Sheila Killian and Philip O'Regan did a case study of Shell and its community reporting in North-West Irelan

Killian, Sheila

O'Regan, Philip

LSE Research Online

4/26/2016Community involvement lends legitimacy to firms’ socialaccountingblogs.lse.ac.uk /businessreview/2016/04/26/community-involvement-lends-legitimacy-to-firms-social-accounting/Social accounting is a broad term describing a range of company reports on community or wider stakeholderengagement. It is often viewed as a simple process of one-way communication as a company seeks to put forwardan account of its social impact. It is less regulated in form than financial accounting, and its purpose is usuallyframed as winning some kind of legitimacy – a way for the company to manage its reputation or to soften its image.The focus of most research has been on the content of the reports: what are companies saying? What disclosuresare they making? What is the effect of particular types of content?Our research, however, finds that the narrative elements of social accounting may be more powerful than the detailof content, and that the active involvement of the target community is key to its effectiveness in winning legitimacyfor the company. We used a theoretical frame based on the work of French sociologist Pierre Bourdieu as a way oforganising ideas around the case of Royal Dutch Shell and their community reporting in North West Ireland.The case was an interesting one, as Shell had established in the area some years prior to the commencement ofsocial accounting, but had faced widespread and entrenched local opposition to their plans to build a pipeline andgas refinery. We used qualitative methods – in-depth interviews with people inside and outside of the company – aswell as an analysis of a nine-year series of community-facing social reports. Our study of how they used socialaccounting to win a measure of local acceptance for their presence led to some new and interesting findings.We find that in the case of locally-focused social accounting, the continuous involvement of local people has asignificant effect over time. The impact of social accounting comes less from individual disclosures, and more fromthis repeated drawing in of community groups into the process. As report follows report, the social accountingnarrative becomes more layered and powerful, weaving in more and more local stories. Bourdieu helps us to seehow, by absorbing the local, and reflecting it back to the community, the social accounting series gradually becomesa kind of local artefact. This gives it symbolic power, rather like folklore, so that it doesn’t have to be literally believedin order to influence attitudes and behaviour.1/3This is significant for the way we understand social accounting. Unlike more metric-based forms such as financialaccounting, it can change attitudes in a way that does not depend on evidence, analysis or quantitativemeasurement. The social accounting series comes to influence behaviour because it is accepted as part of localculture, and this acceptance comes from the direct involvement of locals in supplying content and seeingthemselves reflected in the outputs. The fact that this power is not based on assertions of fact means that it is notdirectly refutable. In this way, social accounting as a co-created local story can become powerful and unquestionedin a way that financial accounting cannot.Apart from the inclusion of local content, the social accounting process itself also creates a sense of acceptancewithin the community beyond that which could be achieved by economic power alone. A community investmentprogramme, for instance, if not used to trigger a shared social accounting process, could at most win limited supportfrom groups receiving grants or awards from the company. The accounting for that engagement, however, is farmore powerful because it is not done by the company alone.We observed how groups which received grants from the company responded by freely offering accounts of how itimpacted on them, photographs of activities etc. to be included in the corporate social accounting series. They donot spontaneously offer this level of accountability to other donors, such as government agencies or lottery funders.They choose to “account to” the company as a natural response to what is framed as a kindness on the part of thecompany.This way of understanding the relationship in terms of gift and gratitude transforms how the relationship between thecompany and the community is understood. This “accounting to” the company for their everyday activities changesnot only how they view the company, but also how they view their own actions. What was spontaneous andinstinctive becomes something to be accounted for externally. Their interactions become something to be described,and this can de-prioritise things that are not readily describable. More fundamentally, as the groups generatecontent for the company’s social accounting process, they narrate themselves into a relationship of trust anddependence.In summary, we find that, at least for community-facing social accounting, who? and how? are more importantquestions than what? Social accounting’s power is essentially symbolic, depending on process rather thanevidence, and so is softer and more difficult to challenge. This is achieved at some cost to the community ofstakeholders. This is important, as it sheds light on the power and purpose of social accounting, and the processesby which it becomes effective.♣♣♣Notes:This post is based on the authors’ paper Social Accounting and the Co-Creation of Corporate Legitimacy , inAccounting, Organizations & Society, April 2016. This post gives the views of its author, not the position of LSE Business Review or the London School ofEconomics.Featured image credit: BoH, CC BY-SA 3.02/3Sheila Killian is the Assistant Dean, Research, Director for Principles of ResponsibleManagement Education and a member of the ARC Accountability Research Cluster at the KemmyBusiness School, University of Limerick. Her qualifications are in maths, taxation, business studiesand CSR as well as accounting. Her research and published work addresses responsibilitysustainability, accountability and the common good, with a focus on professional expertise, taxpolicy and business school education.Philip O’Regan is as Executive Dean of the Kemmy Business School and member of the ARCResearch Cluster at University of Limerick. He has qualifications in archaeology and history,political history, corporate governance, financial strategy and inter-faith studies as well asaccounting. His research and published work addresses financial reporting, professional servicefirms, intellectual capital, accounting history, corporate governance and top management teams. Copyright © 2015 London School of Economics3/3

Community involvement lends legitimacy to firms’ social accounting

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