LEGITIMACY THEORY IN THE FORMATION OF THE INSTITUTIONAL AND LEGAL BASIS OF THE COMPANIES’ NON-FINANCIAL REPORTING SYSTEM

doi:10.26565/2524-2547-2021-61-06

Hanna Mysaka Taras Shevchenko National University of Kyiv, 90 A, Vasylkivska str., Kyiv, 03022, Ukraine https://orcid.org/0000-0003-0621-8513
Ivan Derun Taras Shevchenko National University of Kyiv, 90 A, Vasylkivska str., Kyiv, 03022, Ukraine https://orcid.org/0000-0003-0114-4746

DOI: https://doi.org/10.26565/2524-2547-2021-61-06

Keywords: Corporate Social Responsibility, Legitimacy, Non-financial Reporting, Non-financial Information, Sustainable Development

Abstract

Ensuring sustainable development depends on achieving balanced economic efficiency management with a parallel solving the humankind social and environmental problems. This led to the formation of an information request for reporting on the social and environmental aspects of business-doing under the pressure of the world economy development and the civil society formation. Stakeholders’ dissatisfaction with the degree of reliability, relevance and comparability of non-financial reporting voluntarily published by companies prompts the search for new mechanisms for its provision, since the problems of climate change, the fighting inequality and poverty have rapidly acquired a global scale and require urgent solutions.

The paper examines the main concepts of the origin of phenomenon of non-financial reporting as a tool for communication between a company and its stakeholders. It has been established that the legitimacy theory plays a key role in stimulating the companies’ voluntary disclosure of non-financial reporting and in the formation of the institutional and legal basis for the transition to a mandatory procedure for its provision both at the national and supranational levels. Based on a critical analysis of the voluntary disclosure practice of information on the economic, environmental and social aspects of business-doing, the authors substantiated the need to legalize the non-financial reporting system as the next stage of its evolution in the interests of all stakeholders.

It was found that the relevance of non-financial reporting indicators is influenced by the correct interpretation of the concept of “non-financial information” in the context of the characteristics of the business entities’ activity. Based on this, the authors substantiated their own definition of non-financial reporting and made an assumption about the implementing of the mandatory reporting in a certain order, taking into account the contiguity of the thematic areas to which certain non-financial reports are devoted. It has been proved that the root causes of the unreliability and low information content of non-financial reporting are the insufficient development of standards (or other norms), based of which it is drawn up, and the system of its independent assessment.

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Author Biographies

Hanna Mysaka, Taras Shevchenko National University of Kyiv, 90 A, Vasylkivska str., Kyiv, 03022, Ukraine

PhD (Economics), Associate Professor

Ivan Derun, Taras Shevchenko National University of Kyiv, 90 A, Vasylkivska str., Kyiv, 03022, Ukraine

PhD (Economics)

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