CORPORATE ENVIRONMENTAL REPORTING: AN IMMANENT CRITIQUE
Dewan Mahboob Hossain & Amirus Salat
Department of Accounting & Information Systems
University of Dhaka, Dhaka, Bangladesh.
Introduction
Business organisations deal in a social setting. It is said that business and society have a symbiotic relationship. On one hand, business supplies the products and services that the society needs. Thus business helps in improving the living standard of the people in the society. On the other hand, in order to operate and survive, business organisations have to depend on the resources of the society. Business collects its raw materials and human resources from the society. Business also sells its products and services to the society and thus ensures its survival. As it is the society that gives the business the permission to operate, business has to conduct its activities in a socially responsible manner. It is expected that the business will contribute to the welfare of the society and do not harm the society in any manner. That is why, over the last few decades the social and environmental impact of business activities has remained a major concern for both the professionals and the researchers.
The issues like environmental pollution and environment conservation have become burning questions these days. It was found that our mother earth is getting polluted because of various human activities. In search of development and prosperity, human beings, in many ways, are polluting the environment. As a result, natural endowments like air, water and land are getting contaminated. One of the major reasons of pollution is the massive industrialisation all over the world. It is said that industries, during the time of the production, are producing many wastages that are harmful for the environment. They are emitting gas in the air and throwing wastages in the land and water. Thus industrial activities are creating harmful impact on the environment.
These days because of the several problems (that are becoming clearly visible) arising from environmental pollution, several stakeholders (like shareholders, customers, governmental agencies, labour unions and several environmental groups) are becoming aware of the environmental issues. In many cases, they are raising their voices also. In some cases, the activities of the business are getting criticised vehemently. As businesses gain their legitimacy from the society, they are also becoming concerned about this public awareness. That is why these days ‘Corporate Social and Environmental Responsibility’ has become a common catchphrase in the business world. Corporations around the world are performing various activities that represent their social and environmental consciousness.
In order to let the stakeholders know about their responsible environmental practices, companies started to report on their activities in the various corporate reports. Annual reports and web sites have become the most common media where companies disclose their environmentally responsible activities. Recently many big companies are also preparing a separate sustainability report to highlight their social and environmental performances. In this way they try to exert their accountability towards the society. These reports are mostly narrative in nature describing the environmentally and socially responsible activities of the companies.
Even after all these attempts from the part of the companies, corporate social and environmental reporting faced enough criticism. Many researchers and social activists mention that these reports are mere tools of impression management. Companies just want to maintain and safeguard their legitimacy in the eyes of the stakeholders. Critics who comment from a critical perspective highlight that social and environmental reporting is mainly done from a business perspective and not from a normative perspective. Thus these reports are serving the purpose of the capitalists and not of the stakeholders in general. Management tries to create an impression in the stakeholders’ mind that the company is serious about the environmental issues. In reality the situation may be different. This can be considered as a social contradiction. It creates a false unity between the presented ideology in the environmental report and the hidden reality.
This contradiction can be analysed through a method called immanent critique that has its root in the work of the famous German philosopher, economist and sociologist Karl Marx. This article is based on this particular issue. In the next section, the article introduces the theory of Karl Marx and the concept of immanent critique. Then the article describes the Marxist perspective of environmental conservation. At the end, the article, with the help of Marx’s immanent critique method attempts to find out whether there exists a contradiction between the words of corporate environmental report and the underlying reality.
Marxism and Immanent Critique: An Introduction
Karl Marx (1818-1883) was a German philosopher. He produced most of his writings jointly with his companion Friedrich Engels (1820-1895). They introduced a socio-economic theory that is now popularly known as Marxism (though in their writings they used the term ‘communism’) (Barry, 1995). The main goal of Marxism is to create a classless society based on common ownership (Barry, 1995). Marxism is one of the most debatable as well as popular philosophies that the world has ever seen. Even after hundred years from the death of Karl Marx, it is still studied with enough importance.
In general, there are three dominant theories in sociology. The first one is the functional theory that shows how the different components/parts of the society are expected to work in a coordinated manner in order to maintain the stability of the society. Functional theorists highlight that the society consists of several institutions. In order to maintain the stability in the society, all these institutions should perform their tasks by maintaining proper coordination with each other. Stability ensures the proper operation of the society. The second one is the symbolic interactionism theory that explains the social interactions in a micro level. The basic of this theory lies on the idea that society is mainly consisted of interactions. The symbolic interactionists focus on people’s ‘pattern of behaviour’ and thus they deal with symbols, interactions, communication, meanings and definitions (Henslin, 2011: 28). The third dominant theory is the conflict theory and it highlights that in the society there exists a continuous conflict among the groups over scarce resources and the dominant group makes the social arrangements to exploit the dominated group. The dominant group use authority and power (Henslin, 2011).
Marx introduced conflict theory in sociology. After the introduction of Marxism, over the years, many other conflict theories were developed on the basis of Marxism. Conflict theory highlights the issue that there exists a constant conflict among the groups for the resources of the society. Among these groups, one is the dominant group. The other is the group that gets dominated. The dominating group utilises and exploits the dominated group in order to accumulate wealth and power. Marx believed that ‘conflict is a normal condition of social life whose nature and variations are some of the most important things to be described and analysed by social science’ (Vago, 2004 : 60).
Socialism is a concept that has it root in the works of Karl Marx. Karl Marx wrote against capitalism. According to Marx, capitalism created two conflicting groups in the society. One is the bourgeoisie (in other words the capitalists) and the other is the proletariat (or the labour class).Marx believed that progress can come through the power struggle between these conflicting groups (Barry, 1995). He sees human history as a history of class struggle. In this recent capitalistic society the class system is more visible. Here the labour class is economically oppressed as the capitalistic class exploit them to get economic privilege (Tyson, 2006).
The powerful group always want to manipulate the psychology and ideology of the dominated group. They want the dominated group to believe what they (the powerful group) want them to believe. They try to change the ideology of the people. Tyson (2006) explains this phenomenon through the example of colonised societies. According to Tyson, the colonial masters or the imperialist nations in most of the cases try to ‘colonise’ the ideology of subordinate people. Tyson (2006: 63) mentions that ‘to colonize the consciousness of subordinate people means to convince them to see their situations the way the imperialist nation wants them to see it’.
The famous philosopher Friedrich Hegel and Karl Marx made an attempt to explain this kind of situation where the presented ideology differs from the underlying reality. This explanation method is called immanent critique. Kamla and Rammal (2013) explained this method. According to them, ‘immanent critique method illuminates the contradiction between ideology and reality by highlighting inequalities and injustices that result from the power of capital’ (Kamla and Rammal, 2013:913).
This method takes an attempt to uncover the masked interest of a group that provides with self-interest oriented (in a disguised manner) justification of their activities and words. Immanent critique method tries to find out the hidden interest behind a particular view.
Society, Nature and Marxism
People in this world, in many ways, are dependent on the endowments of nature. Though environmental pollution is not a new phenomenon for humankind (as it existed even in the ancient times), the issue got immense importance mainly during last few decades. The major environment-polluting human activities mainly started after the industrial revolution when heavy machineries and equipments came into the production process by replacing a good portion of manual labour. The changing nature of economic activities was harming the natural environment a lot. Though at first the society mainly concentrated on the economic advantages of industrial revolution, later the issue of nature and its conservation started to get attention.
The issue of environmental conservation has always been exploited by the people in power. It was seen that even at the time when capitalism was getting introduced to the world history, philosophers and literary people wanted to use the issue of environmental conservation in support of the feudal lords (Barry, 2007). After industrial revolution, lots of industries were growing up. These industries needed lands for their set up. As a result green country sides were losing their greenery. At that time there grew a conservative romantic view among the philosophers and poets. They wrote against the industrialisation and ‘wished for a return to the pre-industrial rural and almost medieval class-based societies’ (Barry, 2007: 126). At that time in the history it was seen that the socio-political power was getting transferred to the businessmen from the landlords. According to Barry (2007: 126), ‘conservatives on the whole were completely against the extension of political power to those outside the landowning class, the monarchy and the established church’. That is why, through their writings, they were trying to safeguard the interest of the people in power. But even after the lack of support from these philosophers, capitalism gained its position and survived.
But industrial revolution created new problems for the society. The lifestyle of the people was changing. Because of the mass production of different products at a lower cost, the handmade products were losing the market. As a result, many people in the rural area had to close the business and migrate to the cities to work in the industries. So, a labour class was created. Other than the changed lifestyle, because of massive industrialisation and use of heavy machinery and fuel, the environment was getting polluted. Huge migration to the cities made the cities overpopulated. This also became a major reason for environmental pollution.
Philosophical ideas took a new turn in the first half of the nineteenth century when sociology emerged as a new discipline. It is said that the discipline of sociology mainly emerged in order to solve the new problems arising from industrial revolution. Though the first few sociologists like August Comte, Herbert Spencer, Emile Durkheim and Max Weber were concerned about introducing scientific methods to solve social problems, the issue of environment and nature were highly ignored by them.
It was Karl Marx who first highlighted the relationship of human beings with nature. But Marx did not address the issue of environmental degradation directly in his writings. Marx did not identify the ‘significance of ecological issues that have come to play such an important part of late twentieth century political and ethical discourse’ (Barry, 2007: 155). But Marx was a supporter of organic agricultural techniques. Marx wrote ‘at length about the benefits of spreading manure on crop lands, even suggesting that human waste from the city be recycled as fertiliser rather than polluting the rivers and oceans’ (Hannigan, 1995: 9). Both Marx and Engels believed in the interrelationship of humankind with nature.
But the later theorists by using the basic ideas of Marxian views on capitalism, explained the recent environmental problems. In many ways, they highlighted that capitalism and the role of the states are jointly liable for the massive environmental degradation all over the world (Hannigan, 1995). Hannigan (1995: 9) comments that:
“Both elected politicians and bureaucratic administrators are depicted as being centrally committed to propping up the interests of capitalist investors and employers”.
Though Marx did not address the issue of environmentalism directly in his writing (for some, Marx failed to address this issue totally), he highlighted the issue that capitalism will ultimately give rise to so many social problems. Especially capitalism’s continuous urge for money making became detrimental for the environment. As a very powerful group of the society, capitalists can even try to manipulate the activities of the government and it may go against the natural environment. Thus general public can get harmed. So, there is no doubt that the capitalistic spirit of profit making can damage the natural environment in many ways.
That is why, the recent theorists are trying to interpret the environmental crisis from the Marxist point of view that is against capitalism. As a result, new terms like ‘left biocentrism’ and ‘eco-feminism’ came into the literature. The left bio-centrists find industrialism as one of the main causes of environmental degradation. This theory is a little bit different from traditional Marxism because Marx was not against industrialism. That is why, the new Marxist theorists are demanding for a new interpretation of Marxism:
“Marxism needs, therefore, to become more fully ecological in realising its potential to speak for nature as well as humanity. In practice, this means replacing capitalists with ecologically sound/socialist production..” (Kovel, 2002: 10).
It was mentioned earlier in the discussion that Marx introduced the conflict theory in sociology. Later basing on the basic principles of conflict theory (that is, there exists conflicting groups in the society), some other theories were developed. Feminist theory is one of them. Feminist theorists highlight the constant domination and oppression of men over women in almost every society in the world. In 1972, French feminist Francois d’Eaubonne introduced a term called eco-feminism. The main theme of eco-feminism is that the nature is also getting dominated and oppressed just like the women in the society. Eco-feminists call for showing a better attitude towards the nature.
The conflict situation between the dominating and the dominated groups can be further explained by a recent phenomenon related to climate change issues. Over the years because of the massive industrialisation in the capitalistic Western countries the temperature of the world has increased. It happened because of the extensive use of fuels. Burning of fuels creates green house gases that are harmful for the humankind. When these green house gases are emitted in the air, the world temperature increases. As a result the ice in the polar areas gets melted and thus the sea level rises. Because of this rise in the sea level, there is a chance that many low lands in the world will be submerged under water in next few decades. Saline water will get mixed with drinking water and as a result there will be a crisis of drinking water. Moreover, the land will also suffer from salinity and thus the crop production will be hampered. It will lead to extreme food crisis. Because of the massive industrialisation in the developed countries the whole world will be suffering. That is why, in the year of 1997, in Japan, the world leaders met and proposed the Kyoto Protocol. This protocol aimed to reduce the green house gas emission to a certain level within a timeframe. The world leader also proposed for the compensation to the suffering countries as they are not responsible for this environmental degradation. The suffering nations are just the victims of the activities of the industrialised developed countries. Though many of the countries ratified this protocol, industrially developed countries the USA and Australia did not ratify the protocol. Later in 2008, Australia ratified it. So, it can be said that the developed countries are dominating and in order to uphold their interest they might do something that goes against the less powerful developing and underdeveloped nations.
In summary, it can be said that though Marxism does not directly address the issue of environmental degradation and environmental conservation, the basic theory of Karl Marx (i.e., the issue of conflict and exploitation) can be employed in theorising the present condition of environmental degradation. Environment was massively polluted because of imprudent and greedy attitudes of the human beings – more specifically the capitalists.
An Immanent Critique of Corporate Environmental Reporting
This section attempts to conduct an immanent critique of the present situation of corporate environmental reporting on the basis of several prior research.
It can be seen from the previous discussion that one of the major causes of environmental degradation is the industrial pollution. The capitalistic spirit of high concentration on profit makes the whole situation worse. It needs to be mentioned here that performing environmental responsibility can be costly for the organisations. It may need a good amount of investment in the research and development to introduce an environment-friendly manufacturing process. Producing environment friendly product may also demand higher cost. The waste management and treatment plants are also expensive. Naturally, if the cost becomes high, the profit will be less. In some cases, companies may have to raise price of the product in order to cope with the increased cost. Thus the competitive advantage of the company might get reduced. This may also result in less profit. This is against the capitalistic spirit of profit making.
This situation creates a dilemma for the capitalists. On one hand, they have this greed of profit making and less concentration of environmental responsibility may result in higher profit. On the other hand, in this era of high environmental awareness among the various stakeholders, organisations have to maintain their legitimacy by behaving in an environmentally responsible manner. So, there is a chance that managers will try to go for a trade-off between profit motive and environmental performance.
From a Marxian perspective it can be said that the managers and the other stakeholders are two different groups. Both of them have their own interests related to the organisation. In a sense the management can be considered as a more powerful group as they possess more information about the organisation. In order to serve their best interest, management can manipulate information and the less powerful group, i.e., the other stakeholders may get deprived of getting authentic information.
It is mentioned earlier that in order to maintain legitimacy, companies generally communicate their environmental performances in several corporate reports like annual reports and sustainability reports. In many cases, researchers working from the critical perspective have mentioned that these reports are mainly serving the interests of the capitalists and thus these reports are mainly prepared form a business perspective (Joseph, 2012; Kamla and Rammal, 2013). As accountants remain highly involved in the preparation of these reports, the discipline of accounting has also been criticised by the critical perspective researchers.
Sikka (2013), by presenting several historical evidences, showed how accounting and accountants play an important role to uphold the interests of the capitalists and thus the society in general gets harmed. By giving emphasis on the discourses like cost reduction and tax reduction, the accountants are contributing in the inequitable distribution of income and wealth. From this research evidence it can be inferred that as performing social and environmental reporting also involve costs, the capitalists may intend to perform these activities to at a lower extent and apply manipulation in reporting for the sake of safeguarding legitimacy. Kamla and Rammal (2013: 913) state that:
“In critical accounting research, corporate social reporting is often perceived as being captured and mobilized by corporations’ managers (as society’s elite) to portray “false unity” between social expectations and their negative social and environmental consequences”.
Kamla and Rammal (2013) analysed the annual reports and web sites of nineteen Islamic banks around the world and found that rather than reporting on the issues highlighted in Shariah (Islamic laws), the social reports of Islamic banks are depicting the prevailing capitalistic ideals. The similar research results can be seen in Maali, Casson and Napier (2006). In this research it was found that in the corporate social reporting practices of Islamic banks ‘social issues are displaced by financial concerns, thereby replicating Western hegemonic practices’ (Rania and Kamla, 2013: 932).
Episten (2007) identified that though there is a growing awareness about the corporate social responsibility all over the world, the factors like massive competition, shareholders’ wealth maximisation and short term accounting performance measures are pressurising the management to emphasise the business perspective rather than social and environmental perspectives. Again, the issue of capitalistic spirit of profit maximisation is highlighted here.
A similar comment was made by Ocler (2009). While analysing the discourses on corporate social responsibility of the French companies, the author found that the reports on corporate social responsibility mainly subordinates the financial reports. When the issue of the performance of the company is highlighted, economic performance gets more importance than the social performance. Ocler (2009: 181) mentions that: “…economic factors were a prerequisite to any interest in social responsibility”.
That is why there exists a difference between the rhetoric used in the corporate environmental reports and the reality. In most of the cases scholars analysing from critical perspective highlight that corporate environmental reporting is mainly a tool for impression management. Everett (2004: 1066) the languages used in the corporate social and environmental reporting give the companies a social advantage. The language helps them to portray themselves as the ‘friends of the environment’.
In general, while reporting on corporate social and environmental reporting, companies follow some guidelines given by some organisations. For example, Global Reporting Initiative (GRI) is one of the non-profit organisations that has given guidelines for corporate social and environmental reporting. Joseph (2012) analysed these guidelines to find out whether these guidelines represents the disclosure of moral values or not. He commented that though the reporting guidelines provided by GRI are good but these guidelines also are focusing more on the business perspectives rather than normative perspectives.
A similar finding was found in the research of Reynolds and Yuthas (2008). In this research different social and environmental reporting guidelines like EMAS, ISO 14000 series, SA8000, AA1000, GRI and the Copenhagen Charter were compared with the criteria of communicative validity mentioned in the theory of communicative actions proposed by famous contemporary philosopher Hebermas (another critical perspective thinker). The four criteria of communicative validity are: truth, sincerity, understandability and appropriateness. The researchers found that none of these standards/guidelines mentioned here covers all four of these criteria. The researchers concluded that (Reynolds and Yuthas, 2008: 62):
“…the models do not quite move to the level of ethical discourse through which social progress might be achieved”.
So, it can be said that the several guidelines proposed by various organisations are also in a way focusing less on the ethical perspectives that is important for the society. One reason for this can be that as these organisations are dependent on the business organisations for the acceptance of these guidelines, they have to prepare these guidelines in favour of these organisations. It has to be remembered here that these guidelines are only meant for voluntary disclosure and these are not laws. So, organisations are not bound to follow these. If these disclosure requirements are not suitable for the organisations, they will not follow it. That is why these guideline setting organisations cannot include many things that will not be accepted by the organisations. So, again, in a way, the intention of the capitalists survives.
In summary it can be said that the research results and the comments of the researchers presented in this section of the article highlights that there is a gap between the depiction of reality in the annual reports and the facts. The presented words differ from the reality. In fact these presentations fulfil the hidden interests of the capitalists.
Conclusion
This paper, by applying Karl Marx’s immanent critique method on the findings of the several research conclude that management’s representation of companies environmental performance do not efficiently reflect the reality. Environmental degradation has become a major social problem in last few decades. Massive industrialisation and greedy attitudes of the capitalists are responsible for this degradation. That is why the business organisations should be forced to behave in an environmentally responsible manner. They must also report on their environmental performances in the corporate reports. But as the corporate social and environmental reporting is voluntary in nature, corporations are using these reports as tools of impression management. These reports create a different idea and impression in the mind of the readers that is far from reality. Moreover, the guidelines prepared by several organisations for the voluntary social and environmental disclosure are also not serving the real purpose. As a result, the various stakeholder groups are getting exploited by the management. As these social and environmental disclosures are not mandatory, different companies are reporting in different ways by safeguarding their interests. In order to get the authentic information from the companies, laws should be set and environmental audit should be made mandatory.
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