Corporate Sustainability Disclosure Based on Legitimacy Theory and Institutional Co-Structure

Document Type : Research Paper

Author

tabriz-azarbayjan street - mehran-

Abstract

Corporate sustainability, as a strategic framework, supports corporate goals and enhances stakeholder value while preserving future resources. Sustainability practices focus on mitigating environmental and social impacts of corporate operations. This study employed a mixed-method Grounded Theory approach to explore sustainability disclosure in Iran while presenting strategies to enhance corporate sustainability and sustainability reporting. The qualitative phase used Grounded Theory, while the quantitative phase applied structural equation modeling to validate the conceptual model. In 2023, 18 in-depth, semi-structured interviews were conducted with purposively sampled experts, including academic professors in accounting, economics, management, engineering, environmental management, business, and social sciences, and senior directors at the Environment Conservation Organization, with quantitative data analyzed using PLS software. Findings showed that micro- and macro-level economic factors, cultural, environmental, and social factors, managerial and corporate governance factors, and technical and structural factors were key drivers of corporate sustainability disclosure strategies. Additionally, economic recovery, a culture prioritizing corporate sustainability, and prioritizing environmental issues were key outcomes of corporate sustainability disclosure. Validation of components revealed that cultural, environmental, and social factors had the strongest impact, while economic factors had the weakest impact, on corporate sustainability disclosure. Furthermore, awareness-raising, continuous training, and allocation of adequate financial resources were critical for advancing corporate sustainability disclosure strategies.

Keywords

Main Subjects


Abdi M, Homayoun S, & Kazemi Oloum M. (2021). Investigating the Effect of Audit Committee Characteristics on Sustainability Reporting Level.  Journal  of Value and Behavioral Accounting, 5, 335-369. (in Persian)
Adekola, J., & Clelland, D. (2020). Two sides of the same coin: Business resilience and community resilience. Journal of Contingencies and Crisis Management, 28, 50-60.‏
Ashrafi, M., Magnan, G. M., Adams, M., & Walker, T. R. (2020). Understanding the conceptual evolutionary path and theoretical underpinnings of corporate social responsibility and corporate sustainability, Journal of Sustainability, 12, 731-760.‏
Ahmed, N., Eugene, L., Zykovic, S., & Belyava, Z. (2023). Effects of technological innovation on sustainable development and environmental degradation: Evidence from China Technology in Society, Technology in Society, 72, 102-184.
Amoako, G. K., Adam, A. M., Arthur, C. L., & Tackie, G .(2021). Institutional isomorphism, environmental management accounting and environmental accountability: a review. Environment, Development and Sustainability, 23, 201-216.‏
Campbell, D., Craven, B., & Shrives, P. (2003). Voluntary social reporting in three FTSE sectors: A comment on perception and legitimacy, Accounting, Auditing and Accountability, 16, 558–581.
Crossley, R. M., Elmagrhi, M. H., & Ntim, C. G. (2021). Sustainability and legitimacy theory: The case of sustainable social and environmental practices of small and medium‐sized enterprises. Business Strategy and the Environment, 30, 3740-3762.‏
Dechow, P, M. (2023). Understanding the Sustainability Reporting Landscape and Research Opportunities in Accounting. The Accounting Review, 98, 481–493. 
Dowling, J., & Pfeffer, J. (1975). Organizational legitimacy: Social values and organizational behavior, Pacific Sociological Review, 18, 122–136.
Engert, S., Rauter, R., & Baumgartner, R. J. (2016). Exploring the integration of corporate sustainability into strategic management: A literature review, Journal of Cleaner Production, 112, 2833-2850.‏
Florez-Jimenez, M. P., Lleo, A., Ruiz-Palomino, P., & Muñoz-Villamizar, A. F. (2025). Corporate sustainability, organizational resilience, and corporate purpose: a review of the academic traditions connecting them, Review of Managerial Science19, 67-104.‏
Fornell, C & ,.Larcker, D. (1981) .Evaluating structural equation models with unobservable and measuring error, Journal of High Technology Management Reasearch, 14, 39-50.
Gulluscio, C. (2023). Legitimacy Theory. In Encyclopedia of Sustainable Management , 25, 2209-2215.
Gray, R., K. Kouhy & S. Lavers. )2008(. Corporate social and environmental reporting: a review of the literature, Auditing and Accountability Journal, 8, 47-77.
Hamel, G., & Valikangas, L. (2023). The quest for resilience. Harvard Business Review, 81, 52–65.
Hamilton, E., & Smith, J. (2022). The Effect of Omissions on Management’s Fraud Strategies and Auditors’ Evaluations of Identified Misstatements, The Accounting Review, 96, 225–249.
Hekmat, H. , Rahmani, A. & Movaffagh, S. (2025). The Impact of Sustainability Reporting Disclosure and Accounting Information Comparability on Profit Continuity, Accounting and Auditing Review32, 95-116. (in Persian)
Ike, M., Donovan, J. D., Topple, C., & Masli, E. K. (2019). The process of selecting and prioritising corporate sustainability issues: Insights for achieving the Sustainable Development Goals, Journal of Cleaner Production236, 117-161.‏
Kashanipour M, Fathi M R, Faraji O,  & Rahmani M .(2021). Sustainability Reporting Future Study Using Scenario Planning Approach, Journal  of Value and Behavioral Accounting, 5, 69-101. (in Persian)
Karamanou, I. & N. Vafeas. (2005). The association between corporate boards, audit committees, and management earnings forecasts: an empirical analysis, Journal of Accounting Research, 43, 453-486.
Laskar, N. (2019). Does Sustainability Reporting Enhance Firms Profitability? A Study on Select Companies from India and South Korea, Indian Journal of Corporate Governance, 12, 2-20.
Lincoln, Y. S., & E. G. Guba. (1985). Naturalistic inquiry, Thousand Oaks, CA: Sage. 34, 124.139.
Ludwig, P., & Sassen, R. (2022). Which internal corporate governance mechanisms drive corporate sustainability?, Journal of Environmental Management31, 113-160.‏
Lozano, R. (2015). A holistic perspective on corporate sustainability drivers, Corporate Social Responsibility and Environmental Management22, 32-44.‏
Maboodi, H. R. , Rezaei, F. & Kordestani, G. R. (2022). The Effect of Disclosure of Sustainability Reporting Components on the Relationship between Applying Different Levels of Management Accounting Techniques to Value Creation.  Research in Financial Reporting10, 7-34. (in Persian)
Mirmohammadi, Z. and Talaneh, A. (2021). Identification of Nonfinancial Measures through Thematic Analysis Identifying Non-financial Measures Based on Thematic Analysis Method, Accounting and Auditing Review, 28, 161-180. (in Persian)
Ong, K., Mao, R., Satapathy, R., Shirota Filho, R., Cambria, E., Sulaeman, J., & Mengaldo, G. (2025). Explainable natural language processing for corporate sustainability analysis. The Information Fusion, 115, 102-140.‏
Ogundajo, G. O., Akintoye, R. I., Abiola, O., Ajibade, A., Olayinka, M. I., & Akintola, A. (2022). Influence of country governance factors and national culture on corporate sustainability practice: An inter-Country study. Cogent Business and Management, 9, 213-249.‏
Panahi Dorcheh, M. , Didar, H. , Mansourfar, G. , Heydari, M. & Ashtab, A. (2025). Material Sustainability Information Disclosure and Company Performance: The Moderating Role of Business Strategy, Accounting and Auditing Review, 32, 63-94 .(in Persian)
Rahi, A. F., Johansson, J., Blomkvist, M., & Hartwig, F. (2024). Corporate sustainability and financial performance: A hybrid literature review. Corporate Social Responsibility and Environmental Management, 31, 801-815.‏
Rahmani, A. & Mahmoudkhani, M. (2022). The necessity of preparing and assuring sustainability reports: The views of insurance industry experts and auditors. Professional Auditing Research2, 128-156. (in Persian)
Sayal, K., & Singh,G . (2022). Investigating the role of theory of planned behavior and Machiavellianism in earnings management intentions. Accounting Research Journal, 33, 653-668.
Strauss, A.L., & Corbin, J. (1998). Basics of qualitative research: Grounded theory: Procedures and Technique. 2nd Edition, Sage, 2,56-79.
Schaltegger, S., Christ, K. L., Wenzig, J., & Burritt, R. L. (2022). Corporate sustainability management accounting and multi‐level links for sustainability – A systematic review, International Journal of Management Reviews, 24, 480-500.‏
Scherer, A. G., Palazzo, G., & Seidl, D. (2023). Managing legitimacy in complex and heterogeneous environments: Sustainable development in a globalized, Journal of Management Studies, 50, 259-284.
Shokraei fard, P., Nikoomaram, H. & Khan mohammadi, M. H. (2023). Provide a Model for the Evolution of Management Accounting in Public and Private Organizations with an Institutional Approach. Journal of Management Accounting and Auditing Knowledge12, 177-194. (in Persian)
Samimi, S. , Badavar Nahandi, Y. & mottaghi, A. (2022). A Comprehensive Model of Factors Affecting the Expectation Gap between Auditors and Users of Financial Statements: A Multidimensional Grounded Theory and Structural Equation Modeling. Journal of Accounting and Social Interests, 12, 41-60.(in Persian)
Samimi, S. (2023). The Emergence of Responsible Auditors in the Context of Cognitive Dissonance: Applying Grounded Theory to Expectation Convergence. Accounting and Auditing Review30, 481-505. (in Persian)
Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches, Academy of Management Journal, 20, 571–610.
Silva, S. (2021). Corporate contributions to the Sustainable Development Goals: An empirical analysis informed by legitimacy theory, Journal of Cleaner Production29, 125-142.‏
Zahmatkesh, Z., shahrestani, S. & vahidi moghadam, L. (2023). Investigating the effect of management ability on the disclosure level of corporate sustainability reporting, Journal of Accounting and Management Vision, 5, 112-129. (in Persian)
Zia, Farnaz, Vakili fard, hamid reza & Saraf, Fatemeh. (2020). The Effect of Sustainability Reporting on Reducing Information Asymmetry of Companies Listed in Tehran Stock Exchange, Manegement Accounting, 13, 121-135. (in Persian)
Yousefizadeh, S., & Fakhari, H. (2024). Corporate characteristics determining sustainability reporting, Empirical Research in Accounting14, 149-184.‏ (in Persian)
Yu, M., & Zhao, R. (2015). Sustainability and firm valuation: an international investigation. International, Journal of Accounting and Information Management, 3, 289-307.