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Orica & System Oriented Theories Regarding Sustainability Issues

1970 words - 8 pages

This report explores the relationship between system oriented theories, sustainability issues and disclosures made by Orica Limited in their 2013 Sustainability Report (“Orica 2013”). The review is based on the system oriented theories covering Stakeholder Theory, Legitimacy Theory and Institutional Theory. On the basis of this assessment, recommendations are made for future approaches to Orica’s Sustainability Reporting.
The 2013 Sustainability Report by Orica provided benefit to stakeholders. Orica’s key sustainability challenges and opportunities focus on: refining the customer value proposition, developing people capability and competence, driving common systems and processes, ...view middle of the document...

” Deegan (2012, p. 112) sees this as the social contract between the organisation and society. This social contract implies that whilst the organisation aims to make profit, it also has a moral obligation to act in a socially responsible manner (Reich 1998). Failing to do so may see the community revoke its support for the organisation’s operations (Deegan 2012, p. 113). Organisations use sustainability reports as a strategy to ensure that they are perceived as legitimate and take measures to ensure that it operates within the community’s expectation. Disclosing this information demonstrates that it is conforming to the community’s expectation (Deegan, Rankin & Tobin, 2002 p. 320), which may include both negative and positive disclosures (Dowling 1975). Any unfavourable media attention will see management release positive information in order to re-legitimate itself.
Orica promotes its legitimacy by providing both positive and negative disclosures. This can be demonstrated by reporting safety and environmental incidents. There was an explosion at the detonator manufacturing plant in Chile, resulting in improving the safety of its workers under the SHEC plans. Orica was fined $432,000 as a result of non-compliant stormwater and effluent discharges. Engagement plans to clean the site were implemented to rectify this issue (Orica 2013). Orica acknowledges this as a threat to its legitimacy by disclosing the incidents and responds positively by implementing strategies to reinstate its legitimacy and conform to society’s expectations (Deegan, Rankin & Tobin 2002, p. 319).
Other methods utilised by Orica to reinforce its legitimacy is its disclosure of awards, their sustainability performance, reduction in greenhouse gases by 4% (Orica 2013) and reporting within the GRI guidelines (Global Reporting Initiative, 2012). These are positive disclosures to demonstrate the stewardship of the company and to further embed its legitimacy.
Whilst Legitimacy Theory considers the expectations of society, Stakeholder Theory focuses on stakeholder power. Orica acknowledges many stakeholders such as customers, shareholders, employees and communities (Orica 2013). Stakeholder Theory is defined as the importance for an organisation’s survival of satisfying the demands of its various stakeholders (Deegan 2012, p. 110). It comprises of two branches; an ethical branch (a normative theory) which sees the stakeholders as having intrinsic rights and the managerial branch (a positive accounting theory) which seeks to explain and predict how organisations react to their stakeholders (Deegan 2012, p. 111). Organisations provide disclosures about their social responsibility activities as part of their strategy for managing stakeholder relationships (Roberts 1992). Stakeholders have the ability to influence the organisation’s control over its resources (Deegan 2012, p. 111). The more critical the stakeholder’s resources are, the greater the stakeholder’s expectations...

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