entity,
“stakeholder theory” really is. Some have argued that it isn’t a “theory” because theories are
connected sets of testable propositions. Others have suggested that there is just too much
ambiguity in the definition of the central term to ever admit of the status of theory. Still
others have suggested that it is an alternative “theory of the firm” contra the shareholder
theory of the firm.

The Mischaracterization of Stakeholder Theory: R. Edward Freeman, Andrew C.

Wicks, Bidhan Parmar (2018)

One of the most glaring errors of their paper is that Sundaram and Inkpen decide to lump all
views that are not the shareholder maximization thesis as stakeholder views. They claim that
stakeholder views have dominated significant periods of time over the past 150 years
(Sundaram and Inkpen 2004). They lump all the following diverse activities together as part
of a stakeholder approach to corporate governance: corporate chartering, unions, acting in the
interests of consumers, paying attention to the natural environment and, we would suppose,
Nader’s proposal for federal chartering, stakeholder statutes (some of which are obvious
excuses for managerial self-dealing), proposals for independent directors with a sense of
public good, and criticisms of globalization.
According to R. Edward Freeman, Andrew C. Wicks, Bidhan Parmar (2018), stakeholder
theory can be many things to many people, it does not follow that we should cast it as
everything non shareholder oriented. It is important to remember as Sundaram and Inkpen
have forgotten that shareholders are stakeholders. Dividing the world into “shareholder
concerns” and “stakeholder concerns” is roughly the logical equivalent of contrasting
“apples” with “fruit.” Shareholders are stakeholders, and it does not get us anywhere to try to
contrast the two, unless we have an ideological agenda that is served by doing so.

Sundaram and Inkpen write a great deal about the difficulty of resolving conflicts among
stakeholders and figuring out how to treat different groups (Sundaram and Inkpen 2004). Not
only is this concern overblown, it is not unique to the stakeholder view. Advocates of the
shareholder view also have to deal with this criticism, even if they have a different and more
simplistic theory to use. On what terms are we going to get stakeholders to sign on and give
their best for the firm? Ironically, we would argue that stakeholder theory gives managers
more resources and a greater capability to deal with this challenge, because they can offer not
only financial reward, but language and action to show that they value relationships with
other groups and work to advance their interests over time. In an era when firms are relying
on committed value-chain partners for example, employees and a whole range of suppliers in
the supply chain to create outstanding performance and customer service, stakeholder theory
seems to provide managers with more resources to find success.

Sundaram and Inkpen (2004) blow the problem of “whose values count” out of proportion
and make it seem an impossible task. Again, there are many companies that have addressed
this challenge, and that use their answers to the values questions posed by stakeholder theory
to run successful businesses over a long time (for example, Merck, J&J, 3M, and Motorola).
If we see this as a pragmatic exercise of firms with their stakeholders to find ways to
cooperate with each other the task is a lot easier and admits a variety of answers, something
that fits a pluralistic culture that values freedom and voluntary cooperation. If we see it as a
philosophical problem that has only one answer, an answer which has to conform to the
rigors of Kant’s categorical imperative, then life gets much harder. Stakeholder theory pushes
managers to embrace the pragmatic and pluralistic approach and recommends we avoid the
philosophical and single theory approach.

2.3.1 Stakeholder theory limitations and boundary conditions

Stakeholder theory has been used in a variety of different ways by critics. Stakeholder theory
is an excuse for managerial opportunism (Jensen, 2000; Marcoux, 2000; Sternberg, 2000).
The core claim is that by providing more groups who management can argue their actions
benefit, stakeholder theory makes it far easier to engage in self-dealing and defend it than if
shareholder theory were the sole purpose. In contrast, they argue that managers who have a
duty only to shareholders are better able to judge their performance and clearly see whether
they have done well (or not). Phillips, Freeman, & Wicks (2003) offer two replies: first, that
much of the current managerial opportunism has been done under the banner of shareholder
maximization (e.g. Enron, Worldcom) and they specifically critique the actions of Al Dunlap
who grossly mismanaged a number of companies to create his own financial benefit; second,
that this is an issue for any theory of organization and does not put stakeholder theory in a
worse light because of it. Indeed, the authors argue there are good reasons to see stakeholder
theory as creating more accountability from managers as they have more obligations and
duties of care to more constituencies, and therefore less likely to engage in self-dealing.

2.3.2 Stakeholder theory is primarily concerned with distribution of financial outputs

This view depicts stakeholder theory as primarily about who receives the resources of the
organization, and poses a stark and inherent conflict between shareholders and other
stakeholders in terms of who gets what (Marcoux, 2000). If one begins with the idea of the
firm as having a fixed pie of surplus (i.e. profits) to distribute, and views stakeholder theory
and shareholder theory as providing different schemes for distributing that wealth, then the
contrast between them appears to be sharp and stark. Freeman et al. (2003) claim that
distribution is only part of the story, namely that a critical part of stakeholder theory is about
process and procedural justice that stakeholders deserve a say in how resources are allocated,
that such involvement affects how they view the distribution of resources, and that their
involvement can also create new opportunities for value creation. They also mention that
distribution involves more than just financial resources that information is something which
can be shared among stakeholders and does not pit shareholders against other stakeholders.

2.4 Legitimacy theory

This theory refers to a contract between society and companies, whereby the latter adopt
socially oriented behaviours in order to gain social approval (Guthrie e Parker, 1989). The
existence of a social contract between the companies and society is fundamental to the
purpose of legitimation (Mathews, 1993). Such contract is stipulated, though in abstract
terms, between the companies and the individuals that make up a local community. The local
community supplies to the company the natural and human resources; the companies
produce, for the community, the goods and services and they generate waste. The contract is
based on mutually beneficial exchanges. The terms of this social contract reflect the social
expectations on the management of the company. Such expectations can be explicit or
implicit: the former about the firm’s compliance with the laws and regulations; the latter, the
interests of the community in the firm’s activity (Deegan et al., 2000). The legitimacy of a
firm could be threatened by the breach of explicit and implicit terms of the contract. A loss of
the legitimacy creates serious hazards that might endanger the survival of the firm. In the
literature, two different kinds of Legitimacy Theory can be found. The first variable has as
object the individual firm.

In the last twenty years many studies on social and environmental reporting have adopted the
Legitimacy Theory to interpret and explain practices of disclosure that are put in effect by the
firms (Guthrie e Parker, 1989; Patten, 1992; Adams et al., 1998; Tsang, 1998; Campbell,
2000; Wilmshurst e Frost, 2000; Deegan et al., 2002; Milne e Patten, 2002; Newson e
Deegan, 2002; O’Donovan, 2002; O’Dwyer, 2002). Among the first significant contributions
it is worth mentioning the essay by Guthrie e Parker (1989) that aimed at verifying the
relationship between social and environmental events and the activity of voluntary disclosure.

The new economic, social and environmental challenges dictate to the organisations and to
the governments, to respect the rules, values and norms, and to voluntarily disclose social and
environmental information in order to probe their compliance. Therefore, legitimacy theory
plays the role of a justifiable factor for the disclosure of the environmental information. The
global financial crisis and the instability of the financial markets put pressure on the
organisations to re-evaluate their values system and to emphasise the importance of
legitimacy. The correlation of the tangible financial resources with the intangible legitimacy
resources is important for shaping a new organisational vision. Many scholars have criticized
the enhancement of the legitimacy theory (Mobus, 2005; Owen, 2008). Legitimacy theory
was sometimes seen only as a ‘plausible explanation of managerial motivations’ without any
real effort to determine how a disclosure “...may or may not promote transparency and
accountability towards non-capital provider stakeholder groups” (Owen, 2008, p. 248) and
not like an instrument to be used for making viable predictions (Mobus, 2005). Thus, the
organisations must voluntarily disclose social and environmental information in order to
legitimate their legitimacy. The disclosure of information must be accompanied by concrete
actions realised in compliance with social and environmental norms and values.

According to Beata Zyznarska-Dworczak (2018), legitimacy is also considered to be a

generalized perception or an assumption that the subject’s actions are desirable or appropriate
in a socially constructed system of norms, values, beliefs and definitions (Suchman, 1995, p.
574; Deephouse and Suchman, 2008, pp. 51–52). Legitimacy in an enterprise is derived from
its subordination to social norms and the law. It must be noted that there is a positive
correlation between the size of the enterprise and its drive for legitimacy (Van der Laan, Van
Ees and Van Witteloostuijn, 2008, pp. 306–308).

The basic premise of the theory of legitimacy is the belief that a company influences the
society in which it operates. At the same time, the company is also socially influenced, that is
why its functioning is similar to a kind of social contract aimed at obtaining and maintaining
social acceptance Kozarkiewicz,( 2014, p. 48). This social acceptance of the actions
undertaken by the company is particularly important in the Corporate Social Responibity era.

Legitimizing from the perspective of a socially responsible company means the authorization
to act justified by rational premises. And demonstrating the legality of action is perceived as
having a fair impact on the internal and external environment. It supports the justification of
the legitimacy to affect the ever-scarcer resources that it owns and uses, as well as those
resources affected indirectly. Increasingly, the perceived resource constraints in the world
imply a need, increasingly turning into an obligation, to communicate the entity’s responsible
management to the internal and external environment.

The legitimacy theory has a very rich disciplinary background based on management theory,
institutional theory, and stakeholder theory (Burlea and Popa, 2013, p. 1579). Therefore, it is
used in many scientific studies, also by accounting researchers. The dominant status that
legitimacy theory has attained in social accounting research has contributed to the
understanding of the motives and the incentives that lead firms’ managers to engage in social
and environmental disclosure activities (Patten, 1991; Brown and Deegan, 1998; Wilmshurst
and Frost, 2000; O’Donovan, 2002; Deegan, Rankin and Tobin, 2002; Deegan, 2007; Archel,
Husillos, Larrinaga and Spence, 2009). Nevertheless, despite its widespread application,
theory of legitimacy is still an underdeveloped theory and needs further refinements (Archel
et al., 2009, pp. 1284–1285). There is very little scientific research using legitimacy theory in
other areas influenced by sustainability, especially relating to management accounting. They
are still in development and require further in-depth research.

According to the European Sustainability Reporting Association, “the profession needs to

recognise the wider impact of sustainability which touches on many areas of its competence
not only to financial reporting and assurance, but also corporate governance, management
accounting, systems and controls” (Report by the FEE, p. 1). Furthermore, recent
management accounting studies demonstrate the need for multi-dimensional performance,
especially non-financial performance measures of CSR activities and the results (Husain,
2006, p. 129). To find a theoretical justification for the indicated trends observed in practice,
in the economic world it is necessary to take into account the assumptions of the
legitimization theory. The choice of legitimacy theory is based on the notion that accounting
for sustainable development and the associated role of the management accountant in
sustainable development is used as a communication mechanism to inform and/or manipulate
the perception of the entity’s actions (Mistry, Sharma and Low, 2014, p. 112).

Internal Accountability as a tool to legitimize a sustainable

Enterprise The theory of legitimacy is relatively rarely applied to accounting solutions for
internal management needs (Kozarkiewicz, 2013, p. 169). There is also little information
about the importance of social responsibility accounting in the perspective of management
legitimacy. Yet, as indicated by Burlea and Popa (2013), it is important to note that the long-
term impact of legitimacy on the economic and financial performance of the organization will
generate many internal conflicts of the multi-dimensional construct of legitimacy, which will
influence the transition from legitimacy to illegitimacy and from illegitimacy to legitimacy.
Therefore, it is so important to use internal tools for managing legitimacy in an enterprise,
including management accounting. However, there are not many studies in this field in the
literature. The analysis of Anglo-Saxon, German and Polish scientific literature allowed for
indicating four dominant definitions of internal accounting of social responsibility:

1. Management Accounting for Sustainable Development (Birkin and Woodward, 1997;

Mistry et al., 2014).

2. Sustainable/Sustainability Management Accounting (Petcharat and Mula, 2010; Arroyo,

2012; Owen, 2013; Zyznarska-Dworczak, 2015; Sands and Lee, 2015).
3. Managerial Social Responsibility Accounting, Social Responsibility Management
Accounting (Hussain, 2006; Arroyo, 2008).

4. Environmental and Social Management Accounting (Bennett, Bouma and Wolters, 2006;
Sands and Lee, 2015).

5. CSR-Controlling (Greiling and Ther, 2011; Gleich, Bartels and Breisig, 2012; Sailer,
2016).

An analysis of the forms and meaning of internal social responsibility accounting indicates
that, despite the differences in names, its main idea is to enable accountability of the
corporate activities undertaken for sustainable development. Therefore, the author proposes
to harmonize the names of internal accounting of social responsibility and to adopt the term
sustainable management accounting (SMA). The form of strategic legitimization is the way
in which a company use its “operational resource”. Therefore, the main goal of SMA is to
support companies and organizations in assessing and managing their sustainability
performance.

2.5 Institutional theory

Institutions have been defined by institutional theorists to mean rules and predetermined
patterns of conduct that are generally accepted by individuals in a society (Berger and
Luckmann 2014; Rutherford 2004). There are informal rules, such as norms, habits and
customs, and there are formal rules, such as written laws, regulations and standards.
Participants in organisations act in accordance with the rules set out in institutions by
devising strategies to survive or win in society (North 2013). Young (2009) aptly elaborates
the institutional concept by viewing environmental institutions as social institutions operating
within the regime of environmental policy and management. The formal rules of
environmental institutions relate to environmental legislations, regulations, performance
standards and various formal administrative guidelines. Informal environmental institutions,
however, relate to the routine ways of conceptualising environmental policy and
management. For instance, the policy debates on the relationship between economic and
environmental concerns or the allocation of technologies required to achieve environmental
management objectives, are ways in which we conceptualise the notions of ‘conventional
environmental management’ (Hukkinen, 2016).

2.5.1 Institutional Isomorphism

The preceding section portrays institutional theory as a system of constraints, evidence by the
existence of expectations impeding the organisation from fully utilising the strict rationality
of its realm (Meyer and Rowan 1977, 343-347). The theory predicts that a particular form of
social change occurs in response to societal expectation (Lincoln 1990, 269-270).
Institutional elements invariably derive from outside the organisation. The consequence of
which is that this externally endorsed social change generates constraints preventing
organisational development in other course of action (Fogarty, 1992, 333). But the impetus
for action is unclear as the organisation is in an “iron cage” (Zucker, 1987).

Isomorphism has been described as a constraining process that compels a unit in the
population to resemble other units that encounter the same set of environmental conditions
(Hawley, 1968). It has been defined as a process through which organisations in the same line
of business become homogeneous (DiMaggio and Powell, 1983). Extending on Hawley’s
conception, Hannan and Freeman (1977) assert that isomorphism is attributable to the
selection of non-optimal forms of organisation or as a consequence of organisational
decision-makers adjusting their actions upon learning the appropriate responses. The next
section highlights the plausible institutional approach using the cognitive dissonance model
in explaining why the positive espoused environmental talk by business leaders and
accountants does not match their walk-in business environmental practices.

In explaining the processes related to isomorphism, DiMaggio and Powell (1983) suggest
three types of isomorphic processes: coercive, mimetic, and normative. Each of these types
leads to an increased homogenization within a given organizational field. Coercive
isomorphism occurs when other organizations on which the institution depends apply
pressure such as government regulations or new accreditation standards. Accreditation
agencies require standards of academic and financial quality and force institutions to adapt to
maintain their accreditation.

In contrast, mimetic isomorphism arises from unclear technologies for goals that lead less
prestigious or less resourced institutions to model and emulate those considered as leaders
within the organizational field. A nearby college may upgrade its campus recreation facilities,
leading other surrounding institutions to update their own campus recreation offerings in
order to remain competitive. Finally, normative isomorphism occurs as a result of increased
professionalization as networks grow and increased communication takes place, with “best
practices” encouraging a homogenization of institutional activity. External expectations and
higher education norms influence university activity such as the expectation that doctoral
degrees require dissertations or courses are offered on a semester basis.

2.5.2 A Case in Point: Shanghai China

During May 1999, exploratory research interviews with chief executives and accountants in
Shanghai covered the range of their current environmental management activities as well as
their underlying rationale for that programme, however large or small it is. The interviews
provided a rich fabric of business leaders’ positive beliefs and values for environmental
practices, yet the interviews also identified a paucity of managers to act on their personal
convictions, predominantly due to institutional constraints.

For instance, interviews were carried out with environmental decision-makers from the
Shanghai Municipal Bureau of Environmental Protection and World Bank Shanghai
Environment project office during a recent assignment, supports Hukkinen’s theory of
institutions of environmental management concept. Whilst they would like to undertake
environmental sustainability by enforcing environmental regulations, they tend not to do so
for fear that strict enforcement might trigger mass unemployment. In line with the Cognitive
Dissonance concept, the behavioural response was inaction on the environmental
management side, but busy efforts to maintain (or even widen) the distance between ethical
norms and institutional constraints - a classical pattern labelled Dynamic Conservatism by
Argyris & Schön (1978).

Most of these polluting manufacturing companies are State-Owned Enterprises (SOEs),

which provide more jobs to the population. There is a pull between conflicting policy to shut
down inefficient, subsidised and polluting SOEs (on the individual level), and the operating
economic assumption that shutting down is not feasible, due to SOEs’ provision of important
social services. In effect, managers evaluate and justify their choices at two levels: At the
social level the trade-off is between pollution affects and social benefits, at the temporal
level, the trade-off is between industrialisation now and the environmental consequences of
such industrialisation in the future. At the level of decision-makers, the trade-off is between
tangible private gains (income, benefits from social capital) and diffuse social problems
(environmental degradation).

2.6 Positive Accounting theory

Of course, according to Watts and Zimmerman’s theory, the reason why firms (managers)
make social disclosures is because it is in their interest to do so. Nonetheless, if positive
accounting theory is to be rejected as a basis for explaining why firms are making social
disclosures, then it requires a more rigorous examination of the arguments and empirical
evidence that has occurred to date. Watts and Zimmerman (1978, 1986) provide the stated
theoretical basis for a number of social disclosure studies and so their work is reviewed first
in some detail. Direct reference to social disclosure or social responsibility by Watts and
Zimmerman themselves, however, appears extremely scant. From the later section on social
disclosure, it will become clear that the use of Watts and Zimmerman’s work relies on
interpretations and extensions to the original. In the process of reviewing this work, it will be
shown that the original arguments of Watts and Zimmerman have been, if not misused,
misunderstood or taken out of context, then only partially argued and tested.

A review of Watts and Zimmerman’s original positive accounting theory papers (1978,
1979), their subsequent book, Positive Accounting Theory (1986), and their own review
paper on positive accounting theory (1990), reveals that reference to “social responsibility” is
only made in the original 1978 paper. I shall turn to that reference next, but first it is worth
noting that no title of any paper they have either jointly or separately published since 1978
contains any reference to social responsibility. Furthermore, only one paper (Blacconiere &
Patten, 1994) with any reference to matters of social or environmental
responsibility/disclosure in the title has been published in the Journal of Accounting and
Economics. Social responsibility/disclosure is an issue that appears to be of only passing
interest to Watts and Zimmerman and their positive accounting theory project is further
substantiated when one carefully examines the original reference to it, and the context in
which it was made.

Positive Accounting Theory (PAT) literature focuses on management's motives for financial
reporting choices, using economic models and statistical processing, when there are agency
costs and information asymmetry. It attempts to explain and predict firm accounting choices
as a part of the firm's overall need to minimize its cost of capital and other contracting costs,
applying methods and techniques from economics. Opportunistic attitudes and behaviours of
managers and their impacts on accounting policy choices have been investigated widely in
positive research and this led to a rich body of empirical studies on earnings management. A
wide range of the literature incorporates both ex ante contracting efficiency incentives with
ex post redistributive effects.
According to Humayan Kabir Auckland University of Technology, Newzland 2017 Before
the emergence of PAT, normative accounting research had been the dominant research
tradition in accounting. Normative accounting theorists had been preoccupied with
developing accounting principles. The primary concern of these researchers had been
recognition and measurement issues in accounting. Typical accounting questions asked and
answered by normative accounting theorists include whether to recognize changes in market
prices if the entity is not a party to the transaction, what basis (e.g., historical cost, market
value, etc.) to use in preparing financial statements, etc. (Chambers, 1966; Ijiri, 1975;
Littleton, 1953; MacNeal, 1939; Paton & Littleton, 1940). In contrast with normative
accounting theory which deals with “should” type questions, PAT deals with “is” type
questions. Instead of asking which measurement basis to use in accounting, PAT asked, for
example, whether accounting information is useful to the stock market, which accounting
measurement basis management actually uses, and why.

PAT has been subject to various criticisms since its emergence. For example, Chambers
(1993) called the advocates of PAT a PA cult. Sterling (1990) criticized PAT on the ground
that it restricted itself to the positive study of accounting practice and accounting practitioners
and hinders accounting progress by neglecting the need for the assessment of accounting
practice. Sterling (1990) further assessed its potential accomplishment as being nil.
Whittington (1987) criticized PAT for its methodological intolerance and asserted that
normative accounting theory had a legitimate place in accounting. Neu (1997) provided a
largely negative appraisal of PAT. Sue (1997) said that PAT narrowed the researchers’ focus.
Hall (1997), on the other hand, disagreed with Sterling’s (1990) assessment that the potential
contribution of PAT was nil. Deegan (1997) examined how PAT had ignited emotions among
academics. It attracted many academics and alienated some at the same time. Milne (2002)
judged PAT’s attempt to explain an entity’s social disclosures as failure.

PAT has enhanced the understanding of various accounting phenomena and issues. For
example, it has yielded important insights into the linkage between accounting numbers and
stock returns and management’s financial reporting incentives. Despite this, its contribution
to accounting practice has been very limited. Accounting practice has evolved over hundreds
of years through the interplay of a myriad of factors (Edwards, 1989) and the process of
change in accounting practice has been slow. Findings of positive accounting research,
however, have informed debates on important accounting issues. For example, positive
accounting research has helped shape the recent fair value debate (Barth et al., 2001;
Holthausen & Watts, 2001). The fair value debate centers on whether fair value should be
mandated as a measurement attribute in financial statements. The debate on market value is
actually very old (Chambers, 1966; Ijiri, 1975; Littleton, 1953; MacNeal, 1939; Paton &
Littleton, 1940). Empirical evidence, however, now exists on the pros and cons of fair value
measurement. For example, the value relevance literature has documented that fair value of
assets is value relevant in some settings (American Accounting Association Financial
Accounting Standards Committee, 2005; Landsman, 2007). On the other hand, such
accounting sources argued that fair value is a soft measure Positive Accounting Theory and
Science 140 especially when it is measured by reference to models and it is easy to
manipulate fair value estimates.

The PAT literature documents that management manages reported earnings to serve its
purpose (Watts & Zimmerman, 1986). More recently, studies document that management
manipulates fair value estimates. For example, Benston (2006) provided evidence on fairly
extensive use of fair value by Enron and argued that misuse of fair value by management
contributed to its demise. Byrne, Clacher, Hillier, & Hodgson (2008) have reported
substantial variations in assumptions – discount rate, wage growth, expected return on equity,
discount rate spread and equity return spread – used in fair value accounting for pensions in
the UK. They have further suggested that the variations in assumptions are related not to
economic fundamentals but to management’s motives to inflate income from pension scheme
assets. Similarly, the PAT literature has informed the intangible assets debate, which centres
on whether internally generated intangibles should be recognized in financial statements. The
value relevance literature has suggested that disclosure of intangibles in financial statements
is value relevant. These findings have served as the basis for the proposal that the current
accounting for intangibles be changed (see, for example, Lev & Zarowin, 1999; Lev, 2001).

Further, results in PAT have suggested situations in which management is likely to manage
earnings. For example, earnings are managed when management’s bonus depends on
reported earnings Healy (1985), when firms are about to violate debt covenants (Duke &
Hunt, 1990; Press & Weintrop ( 1990), when current year’s earnings is likely to fall short of
certain benchmarks (for example, last year’s earnings, avoiding loss, and securities analysts’
forecasts; Burgstahler & Dichev (1997), when companies issue shares (Teoh et al., 1998),
when there are changes in management (Pourciau, 1993). Auditing standards require the
auditor to identify and assess risks of material misstatements in financial statements (for
example, International Auditing and Assurance Standards Board [IAASB], 2009). These
findings may help the auditor identify situations of possible earnings manipulation.

Difficulties of PAT In pursuing accounting research in the mould of science, PAT has faced
two difficulties. First, there is a long-running debate on whether the methodology of the
natural sciences is appropriate for social sciences. Durkheim (1964) believed that the
methodology of natural sciences can be used to study social phenomena. He treated social
phenomena as things and argued that they be treated as things. Thus, they can be studied
objectively as external things. On the other hand, Lessnoff (1974) believed that the model of
physical sciences is not appropriate for social sciences in several aspects. He argued that to
see an event as a human action, it is necessary to interpret empirically observable behavior in
terms of mental categories. It is the subjective aspect of behavior, not its physical aspect,
which provides meaning to an action. Consistent with the view of Lessnoff (1974), both
Whitley (1988) and Mouck (1990) argued against the reliance of accounting researchers on
the philosophy of natural science.

One major question that PAT researchers seek to answer is why managers make accounting
choices as they do. According to intentionalism, the explanation must be couched in terms of
the mental processes of the agent Fay( 1996). The explanation must be couched in terms of
beliefs and reasons that weighed in the mind of the manager at the time of making accounting
choices. The validity of explanation does not depend on the regularity of the particular
accounting choice behaviour in the same situations by the agent himself or herself and others
Lessnoff (1974). This is because the human being does not always resort to the same action
in the same situation. Two persons can take two different actions in the same situation and
the same action in different situations.

The methodological position of PAT researchers is similar to the behaviourist position. The
idea is that mental processes can be defined in terms of observable behaviour. This
methodological position underlies earnings management research. For example, when
empirical research finds that managers tend to shift income from future periods to the current
period when the conditions in the debt covenant reach their limit, the assumption is that the
tightness of the conditions caused the current period incomeincreasing accounting choices
(Duke & Hunt 1990; Press & Weintrop, 1990). Watts and Zimmerman (1986) emphasize
large sample and statistical methods.

2.6 Relationship between profitability and environmental and social disclosures

One approach to evaluating company’s environmental footprint is to determine if they engage
in environmental disclosure. Examples of such voluntary environmental disclosures by
companies as noted by Jeroh & Okoro (2016) include information regarding expenses on
community involvement, environmental protection, waste management, employee health and
safety, product safety, research and development and a host of others.

Environmental and social disclosures activities include both managerial discretion and
compulsory obligations. Traditional view states that environmental regulations are an
additional cost to the company that reduce profitability and lead to low efficiency.
Conversely, environmental regulation may stimulate companies to innovate technologically
or managerially. These innovations create efficiencies that offset the additional costs and, in
the future, generate more revenue. Firms may also symbolically conform to environmental
policies without actual efforts to pursue the environmental goals Haque and Ntim (2018).
Empirically, adopting stringent global environmental standards will lead to much higher
market value compared to less stringent regulations (Dowell et al., 2000).

The linkages between profitability and environmental disclosure has produced mixed
outcomes. Where in actual fact some of the studies concluded that there is a positive
relationship between profitability and environmental disclosure (Al-Tuwaijri et al. 2004,
Clarkson et al. 2011, Ingram 1978, Neu et al. 1998). Clarkson et al. (2011) outlines that
profitability is important and positively related to environmental and social disclosure. When
profitability is high and a firm achieves a high margin of profit. The managerial groups are
motivated to disclose more information in order to show off good reputation to the
consumers, shareholders, investors and other stakeholders (Ullmann 1985). This will act as a
competitive advantage to the company which discloses to its stakeholders. Indeed, firms
would normally only engage in voluntary disclosures when they have made some economic
gains. This is because disclosing environmental information entails cost, which firms will
only bear when there is sufficient profit beyond fulfilling shareholders’ obligation (Brammer
and Pavelin 2006).

However, other studies report that a significant relationship between a company’s

profitability and its level of environmental disclosure does not exist (Choi 1999; Cowen et al.
1987). This strand of literature argues that firms with low level of profitability tend to justify
such unimpressive corporate performance through reporting their environmental activities. As
these activities have cost implications, reporting them provides a justification for the lower
level of reported profits. The effect of profit on environmental disclosures has therefore, been
inconsistent in literature.

2.6.1 Empirical disclosure

The relationship between firm’s specific attributes and voluntary environmental disclosure
has been investigated in prior studies using various proxies of the firm specific attributes
Magness (2006), Dibia (2015). On the relationship between profitability and voluntary
environmental disclosure, mixed results were found to exist. Cormier et al. (2005), Ten
(2009) found that profitability was not significant in explaining the extent of environmental
disclosure. On the other hand, Christensen and Hughes (2004) attest to the contrary.

First, leverage has been one of the commonly employed firm’s characteristics for corporate
environmental disclosure Hannifa & Cooke (2015). From a legitimacy theory perspective
studies such as Maliah et al. (2014), Naser et al. (2006) has demonstrated a positive
association between environmental disclosure and leverage. Nevertheless, other studies
reported a negative relationship according to Brammer and Pavelin (2006); Mejda and Hakim
(2013). Given the inconsistent empirical findings, many studies explore re-examination to see
the association between leverage and environmental quality.

Second, Donovan (2002) argued that managerial intentions of using legitimization strategies
can vary among industries. In environmental sensitive industries, firms are subjected to
greater public exposure, thus management might elect to maintain, gain or repair legitimacy
through public disclosure (Hu, 2009). However, management may adopt accounting policies
that suit their personal benefit (Yuan, 2007). Prior studies (Yuan, 2007; Nie, 2009) used ratio
of independent directors over the total number of directors to measure management role.
Accordingly, this study assumes that the higher the management role, the more likely
company would issue environmental and social disclosure

2.7 Benefits of social and environmental disclosures

Legitimacy relates to the notion that firms came under increasing pressure to be seen to
operate in a way that shows respect for society and the environment in fitting with the
political backdrop during the 1960s and 1970s (Roberts, 1992). For the firm concerned,
gaining such legitimacy ‘both lessens the regulatory burden that would otherwise constrain
the execution of corporate strategy, and keeps from the market the potential stigma associated
with a reputation for environmental recklessness’ (Brammer and Pavelin, 2006, p. 1169).
According to Hahn and Kühnen (2013), a long list of potential business benefits may accrue
to firms which present sustainability information, including the enhancement of transparency,
improving reputation and brand value, motivating employees and supporting the firm’s
control processes.

A possible link with financial performance may arise through firms being proactive in giving
the impression of doing good by publicising those parts of their operations which meet or
exceed stakeholder explanations. The latter position has led CSR to be viewed with
scepticism from some observers who believe that such firms’ motives are less than sincere,
raising the spectre of ‘greenwashing’ where firms improve social performance for purely
presentational reasons and not to improve underlying sustainability, thus doing the right thing
for the wrong reason (Schaltegger and Burritt, 2010, p.378), or worse, deliberately
advertising good performance on some aspects of CSR while burying poor performance on
others (Owen et al., 2001).

A thread of the literature even goes so far as to argue that corporate ‘sustainability reporting’
has nothing to do with sustainability, but rather represents an attempt to frame the discussion
around how firms would like to interpret sustainability in line with their own interests (Gray,
2010). In the spirit of the critical perspective, this line of argument is that sustainability
reporting does more harm than good, requires a more radical replacement, and is ‘a fad that
will disappear in time’ (Burritt and Schaltegger, 2010, p. 829). Yet as Burritt and Schaltegger
note, this viewpoint cannot solve practical management problems and a more pragmatic
perspective is required for firms to have a way to move forward.

Empirically, Brammer and Pavelin (2006) examine the factors that affect the quality and
quantity of environmental disclosures in a cross-sectional sample of large, UK companies.
They show that, perhaps counter-intuitively, firms with bad environmental performance are
no more likely than others to make an environmental disclosure, but when they do, it will be
carefully nuanced to minimise the likelihood of adverse reactions.

Patten (2002) suggests that the inconsistency in the findings of research concerning the
empirical link between environmental performance and disclosure can be ascribed to a litany
of methodological problems that beset studies up to that point, including problems with
measurement of both key variables, sampling issues and a lack of control variables. A further
issue is the blurring of mandatory and discretionary disclosures by many authors. For
example, matters such as toxic waste damage, environment-related fines or oil spills, are not
discretionary, and tend to be serious in nature.

2.8 Chapter Summary

This work aimed at analysing the content of sustainability reports verifying whether their
wideness varies according to the industries in which the companies operate. Based on the
theory of legitimacy the companies adopt systems of voluntary disclosure in order to keep
and widen the consensus within the local community. In this view, the companies make
communicative choices and actions in order to fill the legitimacy gap, until they the level they
wish is reached. The empirical analysis supports the social and environmental theories, in
cases where the companies search for consensus through the publication of
information concerning not only the financial aspects, but also the social and environmental
ones.

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction
The fundamental objective of this chapter is to discuss the approach to the research project
and how it will be administered. Methods of data collection for the study are outlined as well
as the techniques which the researcher will apply to ensure that the objectives of the project
would be achieved.
3.2 Research design
Similarly, social research needs a design or a structure before data collection or analysis can
commence. According to Babbie E (2008), a research design can be defined as detailed plan
or blueprint of how the research is to be completed through operationalizing variables so that
they can be measured, analysed and reported focusing on a sample of interest to the study.
For the purpose of this research the researcher utilised a mixed approach (qualitative and
quantitative) this proved to be effective in capturing both the qualitative and quantitative
aspects of environmental disclosures and reputation with regard to the problem under study.

3.2.1 Descriptive research design

The researcher used descriptive research so as to outline the care that Intercrete Zimbabwe
does on Environmental and Social disclosures. Aliaga, and Gunderson (2002), describes
quantitative research methods as the explaining of an issue or phenomenon through gathering
data in numerical form and analysing with the aid of mathematical methods; in particular
statistics.

Why descriptive research?

The researcher chose descriptive research because many Authors who did the similar research
used descriptive research design. Leedy & Ormrod (2001); Williams (2011) describe the
descriptive research design as the holistic steps a researcher employ in embarking on a
research work. The researcher used questioners structured clearly to communicate with
Intercrete Zimbabwe. This helped the researcher to draw conclusions from Intercrete’s
response which were measured against the objective of the study.

3.3 Population and sampling

3.3.1 Population size
A sample is generally a subset of the population that one intends to study so that they can be
able to generalize findings to the total population. According to Davies, Williams & Yanchar
(2004) the researcher should decide on an appropriate size for sample depending on the
research topic, population, aim of the research, analysis techniques, sample size in similar
research, the number of the subgroups in the sample. The sample size of 4 people in
Intercrete Zimbabwe Pvt Ltd was selected each person representing each department. There
are four functional departments at Intercrete Zimbabwe Pvt Ltd. Questionnaires will be
distributed to the relevant people Intercrete Zimbabwe Pvt Ltd followed by follow up calls
on questionnaire.

3.3.2 Sample size

The sample size of 4 people in Intercrete Zimbabwe Pvt Ltd was selected. The number of
people representing managers were considered a true representation of the population, since
most of the environmental population is well known by head departments.

3.4 Sampling procedure

3.4.1 Purposive sampling
According to Ashley Crossman (2018) a purposive sample is a type of non-probability
sample that is selected on characterised of a population and the objective of the study.
Purposive sample aims to produce a sample that can be logically assumed to be representative
of the population. Due to the homogeneous nature of the sampling units, the researcher used
purposive sampling to maximize analysis of the themes and information being disclosed.

Justification

The divergent nature of the business Manufacturing Company made the researcher to use
purposive sampling; to ensure that the data collection and analysis instruments produced
valid and reliable data.

3.5 Research Instrument

Research Instruments are simply tools used by researcher to collect data.

3.5.1 Questionnaires
The questionnaire used by researcher comprises of structured closed and open-ended
questions. A questionnaire (with structured and unstructured questions) was designed by
researcher using a Likert scale. There will be judicious balance between open ended and
close-ended questions. The researcher used questionnaire because Akintola Owolabi (2013)
of Nigeria used the same research instruments. Specimen questionnaire is attached to the
appendix.

Justification for using questionnaire

Questionnaires were chosen because they are relatively cheaper and cover a large number of
respondents, thereby enhancing accuracy. A high volume of data was obtained within a short
space of time in a convenient manner. Also, they did not require trained interviewers
therefore this was very helpful to an undergraduate researcher. On the other hand,
respondents had the opportunity to answer the questions openly without fear of being judged
as the researcher will not be present and they were not supposed to provide their names.

3.6 Data collection procedures

3.6.1 Primary data
Questionnaire was distributed to company administration after given permission to conduct
the research. Introductory letter and questionnaire were sent to Intercrete Zimbabwe Ruwa
through mail and follow up by telephone. In the case of Intercrete Zimbabwe permission was
given without hesitating, since the researcher had an opportunity to be on one-year intern
during industrial attachment (July 2017 to August 2018). A period of one week was given to
respondents to complete the questionnaires.
3.7 Data analysis and presentation
The researcher made data ready for analysis through arranging data in a tabular form.
Number of responses from questionnaire were counted and placed in a table. To make data
easy to interpret the researcher made use of percentage calculations. Pie charts and bar charts
were used to illustrate relative magnitude frequencies. The use of Microsoft excel, graphs and
Statistical Program of Social Science (SPSS V16) were also employed by researcher for data
analysis. The questionnaire was designed to solicit respondents’ view on five where
1=strongly disagree and 5=strongly agree. Graphs and charts were used for investigating the
findings so as to identify important variables, their significations and allowing for literature
review and interpreting them thereon.

3.8 Validity and reliability

3.8.1 Validity
Questionnaires included a variety of questions to test on the knowledge of the respondent for
environmental disclosure, environmental and social reporting, reputation of a firm, which
were within the context of research objectives. Questions were based on information gathered
during literature review to ensure that they are representative of what respondents know
about environmental and social accounting as well as reputation of a firm. The language used
on the questions was made simple so as to assure better understanding and clear instruction
for the respondent. The researcher made significance efforts to make sure that the reliability
of instruments remained high. The researcher also carried a preliminary test using the
research instruments and as such increased the validity of data.
3.8.2 Reliability

The researcher managed to ensure reliability by minimising sources of measurement error

like data collection bias. By standardizing the questionnaires and also being the only person
administering the questionnaires, the researcher was also able to minimise data collection
bias. All the members of the target population had equal chances of being members of the
sample that increased the reliability of the research findings. Furthermore, by analysing the
annual reports directly from the published reports it made the data more reliable because
annual reports are official documents which have passed an internal and external audit form
and they are a true reflection of the company. Moreover, the use of SPSS and excel was
successful in ensuring reliability as well as applying CronbachAplha test to check internal
consistency of questions and it gave result of 0.785. This is over and above the Cronbach
Alpha of 0.6 as suggested by Nunnally, (1978) cited in Khan F et al, (2015).

3.9 Ethical Consideration

The researcher assured questionnaire respondents that the information they provided was for
academic policies and use therefore confidentiality was assured. Also, the research was
conducted in ethical manner in which the researcher gained clearance from relevant
authorities before conducting the research. The researcher sought consent on anonymity
from respondents hence no individual participant name was used in the research and also the
researcher explained the use to which the information gathered would be put to every
respondent. All sources used for secondary data were acknowledged by way of referencing in
text.

Confidentiality

Information given was kept by researcher to the better side of the company. Also, as a former
attaché from Intercrete the student had a certain degree of trust given to the researcher to
safeguard information given. During this survey care will be given about the information
disclosed and this is going to be made known to the respondent that any information that they
disclose will remain confidential. An appropriate methodology was employed by researcher.
The research was free from bias and information was presented as it is from respondent.

Informed Consent
The respondent was also made aware of the information that was requested from them, what
the information was being requested for, what purpose it was to be put into and how they
were expected to participate in the study a well as how the study was to directly and
indirectly affect them.

3.10 Chapter Summary

The chapter outlined the methodology for the research project, which is based on the
literature review and questionnaires. The information is both qualitative and quantitative and
methodology was chosen as a result of limited time and financial resources. The research
fieldwork will be conducted between January 2019 and April 2019.
CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND DISCUSSION

4.0 Introduction
Results and interpretation of the responses from the field was done in this chapter. It shall
focus on presenting and discussing the findings of the impact of environmental disclosure on
reputation of a firm. The findings were generated from research questions that were
constructed in line with the objectives as presented in chapter one. Additional information
was obtained from review secondary data in literature review made by the researcher. Results
were analysed and categorised in relation to the responses from participants, making use of
the SPSS Data analysis process.

Presentation, analysis and discussion of results were done in accordance with the study
objectives which are:

 To determine the relationship between environmental disclosure and reputation of

firm
 To ascertain the significance of environmental disclosure to the reputation

4.1 Presentation, analysis and interpretation of findings

4.1.1 Response rate analysis

Table 4.1: Response rate

Instrument Target sample Achieved sample Response rate

Questionnaire 4 4 100%
Total 4 4 100%
Source: Primary data
A total of 20 questionnaires were distributed to the targeted sample population of Intercrete
Zimbabwe Pvt Ltd in Harare. All questionnaires were received and a total of 18 out of the 20
delivered were responded giving the results in the above. The researcher achieved a 90%
response rate which she considered a significant response rate as it is above 50%. This is
important to the researcher as it will help her to obtain accurate results.
4.1.2 Demographic analysis
4.1.2.1 Gender of respondents
Table 2.2: Gender of respondents

Gender
Frequency Percent Valid Cumulative
Percent Percent
Male 10 56.0 56.0 56.0
Valid Female 8 44.0 44.0 44.0
Total 18 100.0 100.0 100.0

Source: SPSS (Primary data)

Table 4.2 above shows the gender distribution of respondents. As shown by the table, 44%
was accounted by female participants whilst the remaining 56% was accounted for by male
participants. Even though the percentage of male participants dominated more than that of
female participants, it shows that women are also presented in organisations such Intercrete
Zimbabwe Pvt Ltd in Zimbabwe. However, the impact of this on the research is that they will
be more male views than female views. These results were further illustrated on the pie chart
below.

Gender

Female
44%
Male
56%

Figure 4.1: Participants gender

Source: Primary data
4.1.2.2 Identification of participant age's
Table 4.3: Age of respondents in years

Age
Frequency Percent Valid Cumulative
Percent Percent
<25 4 22.0 22.0 22.0
26-34 6 33.0 33.0 33.0
35-44 5 28.0 28.0 28.0
Valid 45-54 2 11.0 11.0 11.0
55 and
1 6.0 6.0 6.0
above
Total 18 100.0 100.0 100.0
Source: SPSS output (Primary data)

The respondents were encouraged to indicate their age groups. As shown by the results above
from both the table and the pie chart, 22% of the total respondents was present by people
from the age of 25 years and below, 33% fall in the age category of 26-34 years, 35-44 years
category had 28%, 45-54 years with11% and the last age category was 55years and above
with 6%. This shows that the data gathered is valid and accurate to the research since a large
number of respondents were mature and do understand what the research is all about.

4.1.2.3 Identification of level of experience

Table 4.4: Respondents level of experience in years

Years of experience
Frequency Percent Valid Cumulative
Percent Percent
<4 years 2 11.0 11.0 11.0
5-10 years 6 33.0 33.0 33.0
10-15 years 8 44.0 44.0 44.0
Valid
15 and
2 11.0 11.0 11.0
above
Total 18 100.0 100.0 100.0
Source: SPSS output (Primary data)

Table 4.4 shows the experience of the participants in terms of the years' service within Delta
Beverages. According to the results those with experience of 4years or less add up to 11%,
followed by those with 5-10 years with 33%, 10-15 years 44% and lastly 15 and above with
11%. These results show that the staff who responded has experience within the organisation
hence they were in a better position to understand the processes of production of the company
and its impact to the environment as well as the impact of its products to the environment.
This was found relevant to the research so as to obtain significant results as the majority of
the respondents had more experience with the organisation.

4.1.2.4 Identification of educational level

Table 4.5: Level of education of the respondents

Education level
Frequency Percent Valid Cumulative
Percent Percent
Certificat
2 11.0 11.0 11.0
e
Diploma 3 17.0 17.0 17.0
Valid Degree 10 56.0 56.0 56.0
Masters 2 11.0 11.0 11.0
5 1 5.0 5.0 5.0
Total 18 100.0 100.0 100.0
Source: SPSS output (Primary data)

Results in table 4.5 shows that the majority of respondents of 56% had a Bachelor’s degree
relevant to the field of employment, 11% accounted for those who had Masters, whilst 5% of
the respondents indicated other professional qualifications specified as C.A, 17% was
accounted for by a diploma holder and 11% certificate holders. Therefore, the results were
reliable to the research since the majority of the respondents where degree and masters
holders. Hence, they had the necessary qualifications and expertise to understand
environmental disclosures and its impact on the reputation of a firm as they were highly
educated.

4.1.2.5 Position in the firm

Table 4.6: Position of respondents in the firm

Position in firm
Frequency Percent Valid Cumulative
Percent Percent
Valid Accountant 7 35.0 35.0 35.0
 Accountant
6 30.0 30.0 65.0
Assistance
Financial Analyst 3 15.0 15.0 80.0
Others 4 20.0 20.0 100.0
Total 20 100.0 100.0
Source: SPSS output (primary data)

Table 4.6 shows the positions of the respondents in the firm, majority of the respondents were
accountants and accountant assistance with 35% and 30% respectively. Financial analysists
accounted to 15% and the remaining 20% was of those whose positions which were not listed
on the questionnaire and had to specify their position by writing on the space provided, and
these were found to be accounting officers and managers. As most of the respondents were
accountants the results were found relevant and reliable to the research because accountants
are the ones who prepare financial reports so they really know if they are disclosing
environmental issues in the reports.
4.2 Primary data analysis
4.2.1 Significance of environmental societal and disclosure of the reputation
a firm
Table 4.7: Respondents of question 1 from section B
Your organisational report has environmental issues (B1)
Frequency Percent Valid Cumulative
Percent Percent
Strongly agree 7 35.0 35.0 35.0
Agree 8 40.0 40.0 75.0
Somewhat agree 1 5.0 5.0 80.0
Neutral 1 5.0 5.0 85.0
Valid
Somewhat
1 5.0 5.0 90.0
disagree
Disagree 2 10.0 10.0 100.0
Total 20 100.0 100.0
Source: SPSS output (Primary data)
The table overleaf is representing question one and how it was responded. As shown by the
table the percentage rate for strongly agree was 35%, 40% for agree, somewhat agree, neutral
and somewhat disagree had 5% each and disagree had 10%. Basing on the results given
above it shows that the majority of the respondents have a clear understanding of what is
environmental disclosure. On this question the majority of the respondents agreed that Delta
Beverage's reports have environmental issues, these respondents where from the accounting
department and they really know what is in and what is out when it comes to financial reports
to be disclosed. However, this was reliable to research to attain accurate result. More so,
Delta beverages Company’s financial reports do really disclose a little information about
environment issue and giving warning to its stakeholders not to litter or dispose their empties
of the beverages anywhere as it attracts penalties. Furthermore, those who were on the
disagree side where from the low management team who do not have much knowledge about
environmental issues that should be disclosed in the reports. More over the same applies on
question one, three and four as the majority of the respondents where on the favour of the
questions except for one respondent who disagreed on question three and one who was
neutral on question four on the issue that environmental disclosure is important to the
respondents as customers or investors as they will be able to see its impact to the environment
and other dangers caused to the environment by the packages of the firm's products or during
production. The tables below show the frequency distribution on the response of question 2, 3
and 4 representing objective number one:

Table 4.8: Environmental disclosure creates good customer loyalty

Environmental disclosure creates a good customer loyalty (B2)
Frequency Percent Valid Cumulative
Percent Percent
Strongly
8 40.0 40.0 40.0
agree
Valid
Agree 12 60.0 60.0 100.0
Total 20 100.0 100.0
Source: SPSS output (Primary data)
According to the table above the percentage for strongly agree was 40% and 60% was agree.
This shows that a significant number of the respondents were in a better position to
understand how environmental disclosure creates a good customer loyalty. As supported by
Park, Lee, & Kim (2014) who carried a study which suggested that ethical and philanthropic
CSR practises foster customer beliefs that organisation adheres to high ethical standards and
cares about society’s wellbeing, in turn, positively impacts consumer assessments of
corporate reputation there by create a good customer loyalty.
Table 4.9: Environmental disclosure in financing and investing decisions

Environmental disclosure in financing and investing decisions(b3)

Frequency Percent Valid Cumulative
Percent Percent
Strongly agree 5 25.0 25.0 25.0
Agree 12 60.0 60.0 85.0
Somewhat
Valid 2 10.0 10.0 95.0
agree
Disagree 1 5.0 5.0 100.0
Total 20 100.0 100.0
Source: SPSS output (primary data)

Results in table 4.9 shows how environmental disclosures influence investment and financing
decisions. According to the table above strongly agree was 25%, agree 60%, somewhat 10%
and disagree 5% and this confirms that the respondents believe that environmental disclosure
is significant in making investment and financing decisions as reflected by the crosstab chi-
square of (X^2=.741) df=2 p=0.690 which shows that no significant difference exist in the
answers across all levels of education at a p>0.05 level of significance.
4.2.2 Motivations leading to environmental disclosure by firms
Table 4.10: Results of KMO and Bartlett's Test

KMO and Bartlett's Testa

Kaiser-Meyer-Olkin Measure of Sampling
.704
Adequacy.
Approx. Chi-Square 78.836
Bartlett's Test of
df 21
Sphericity
Sig. .000
Source: SPSS output (primary data)

Table 4.11: Total variance explained

Total Variance Explained

Component Initial Eigenvalues Extraction Sums of Squared
Loadings
Total % of Cumulative Total % of Cumu
Variance % Variance lative
%
50.26
1 3.439 50.268 50.268 3.439 50.268
8
77.14
2 1.839 26.877 77.145 1.839 26.877
5
Raw 3 .761 11.117 88.262
4 .480 7.010 95.271
5 .148 2.165 97.437
6 .105 1.535 98.972
7 .070 1.028 100.000
Extraction Method: Principal Component Analysis.
Source: SPSS output (primary data)
Table 4.12: Component Matrix

Component Matrixa
Raw Rescaled
Component Component
1 2 1 2
B5a .734 .266 .849 .308
B5b .666 .164 .714 .176
B5c .645 -.013 .751 -.015
B5d .452 .129 .674 .192
B5e 1.091 .177 .884 .144
B6 .538 -1.280 .387 -.920
B7 .597 .236 .787 .310
Extraction Method: Principal Component Analysis.
Source: SPSS output (primary data)

A factor analysis was performed on the motivations leading environmental disclosures in

Zimbabwe. Table 4.10 to 4.12 above shows the results of factor analysis done. According to
the factor analysis the KMO measure of statistical sampling was .704 (70%) >50% the
required acceptable correlation which is a significant discrepancy correlation. In addition,
there were 7 variables extracted in the table and 2 new factors were developed using SPSS
V20. Factor 1 is explained by 3.439 which is 50.27% and factor 2 is explained by 1.839
which is 26.88% that is the hidden value is well explained by these two factors.
Rotated matrix was also established to show which variables falls in the factors developed
(Factor 1 and 2), factor 1 had high values in building reputation and corporate brand (0.849),
and investors request for disclosure (0.714), stakeholder pressure (0.751), company policy
(0.674) and demand by regulators (0.884), these variables were correlating with factor 1. In
addition, factor 2 correlated with environmental disclosure attracts new customers and
employees (B6) (0.387) and environmental disclosure creates accountability and transparency
(B7) (0.78). These results are shown by the tables 4.10 to 4.12 above. Two out of seven
variables considered in Factor are supported by EY and Boston College Centre for Corporate
Citizenship survey, (2016) in which they found that corporate reputation and stakeholder
pressure are drivers to environmental disclosures.
4.2.3 Strategies in place to improve the quality of environmental disclosures
Table 4.13: Environmental disclosure by your institutions guided by IAS

B8a
Frequency Percent Valid Cumulative
Percent Percent
Strongly agree 7 35.0 35.0 35.0
Agree 5 25.0 25.0 60.0
Somewhat agree 2 10.0 10.0 70.0
Valid Neutral 5 25.0 25.0 95.0
Somewhat
1 5.0 5.0 100.0
disagree
Total 20 100.0 100.0
Source: SPSS output (primary data)

The table above shows responds on question 8a which states that environmental disclosure by
Delta Beverages is guided by IAS. As shown by the table 35% strongly agreed, 25% agreed,
10% somewhat agree, 25% neutral and 5% somewhat disagreed. The results were found
reliable and relevant to the research as the majority which strongly agreed and agreed on the
question were found to be accountants and accountants assistance according to the
questionnaires. Since they are the one who prepare the reports they would have enough
knowledge on how it is done. More of this shall be explained under the component graph.

Table 4.14: Environmental disclosure by your institution is guided by IFRS

B8b
Frequency Percent Valid Cumulative
Percent Percent
Strongly agree 5 25.0 25.0 25.0
Agree 5 25.0 25.0 50.0
Somewhat agree 5 25.0 25.0 75.0
Valid Neutral 4 20.0 20.0 95.0
Somewhat
1 5.0 5.0 100.0
disagree
Total 20 100.0 100.0
Source: SPSS output (primary data)
Table 4.14 above shows the respond on environmental disclosure by your institution is
guided by IFRS strongly agree, agree and somewhat agree had 25% each whilst neutral had
20% and somewhat disagree had 5%. More shall be discussed below the component graph.

Table 4.15: Environmental disclosure by your institution is guided by GRI

B8c
Frequency Percent Valid Cumulative
Percent Percent
Strongly agree 4 20.0 20.0 20.0
Agree 8 40.0 40.0 60.0
Somewhat agree 4 20.0 20.0 80.0
Valid Neutral 3 15.0 15.0 95.0
Somewhat
1 5.0 5.0 100.0
disagree
Total 20 100.0 100.0
Source: SPSS output (primary data)
As shown in the table strongly agree accounted to 20%, agree 40%, somewhat agree 20%,
neutral 15% and somewhat disagree 5%.

Component graph for question B8

40%

35%

30% strongly agree

agree
25% somewhat agree
neutral
20% somewhat disagree
disagree
15% strongly disagree

10%

5%

0%
IAS IFRS GRI

Figure 4.2: Environmental disclosure by your institution is guided by IAS, IFRS, GRI,
Source: Excel output (primary data)
As show by the component graph above and tables 4.13 to 4.15 the majority of the
respondents agreed that the environmental disclosure by Delta Beverages is guided with IAS,
IFRS and GRI. Moreover, the GRI guideline is dominating in guiding the environmental
disclosures. This was use to the research so as to attain accurate results on strategies that can
be put in place to improve quality of environmental disclosures so as to enhance reputation of
a firm. According to a survey by EY and Baston Centre of corporate Citizenship, (2016) the
establishment of the Global Reporting Initiative was appreciated by hundreds of corporates
voluntary issuing sustainability using GRI framework. The Global Reporting Initiative (GRI)
Guidelines (2002) address the need for transparency, completeness, relevance and auditability
of sustainability reporting to assure the accuracy of corporate reports, which, according to
Laufer (2003), is still a challenge. Walker and Wan (2012) argue that in order to better
understand, and therefore assess environmental performance it is important to know
environmental issues that firms are actively engaged in, and how these might vary across
industries.

Table 4.16: Sustainability reporting should be mandatory

B10
Frequency Percent Valid Cumulative
Percent Percent
Strongly agree 7 35.0 35.0 35.0
Agree 11 55.0 55.0 90.0
Somewhat agree 1 5.0 5.0 95.0
Valid
Somewhat
1 5.0 5.0 100.0
disagree
Total 20 100.0 100.0
Source: SPSS output (primary data)
 Sustainability reporting
SA A SWA N SWD DA SDA

SWD
11%

SWA
11%
SA
44%

A
33%

Figure 4.3: Sustainability Reporting should be mandatory

Source: Excel output (primary data)

The pie chart and the table overleaf show responses on sustainability reporting should be
mandatory. As in the time table on the pie chart 35% strongly agree, 55% agree, 5%
somewhat agree whilst 5% was on somewhat disagree. The majority of the respondents
giving 95% when summed up agree to the fact that sustainability should be mandatory so as
to improve quality of environmental disclosure. The results were found relevant to the
research as they were need to know strategies that can be put in place to improve
environmental disclosure. Also, as supported by Farisa A et all (2017) states that
sustainability goes beyond focusing on the interests of investors and shareholders, but also on
the accountability of stakeholders who are either directly or indirectly affected or connected
to the business such as customers. He went on and state that by making sustainability
reporting mandatory the quality of environmental reports will be improved.
4.2.4 The relationship between environmental disclosure and firm
performance
Table 4.17: Regression analysis of environmental disclosure and firm performance

Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate

1 .201a .040 -.080 .72648

Source: SPSS output (Primary data).
In addition, table 4.17 shows a linear regression of environmental disclosure as single
factor and organizational performance. From the results in the table above R square of the
linear regression analysis of 0.04 shows that the relationship between environment
disclosure and organizational performance of the sampled company (Delta Beverages
Company) is 4% and adjusted R square of -0.080. The researcher argues that the small
percentage of 4% as shown by the regression analysis of environmental disclosure as a
single factor might be attributable to the lack of sustainable reporting policy in Zimbabwe
and also low uptake of environmental issues by manufacturing industries in Zimbabwe
which might not be the case if studies where to be done in neighboring countries like
South Africa and Botswana and also in developed nations because they are already
engaged in environmental disclosure. Thus, in this case the researcher can conclude that
Zimbabwe is still lagging behind in incorporating environmental disclosures in
organizational performance.

Table 4.18: Significance of environmental disclosure: Anova analysis

Model Sum of df Mean Square F Sig

Squares
Regression .305 1 .305 .595 .463b
Residual 4.095 8 .512
Total 4.400 9
Source: SPSS Output (primary data)
In table 4.2 above environmental disclosure significance in the reputation of a firm amounts
to 46.3% which is partially a considerable percentage of influence as compared to other
factors which account for 53.7%. Summarizing the results of the Anova factor analysis in
table shows that environmental disclosure is of little significance to investment and finance
decision by financial institutions. However, Breckinridge Capital Advisors, (2016) in their
research on the relationship between and corporate fixed income concluded that sustainability
disclosures have become significant not only for ESG sustainability but also financial
performance as they can be used to measure business success. This contradicts with the
research results since the findings suggests implementation of ESG strategies to attain
corporate financial sustainability whilst the results from Anova analysis shows that there is
little significance of ESG disclosure in making investment and financing decisions.

CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.0 Introduction
In this chapter the researcher is going to summarises the whole project. The chapter, in
addition will outline the conclusions that were drawn from the study and suggests
recommendations from the research findings.

5.1 Summary of findings

The research was motivated by the need to analyse the impact of environmental disclosure to
the reputation of a firm. A synthesis of different authors' ideas in literature review was made
to see the findings which were observed by other authors who had studied this area before.
The researcher used a sample of Intercrete Zimbabwe Pvt Ltd. Theoretical and empirical
literatures were used to make a strong analysis of previous work. The researcher also
collected raw data from the field. An appropriate descriptive research design was used in the
research in relation to the nature of the phenomenon that was studied to enable interpretation
and analysis of data. The major findings which were drawn from the study are as following:

 The researcher finds out that corporate reputation is influenced by environmental

disclosure, the more a firm posts its environmental reports the more it gains good
reputation and attract more investors.
 Corporate reputation and brand building and investors request for disclosure were the
major drivers behind environmental disclosure.
 Stakeholder pressure and company policy were the least though with a larger agreeing
respond rate influential factors on the motivators of environmental disclosures, this was
due to what the population think could do not to what was on the ground.
 A positive relationship exists between secondary data review and primary data on the use
of stock exchange as the second-best strategy to promote environmental disclosure.

5.2 Conclusion
From the extensive search and analyses of empirical data and primary data which was in line
with the research objectives, the researcher managed to draw these conclusions:

 The majority of the respondents strongly agreed that environmental disclosure have
an impact on the reputation of a firm. In light of this view the researcher concluded
that Intercrete Zimbabwe Pvt Ltd need to make environmental disclosures mandatory
in making credit and customer loyalty.
 From the study the researcher concluded that there is need for a localized policy on
environmental disclosures and sustainability accounting such as making
environmental audit and sustainability accounting mandatory.
 Also, organisations that do environmental accounting and those who have not yet
started should make an effort of disclosing their environmental reports which includes
cost incurred in dealing with those issues.
 The researcher also concludes that local manufacturing industries have been placing
little attention on environmental accounting, reporting and disclosure but however
 they only disclose little information about their environmental impacts in their annual
reports for example Intercrete Zimbabwe Pvt Ltd.

5.3 Recommendations
 The researcher would recommend that firms should make environmental disclosure
mandatory to all its stakeholders mainly customers and investors.
 The researcher further recommends that all local firms craft an environmental
disclosure and sustainability policy.
 They should be a board which represents all firm that will push integration of
environmental issues into the Zimbabwean manufacturing sector and make
environmental disclosures mandatory to every organisation.
 The government and the international bodies should come up with initiatives to
redraft and refocus the current regulations on firms to incorporate sustainability
issues.

5.4 Recommendation for Further Studies

 Since environmental accounting is becoming an evolving element in accounting there
is a necessity for researchers to evaluate the integration of environmental, social and
governance factor into the manufacturing industries of Zimbabwe. The researchers
thrust will be on assessing the possibility of adjusting current organisation regulation
to factor in environmental issues.
 Future research is also encouraged to find out strategies that can be put in place to
enhance the quality of environmental accounting in Zimbabwe and their impacts to
the firm’s financial performance.
 There is also a need to conduct a comprehensive research on the emerging of
environmental disclosure where it come from, where it is right now and is it going to
be a success as this area has not yet been thoroughly researched on.
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