organized hypocrisy, organizational faÃ§ades, and

Accounting, Organizations and Society 40 (2015) 78–94

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Accounting, Organizations and Society

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Organized hypocrisy, organizational façades, and sustainabilityreporting

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⇑ Corresponding author.E-mail addresses: [email protected] (C.H. Cho), [email protected]

(M. Laine), [email protected] (R.W. Roberts), [email protected] (M. Rodrigue).

Charles H. Cho a,⇑, Matias Laine b, Robin W. Roberts c, Michelle Rodrigue d

a ESSEC Business School, 1 Avenue Bernard Hirsch, CS 50105 Cergy, 95021 Cergy Pontoise Cedex, Franceb School of Management, 33014 University of Tampere, Tampere, Finlandc Kenneth G. Dixon School of Accounting, University of Central Florida, 4000 Central Florida Blvd, Orlando, FL 32816-1400, USAd École de comptabilité, Faculté des Sciences de l’Administration, Université Laval, Pavillon Palasis-Prince, 2325 rue de la Terrasse, Québec, Québec G1V 0A6, Canada

a b s t r a c t

Sustainability discourse is becoming ubiquitous. Still, a significant gap persists betweencorporate sustainability talk and practice. Prior research on corporate sustainability report-ing has relied primarily on two competing theoretical framings, signaling theory and legit-imacy theory, which often produce contradictory results regarding the significance andeffects of such disclosures. Thus, despite this substantial body of research, the role that sus-tainability disclosures can play in any transition toward a less unsustainable societyremains unclear. In an effort to advance our collective understanding of voluntary corpo-rate sustainability reporting, we propose a richer and more nuanced theoretical lens bydrawing on prior work in organized hypocrisy (Brunsson, 1989) and organizational façades(Abrahamson & Baumard, 2008; Nystrom & Strabuck, 1984). We argue that contradictorysocietal and institutional pressures, in essence, require organizations to engage in hypoc-risy and develop façades, thereby severely limiting the prospects that sustainability reportswill ever evolve into substantive disclosures. To illustrate the use of these theoretical con-cepts, we employ them to examine the talk, decisions, and actions of two highly visibleU.S.-based multinational oil and gas corporations during the time period of significantnational debate over oil exploration in the Alaskan National Wildlife Refuge. We concludethat the concepts of organizational façade and organized hypocrisy are beneficial to thesustainability disclosure literature because they provide theoretical space to more formallyacknowledge and incorporate how the prevailing economic system and conflicting stake-holder demands constrain the action choices of individual corporations.

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Introduction

The expansion of human societies and economic activi-ties is exceeding the ecological boundaries of our planet(IPCC, 2014; Rockstrom et al., 2009). Sustainability is, forinstance, now a regular feature in high profile business

meetings and global leader summits. Simultaneously,however, an interlinked debate exists concerning the roleglobal business can play in the aspired transition towarda less unsustainable future (e.g., Bansal & Hoffman, 2012;Bebbington & Larrinaga, 2014; Bebbington, Unerman, &O’Dwyer, 2014; Jackson, 2009). The spread of social andenvironmental issues into the corporate boardrooms isperhaps most noticeable through corporate sustainabilityreporting practices, which have in recent years diffusedswiftly and become institutionalized as one elementof the information stream produced by commercial

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C.H. Cho et al. / Accounting, Organizations and Society 40 (2015) 78–94 79

organizations. Despite the influx of sustainability talk, theglobal environmental indicators show a constant declinein the state of the natural environment (Milne & Gray,2013). A significant gap between corporate sustainabilitydiscourse and its practice continues to persist (Malsch,2013; Spar & LaMure, 2003).

This tension between sustainability discourse and prac-tice spawned extensive analyses of corporate voluntarysustainability disclosure and reporting, often generatingcontradictory conclusions (e.g., Archel, Husillos, & Spence,2011; Dhaliwal, Radhakrishnan, Tsang, & Yang, 2012;Milne & Gray, 2013; Unerman & Chapman, 2014). Propo-nents of sustainability reporting support its potential tomake corporations more accountable and transparentabout their social and environmental impacts (seeBebbington, Unerman, & O’Dwyer, 2014). The claimsexpressed in sustainability reports are viewed, at the veryleast, as credible voluntary signals to the market that thesecorporations are proactively managing social and environ-mental risks (Malsch, 2013). Critics question voluntarysustainability reporting because it tends to be limited inscope (Jupe, 2007; O’Dwyer, Unerman & Hession, 2005),disingenuous (Aras & Crowther, 2008), and utilized as alegitimacy tool (Cho, Michelon, & Patten, 2012; Milne &Gray, 2007). Moreover, the argument exists that corpora-tions do not walk the sustainability talk, resulting in sus-tainability reports consisting largely of spurious claimsand unmet commitments rather than signaling rationalplans and actions that address substantive concerns (e.g.,Adams, 2004; Boiral, 2013; Patten, 2012). A significantbody of research suggests that companies engage in socialand environmental reporting mainly to secure their ownposition and private interests (e.g., Cho, 2009; Milne &Gray, 2013; Tinker & Neimark, 1987). Accordingly, legiti-macy or reputational threats tend to drive sustainabilityreporting decisions, with corporate management beingmost concerned with deflecting, obfuscating, or rationaliz-ing their relatively poor social and environmental perfor-mance (Cho, Roberts, & Patten, 2010).

In this paper, we argue that while sustainability report-ing research can continue to glean new insights from thebroad theoretical lenses of signaling theory and legitimacytheory,1 our collective attempts to understand voluntarycorporate sustainability reporting can be moved forwardby examining sustainability reporting through a richer andmore nuanced theoretical lens. Richer by acknowledgingthe likelihood that sustainability reports overreach in theirclaims, yet also may report honestly on the implementationof corporate social responsibility plans that differentiatethem from other corporations in their industry. Morenuanced by acknowledging the significant limitations ofmarket reforms and the potential for regulatory capture bycorporate interests (Archel et al., 2011; Malsch, 2013), andby allowing space for corporate maneuvers which could ulti-

1 We contrast signaling theory and legitimacy theory understanding thatthere are many applications of these theories that are labeled differentlywithin social and environmental accounting research. In this study,signaling theory represents work also characterized as voluntary disclosureand incremental accounting information research. Legitimacy theory alsorelates to work in impression management.

mately improve corporate social and environmental stew-ardship. For example, Christensen, Morsing, and Thyssen(2013) argue that discrepancies between corporate talkand actions might actually be beneficial and should there-fore be tolerated. They maintain that such aspirational talkcan serve as an avenue through which organizations staymotivated in their explorations of a less unsustainablefuture.

Our paper’s overarching purpose concerns the signifi-cance that corporate voluntary sustainability reportingcan have in attempts to solve contemporary social andenvironmental problems (IPCC, 2014; Raworth, 2012;Rockstrom et al., 2009). More specifically, our interest isin discussing the broader role structural factors have onthe content of sustainability disclosures, particularly asthey relate to expectations regarding the congruencebetween corporate talk and corporate action. In order toexplore this issue systematically, we draw on Brunsson’smodel of organized hypocrisy (1989, 1990, 1993, 2002,2007) and related research (e.g., Christensen et al., 2013;Lipson, 2007), as well as on prior research on organiza-tional façades (Abrahamson & Baumard, 2008; Nystrom &Strabuck, 1984). Organized hypocrisy attempts to explainthe discrepancies between a corporation’s talk, decisions,and actions, and how these discrepancies may allow corpo-rations flexibility in their management of conflicting stake-holder demands. Research on organizational façadesmoves beyond a model of a unitary façade, setting forththe notion that rational, progressive, or reputation façadesmight serve organizational purposes beyond societal legit-imacy (Abrahamson & Baumard, 2008). By utilizing theconcepts of organizational façade and organized hypocrisy,the sustainability disclosure literature moves beyond itsusual focus on signaling, or legitimacy and impressionmanagement by more formally acknowledging and incor-porating constraints on an individual corporation’s actionchoices given the current economic system. Further, thesetwo concepts, when taken together, raise the possibilitythat incongruence between a corporation’s talk and itsactions may generate beneficial consequences for a broadset of organizational stakeholders.

To illustrate the use of these theoretical concepts, wepresent an empirical example of the application of thesetwo concepts. To achieve this, we explore the talk, deci-sions, and actions of two highly visible U.S.-based multina-tional oil and gas corporations during the time period ofsignificant national debates over allowing oil explorationand drilling in the Alaskan National Wildlife Refuge(ANWR). This study qualitatively analyzes the annualreports, stand-alone sustainability reports, website disclo-sures and shareholder resolutions during the deliberationperiod of the ANWR Bill.2 The ANWR provides us a suitableresearch setting as the debate juxtaposes incommensurableissues such as protecting the biodiversity in fragile environ-ments, respecting the human rights of Alaskan Aboriginals,

2 The Arctic National Wildlife Refuge (ANWR) Bill (also known officiallyas the American-Made Energy and Good Jobs Act) is a piece of legislationpassed to provide a platform to explore and develop hydrocarbon-basedresources in the Arctic National Wildlife Refuge area, thus resulting in thecreation of a potential boost in the economy (THOMAS, 2009).

80 C.H. Cho et al. / Accounting, Organizations and Society 40 (2015) 78–94

and developing commercial energy resources and energyindependence. Our empirical analysis revealed that thesecorporations’ messages and activities appear to be generallyconsistent within each façade. However, in line with Bruns-son’s idea of organized hypocrisy, we show how differencesbetween corporate talk and actions become evident whenexploring across façades—while rational and progressive faç-ades have more common features and fewer contradictions,we identified more incompatibilities between the rationaland reputation façades in our case firm disclosures.

The remainder of the paper is organized as follows. Therole of sustainability disclosures in society is discussednext. The third section offers insights about the relationbetween hypocrisy and façades and their role in managinglegitimacy and conflicting stakeholder interests. The fourthsection provides an empirical illustration of how the ideasof organized hypocrisy and façades can be fruitful in corpo-rate sustainability reporting research. The paper ends witha discussion and conclusions.

The role of sustainability disclosures in society

Corporate sustainability reporting spurred a substantialbody of research exploring the characteristics of this con-temporary phenomenon (see reviews by Gray (2002),Owen (2008), Parker (2005)). Specifically, this paperrelates to prior work exploring why private organizationsengage in sustainability reporting (e.g., Clarkson, Li,Richardson, & Vasvari, 2008; Deegan & Blomquist, 2006;O’Donovan, 2002; Patten, 2002) and the role of sustainabil-ity reporting in society (e.g., Gray, 2010; Malsch, 2013). Inbroad terms, the heightened interest in corporate sustain-ability reporting is driven primarily by increasing stake-holder concerns regarding organizations’ impacts on thesocial and natural environment (Adams & Narayanan,2007; Ballou, Heitger, & Landes, 2006; Bebbington,Larrinaga, & Moneva, 2008). Much corporate social andenvironmental reporting research is based in legitimacytheory (Gray, Kouhy, & Lavers, 1995), which is groundedin the notion that an implicit contract exists between indi-vidual organizations and the society in which they operate(Chen & Roberts, 2010). The essence of this implicit con-tract lies in civil society having the authority to grant andremove an organization’s permission to exist and conductbusiness within that society. Societal expectations arebased upon numerous agreed-upon social norms, thus anorganization’s survival depends on its ability to meet soci-ety’s expectations in the fulfillment of this implicit con-tract. In general, research based on legitimacy theoryconsiders corporate sustainability reporting as a mecha-nism through which organizations can influence how theyare perceived by society (Lindblom, 1993; Suchman, 1995).

Legitimacy theory operates at a very broad level of anal-ysis, viewing an organization’s implicit contract with soci-ety as essentially a single contract that is either enforced orbroken. Society is, thus, a unified actor with a cohesive setof societal norms. As such, legitimacy theory focuses onwhether the norms exhibited by an organization are

congruent with the most general norms of society. It isimportant to point out that legitimacy theory considersthe organization also to be a unified (or unitary) actor. Thisassumption allows conclusions regarding the strategicintent of disclosure decisions to be inferred.

In the legitimacy-based research, corporations are char-acterized as using sustainability disclosures and reportsstrategically for window-dressing and impression manage-ment purposes. Disclosures can be explained in part by thevoluntary, unregulated nature of sustainability reporting(Boiral, 2013; Merkl-Davies & Brennan, 2007). Selective,incomplete, and/or biased disclosures have been judgedproblematic, since inaccurate and possibly misleading dis-closures can lead stakeholders to make erroneous assess-ments of particular organizations. More broadly, it hasbeen argued that sustainability reports serve not only topromote the interests of individual corporations, but alsocollectively to present current structural arrangementswithin society as able and willing to act on escalating sus-tainability challenges (Malsch, 2013; Spence, 2009). Like-wise, Tregidga, Milne, and Kearins (2014, p. 478) arguethat ‘‘organizations have been able to resist substantivechange to business-as-usual through a process of apparentidentity transformation’’ (see also Laine, 2010; Milne,Tregidga, & Walton, 2009).

Malsch (2013) views the growing standardization ofsustainability reporting and the role of the accounting pro-fession in producing and assuring corporate sustainabilityreports as significant, overt attempts to align ‘‘the sociallyresponsible practices of organizations with the rationalmorality of the market’’ (p. 149). As the market evidenceshowing that corporate sustainability reports have infor-mational value mounts, pressures to meet the market’sexpectations of corporate social and environmentalresponsibility have increasingly become an organiza-tional-level risk to be managed. Risks at this level are mit-igated by managing stakeholders, not through takingimmediate or near short-term unilateral actions aimed athelping address negative, systemic social and environmen-tal consequences of economic activity (Rodrigue, Magnan,& Cho, 2013). The assumed rationality and impartiality ofthe market becomes the final arbiter on definitions of cor-porate social responsibility and its judgment is determinedin the last instance on economic terms (or returns). AsMalsch (2013, p. 155) states so well:

The long-term time horizon [for addressing systemicsocial and environmental issues] is not merely reflectedin the promotion of an ideal of planning and moderatereformism in which social and environmental responsi-bility becomes a key factor of economic success.Another consequence is to consign the social and envi-ronmental effects of economic activity to a relativelydistant future at the scale of the planet, beyond thetemporal and spatial horizon of most citizens and enter-prises. Any contribution that companies and evenwhole countries might make to the prevention of cli-mate change or to maintain the well-being of peopleis accordingly insignificant. It therefore makes no sense


[rationally or pragmatically] for a firm or a country tostandardize norms of business sustainability on a uni-lateral basis. . .

As detailed by Malsch (2013; also Archel et al., 2011;Boiral, 2013), the reformist approach to the developmentof sustainability reporting seems preordained to producereporting standards and performance evaluations that fallwell short of generating serious change in the way inwhich corporate social and environmental responsibilitiesare viewed by society. Spence, Husillos, and Correa-Ruiz(2010) also argue that the role of the prevailing socio-eco-nomic system, capitalism in its various forms, is often leftunattended in social and environmental accountingresearch (but see Collison, 2003; Gray, 2010). Lehman(1999) maintains that corporate social and environmentaldisclosure could facilitate informed public dialogue anddebate through civil institutions. Given the findings, thequestion remains whether corporations can realisticallybe expected to provide substantial and transparentaccounts of their social and environmental impacts withinthe present institutional arrangements (Archel, Husillos,Larrinaga, & Spence, 2009). Can one expect a corporationto declare the full scale impacts it has on planetary sustain-ability within a system which not only penalizes non-eco-nomic activity, but also expects corporations and theirmanagers to pursue and deliver short-term financial gains?As put by Milne and Gray (2007, p. 196):

After all, why would any corporation voluntarily wishto admit that it is probably contributing to humanity’sexceeding of the ecological carrying capacity of the pla-net, and in need of being phased out in the interests ofenvironmental sustainability, greater social equity, andthe sake of future generations?

Nevertheless, corporations are expected to providemore complete and transparent accounts of their sustain-ability efforts. Discrepancies between corporate talk andaction are problematic, since without trustworthy report-ing neither is accountability fulfilled nor is society able toevaluate corporate activities and impacts appropriately.The idea that organizations develop and maintain façades(Abrahamson & Baumard, 2008) and that organizationsengage in hypocrisy are key (Brunsson, 1989, 1990, 1993,2002, 2007) in providing an alternative perspective thatcorporate actions and sustainability talk will remain coun-ter-coupled. Furthermore, persuasive arguments can bemade that the perpetuation of façades is not necessarilyan undesirable steady state. These arguments are explorednow in more detail.

Hypocrisy and façades in managing legitimacy andconflicting stakeholder interests

Hypocrisy as strategy

An organization’s management is compelled to developstrategies designed to continually balance or juggle con-flicting stakeholder expectations to best meet its implicitcontracts with society (Barnett, 2007; Mitchell, Agle, &Wood, 1997). The complexity of this situation places

management in a precarious moral position. If differentinfluential stakeholder groups, whose approvals areneeded for the organization to retain its legitimacy, placeirreconcilable demands on the organization, managementmust develop strategies that at least meet some minimallevel of acceptable agreement by each stakeholder group.Managing conflicting stakeholder demands can thereforetempt organizations to adopt specific stakeholder strate-gies that lack internal consistency, raising fundamentalconcerns over the behavioral integrity of the organization(Simons, 2002). As Brunsson (2007, p. 113) observes:‘‘Modern organizations are particularly apt to pretend thatthey can satisfy a series of conflicting demands.’’

As mentioned, Brunsson (2002, 2007) posits that organi-zations often respond to conflicting stakeholder demandsthrough engaging in organized hypocrisy. Hypocrisy, forBrunsson, is ‘‘a response to a world in which values, ideas,or people are in conflict—a way in which individuals andorganizations handle such conflicts’’ (2007, p. 113). Further,organized hypocrisy is ‘‘a way of handling conflicts byreflecting them in inconsistencies among talk, decisions,and actions’’ (2007, p. 115). Brunsson (2007) argues thatorganized hypocrisy is practically necessary given the con-flicting demands of various stakeholders and that organiza-tional legitimacy may be improved through hypocrisy incertain environments. Even so, an organization still can beaccused of hypocrisy for ‘‘failing to act in accordance withthe ideals it espouses’’ (Lipson, 2007, p. 5). Thus, corpora-tions face a major risk that hypocritical strategies willbecome too apparent to stakeholder groups (la Cour &Kromann, 2011) and eventually damage its perceivedbehavioral integrity and legitimacy (Simons, 2002).

A logical question that follows from this reasoning is:‘‘How can an organization continually engage in hypocrisyand maintain any legitimate standing within the organiza-tion or within society?’’ A potential answer lies in the man-ner in which organizations develop responses to conflictingstakeholder demands. Conflicting stakeholder demands canbe said to, in essence, politicize an organization (Brunsson,1989). By viewing an organization as a political entity, thatorganization may no longer be characterized as a unifiedactor seeking a single path to societal legitimacy. Rather,as a political entity, an organization may develop multiple,somewhat isolated, sub-structures to respond to specificstakeholder management requirements (e.g., an investorrelations department, sustainability office, or charitablefoundation). If responsibilities and processes for handlingstakeholder pressures are independently developed, theirrather autonomous and inconsistent actions are less likelyto be questioned. For example, an organization may insti-tute an affirmative action office yet not actually alter itsemployment practices (Lipson, 2007). Thus, a key strategyfor senior management is to orchestrate their talk, deci-sions, and actions in a way that forms a legitimate solution,pacifies conflicting stakeholder demands, and yet does notreveal damaging discrepancies across these activities.

Hypocrisy and its relation to organizational façades

These sub-structures are often placed on organizationaldisplay and can be identified as organizational façades


(Abrahamson & Baumard, 2008; Nystrom & Strabuck,1984). Abrahamson and Baumard (2008, p. 437) definean organizational façade as ‘‘a symbolic front erected byorganizational participants designed to reassure theirorganizational stakeholders of the legitimacy of the organi-zation and its management.’’ Originally, an organizationalfaçade was theorized to serve one objective: to create orga-nizational legitimacy in the eyes of stakeholders. Withinthis concept, an organization maintained only one façadethat was relatively stable. This understanding of a façaderesonates with broader conceptions of legitimacy theory(Lindblom, 1993). More recent theorization notes that anorganization’s façade is not unitary, but has several facetsthat serve different roles in managing stakeholders.Abrahamson and Baumard (2008) discuss three specific,powerful façades that are relevant to our analysis: arational façade; a progressive façade; and a reputation faç-ade. We can think of each façade as an organizational sub-structure, whether labeled formally (e.g., the sustainabilitydepartment) or merely representing a collection of organi-zational talk, decisions, and actions utilized to manageconflicting stakeholder demands.

First, a rational façade is a key to market legitimacy.This façade presents the organization as one that meetsMeyer and Rowan (1977) concept of rational norms. Ratio-nality in an organization’s decision-making and its actionsare necessary to meet the basic behavioral norms of themarket. For example, managerial decisions are expresslybased on extensive cost/benefit analyses, structuredassessments of market conditions, and an organized logicto determine appropriate actions. At some point itbecomes rational to incur the costs of producing and dis-tributing a corporation’s first sustainability report.

Second, according to Abrahamson and Baumard (2008,p. 445), a progressive façade must ‘‘not only fit the normsof rationality, but they must also mirror norms of pro-gress.’’ When stakeholders demand evidence that manage-ment is acting in their best interest, persuasive evidence isproduced through the adoption of state-of-the-art man-agement techniques that signify a continuous improve-ment in rational decision making. For example, acompany may adopt ISO 9000 Quality Management Stan-dards or agree to follow GRI sustainability reporting stan-dards. A progressive façade is used to display talk anddecisions about new approaches to solving problemsraised by stakeholders. Talk and decisions are likely to pro-duce positive ideas that are obviously agreeable to certainstakeholders (Brunsson, 1990). How can reasonable stake-holders object to deciding on ‘‘green’’ initiatives? The pro-gressive decisions are much less costly or difficult thandeveloping a set of concrete actions that are realistic, prag-matic or feasible. Yet, they address the potential for reformand hide the fact that nothing has changed fundamentallyin the manner in which priorities are articulated, decisionsare made, or actions are determined.

Third, a reputation façade ‘‘displays accounting and rhe-torical symbols desired by critical stakeholders, for exam-ple, most commonly analysts and the press.’’(Abrahamson & Baumard, 2008, p. 447). These symbolsexpress corporate values such as the language found incorporate mission statements and codes of ethics, or the

attainment of an industry excellence award. Reputationfaçade deals in the image of the corporation. This façadecan inflate a corporation’s realistic, achievable goals ormask performance that is unacceptable to certain groupsof stakeholders.

Talk, decisions, and actions as tools of legitimacy and buildingfaçades

Brunsson (1989) views talk, decisions, and actions as anorganization’s three dominant outputs. Talk (i.e., spoken orwritten words that an organization utilizes to interact withits environment), decisions, and actions are tools of legiti-macy and provide different approaches to stakeholdermanagement that can be deployed selectively by differentsub-structures within an organization (Brunsson, 2007). Ifthe organization shows inconsistency across these outputs,the result is organized hypocrisy. In the context of orga-nized hypocrisy, talk and decisions are held to be inconsis-tent with actions. That said, they are not decoupled in themanner described by institutional theory. Rather, asBrunsson (2007, p. 115–116) explains:

In the model of [organized] hypocrisy talk, decisionsand actions are still causally related, but the causalityis the reverse: talk or decisions in one directiondecrease the likelihood of corresponding actions, andactions in one direction decrease the likelihood of corre-sponding talk and decisions. The model of [organized]hypocrisy implies that talk, decisions and actions are‘coupled’ rather than ‘decoupled’ or ‘loosely coupled’,but they are coupled in a way other than usuallyassumed.

Lipson (2007) explains that talk and decisions compen-sate for inconsistent actions and that actions may, con-versely, compensate for inconsistent talk or decisions. Heuses the term counter-coupling as a way to label this rela-tionship. Counter-coupling provides an organization witha vehicle that allows management to pacify some stake-holders through less costly activities (i.e., talking aboutstakeholder expectations or announcing decisions aboutfuture possible actions relevant to those stakeholders)while focusing more significant resources on currentactions that address the expectations of more powerfulstakeholders, often those most interested and affected byits core operations. Hence, the counter-coupling of talk,decisions, and actions greatly expands the possibilitiesopen to corporations to erect rational, progressive, andreputation façades. Hypocrisy permits physical and/orchronological distance between talk, decisions, and actions(Brunsson, 1989). We can think of ‘‘physical’’ distanceexisting across each façade. A rational façade, for instance,can be used to justify an action that necessarily must harmthe natural environment, such as a seafood supplier over-harvesting during the current season to improve profits,while the reputation façade reports that corporation’scommitment to sustainable fishing practices in its sustain-ability report. Consider chronological distance as aidingthe hypocrisy of a progressive façade by setting a timehorizon that keeps fundamental business reform perpetu-ally postponed. Because almost all stakeholders experience


a selective set of an organization’s actions, an organiza-tion’s talk and decisions can affect how stakeholder groupsassess its complete set of actions. Talk and decisions helpshape stakeholders’ images of an organization’s actions.

Potential consequences of organized hypocrisy andorganizational façades

So, what might be the potential organizational conse-quences of sustained organized hypocrisy and organiza-tional façades? Within the voluntary disclosure literature,the two major competing theories used to explain corpo-rate disclosure behavior are signaling theory and legiti-macy theory (Cho, Freedman, & Patten, 2012; Merkl-Davies & Brennan, 2007). These stylized theories attemptto predict the general use of voluntary disclosures by cor-porate management. Although not explicitly addressed,each theory predicts consequences associated with a cor-poration’s strategic use of hypocrisy and façades. Usingthe strictly rational intuition provided by signaling theory,organized hypocrisy and its use in the erection of organiza-tional façades is untenable by corporate management.Within this traditional line of reasoning, sustained incon-gruence between a corporation’s talk and actions will ulti-mately erode the credibility of its disclosures, in essencereveal the façade, and thus result in a significant loss ofthe trust of financial market participants and other stake-holders (Merkl-Davies & Brennan, 2007). Under this theo-retical disclosure regime, the credibility of a corporation’stalk, or in the theory’s vernacular, the corporation’s signal,is determined strictly through its verifiability by the mar-ket (otherwise it is ‘‘cheap talk’’ and is ignored). This con-sistency is expected, in major part, due to signalingtheory’s assumption that an organization acts as a unitaryactor. The proponents of signaling theory argue that themarket accurately assesses the veracity of a signal by com-paring the signal, i.e., the content of the voluntary corpo-rate disclosure, with evidence consistent with the signal,i.e., observable corporate actions. Non-credible signals arecorporate talk inconsistent with its actions. If a corporationcontinually makes non-credible disclosures, the corpora-tion’s overall reputation is harmed with façades exposedto stakeholders as hypocritical attempts to manipulatetheir conferred legitimacy. Sustainability reports can besaid to be treated under this theory as credible disclosuresof a corporation’s sincere efforts to better manage its rela-tionship with the environment. Critics of signaling theorydisagree, however, with its focus on the market being theassessor of disclosure quality (Malsch, 2013). The signalsent to the market through a corporate sustainabilityreport is not necessarily consistent with broader notionsof accountability for the social and environmental impactsof a corporation.

Legitimacy theory and the related notion of impressionmanagement generate a very different set of expectationsconcerning the consequences of organized hypocrisy.Under legitimacy theory and impression management, acorporation purposefully obfuscates potentially controver-sial actions through the use of selective, incomplete, and/orbiased disclosures. This strategic use of voluntary disclo-sure is undertaken to aid the corporation’s management

of its legitimacy within society (Merkl-Davies & Brennan,2007). This view of corporate environmental disclosurequestions the informational efficiency of the market, pur-porting that corporate social and environmental disclo-sures are often used to enhance the reputation of thecorporation, not to provide incremental information tomarket participants (Cho et al., 2010; Neu, Warsame, &Pedwell, 1998).

The preceding discussion can be undertaken withoutreference to signaling theory or impression managementtheory by simply asking whether organized hypocrisyand organizational façades are stable or unstable. Canorganized hypocrisy and the organizational façades be sus-tained? The tenets of signaling theory assume these twoconcepts to be unstable and therefore eventually revealedas deception. The tenets of impression management theoryassume them to be stable, at least in the sense that empir-ical research is consistent with their theory. Both of theseconclusions can be challenged. The fact that stakeholdershave conflicting demands implies that some stakeholdersalways critically examine what the organization is doing.Establishing organizational goals to manage some stake-holders, by default, hints at hypocrisy because it discloseswhat the organization has presently failed to do(Brunsson, 2007). A certain level of scrutiny may, therefore,expose the hypocrisy and the façades. Brunsson (2007)points out, however, that most corporate stakeholders actas spectators with very limited first-hand experienceregarding the organization’s actions. He further argues thattalk and decisions are principally used to manage spectatorstakeholder demands, while actions are reserved for themanagement of stakeholders most directly involved withthe organization.

Certainly, the communication strategies used by corpo-rations to execute organized hypocrisy and erect rational,progressive, and reputation façades can be limited in theirlong-term effectiveness. Talk and decisions that promisefuture actions may reach a point of reckoning such thatstakeholder groups no longer find the organization’s com-munications credible; chronological distance closes in andthe future eventually becomes the present. Corporate man-agement cannot admit that its politicized sub-structuresact independently or that it lacks the power to coordinateits talk, decisions, and actions. Doing so would underminethe organization’s ability to enter into implicit contractswith stakeholders and therefore its legitimacy status. Man-agement would be admitting to irrationality, an inability tomake progress, and weak controls over reputation risk. Anorganization must, therefore, present itself as a unifiedactor that possesses the wherewithal needed to deliverthe actions it promises through its talk and decisions. Man-agement’s continuing insistence that its organization is aunified actor once again exposes its precarious moral posi-tion. They must refute organized hypocrisy and organiza-tional façades. This refutation is ‘‘in itself a form ofhypocrisy, but on a higher level—a ‘meta-hypocrisy’—theposture that a hypocritical organization is not a hypocrite’’(Brunsson, 2007, p. 125). Meta-hypocrisy increases as thedegree of counter-coupling among talk, decisions, andactions increases because more ordinary organized hypoc-risy exists to refute. When stakeholder groups become dis-


illusioned by organizational inconsistencies among talk,decisions, and actions, meta-hypocrisy will often leadorganizations to acknowledge a lack of immediate successand a long-term commitment to the alignment of theseactivities (Brunsson, 2007). It is imperative that marketparticipants believe that an organization is a unitary actor;that the only purpose of talk and decisions are to help cre-ate action; and, therefore, that there is no hypocrisy(Brunsson, 1989). In other words, the management willinstitute organizational reforms, but the aims of thereforms are proposed to help re-stabilize hypocrisy andorganizational façades.

Conventional theories of voluntary disclosure, both sig-naling theory and impression management theory, lead usto conclude, albeit from very different premises, that orga-nized hypocrisy and organizational façades are associatedultimately with negative outcomes for broader society.However, taken strictly on their own terms as ways inwhich organizations manage conflicting stakeholderdemands, organized hypocrisy and organizational façadesmay indeed make room for potentially positive outcomesfor broader society (Abrahamson & Baumard, 2008;Brunsson, 2007). Brunsson stresses that although con-demning organized hypocrisy as problematic or immoralis often an initial reaction, there are reasons to hesitateto come to quick judgment. Hypocrisy can manufactureopportunities for change that are much less likely to arisewithout it, and it can help sustain the societal legitimacyof organizations that deal with significant conflict amongstakeholders (Brunsson, 2007). If the linear, rational align-ment of talk, decisions, and actions was the only optionavailable to organizations, some important stakeholderswould certainly remain totally unsatisfied. Hence, some-how removing the managerial option of organized hypoc-risy and the creation of organizational façades mayactually increase the likelihood of negative societal out-comes. Morality will not necessarily ‘‘improve’’ if theseways of dealing with conflicting demands were stopped.If the talk and the decisions used by organizations are moremoral than their actions, then the most likely consequenceis that organizations’ talk and decisions are now consid-ered as immoral as their actions (Brunsson, 2007). Hypoc-risy and façade thus allow society the chance to refuse toacknowledge its complicity with the current state ofaffairs. Society can and perhaps must hold onto higher val-ues than it can live by.

As Abrahamson and Baumard (2008, p. 451) purport, afaçade can be constructed by an organization with theexpress intent of hiding malfeasance. They also explainthat an organizational façade also can ‘‘transmit potential-ities for change’’ and be ‘‘levers for organizational improve-ment’’. A reputation façade, for example, can express anorganizational ideal that can be strived for. It may seemcounterintuitive, but ‘‘the more façades lie, the more faç-ades have the potential to become realities.’’ The façadescan free the organization to experiment and innovatebeyond the rational boundaries of the market’s judgment.It has the chance to move beyond conventional reform.Given that most public corporations are subject to stake-holder demands, and that these demands are meteredout in a market that increasingly views sustainability

efforts and reporting as essentially economic opportunitiesand risks to be priced (Malsch, 2013), any chances to movecorporate social responsibility activities and reportingbeyond conventional reform may be welcomed.

Of course, just because organized hypocrisy and organi-zational façades can generate positive societal outcomesbeyond their necessary legitimating functions, this doesnot mean that they will. For organized hypocrisy and orga-nizational façades to carry the potential for additionalpositive consequences, organizational talk must not beduplicitous; instead it should be aspirational (Christensenet al., 2013). Christensen et al. (2013) refer to such disclo-sures as aspirational talk, which may bring positive devel-opments for the organization and for the broader society.Christensen et al. (2013) maintain that aspirational disclo-sures may serve as constitutive devices through whichorganizations begin to strive for a different future. Aspira-tional talk is distinguished from lies in that aspirationaltalk is publicly visible, includes ideals that generate expec-tations of future action, and intends to stimulate organiza-tional change. Thus, this form of hypocrisy is intended tomobilize actions that are congruent with some future talk.Brunsson (2007) states that explicitly articulating organi-zational goals in areas viewed as weak is not unusual.The public display of these goals admits that relevantactions have not satisfied certain stakeholder interests,thus closing the chronological distance between decisionsand actions.

Applying organized hypocrisy and organizational façades tosustainability reporting

In analyzing corporate sustainability reporting practicesthrough the lenses of organized hypocrisy and organiza-tional façades, it is important to position a corporationwithin the socio-institutional context in which it operates.This positioning allows the delineation of expectationsabout how corporations define and execute rational, pro-gressive, and reputation façades relative to conflictingstakeholder demands concerning sustainability.

We hold that corporations build a rational façade basedon the concept of business sustainability. Discussion persistsregarding how strongly the market imperative and power-ful socio-economic institutions limit organizations’ abilityto be socially and environmentally responsible (see, e.g.,Campbell, 2007). Also widely accepted are discussions thatcapitalism and the market pressures associated with itlimit potential organizational actions that might improvesustainability. In particular, the very construction of pub-licly listed corporations leaves their management littleroom to maneuver in the face of market pressures requir-ing delivery of short-term financial returns (see Gray,2010). In order to prosper, or even survive, within this sys-tem, corporations sense the need to constantly search forgrowth opportunities. A business sustainability discourse,as opposed to an environmental sustainability discourse,shifts a corporation’s talk, decisions, and actions relatedto its core operations toward justifications couched in eco-nomic, cost-benefit terms.

While the demands of the market seem preeminent,societal themes such as climate change and social progress


feature regularly in social discussions and politicalspeeches. Corporations develop a progressive discourse ofsustainability in their voluntary disclosure reports inresponse to these demands. We thus conceptualize theprogressive façade as one that privileges social and environ-mental innovation and reform. Social and environmentalissues began to gain ground in the 1990s, when the ideasof good environmental management and triple bottom linespread into managerial practices (Elkington, 1997; Levy,1997; Prasad & Elmes, 2005). Appearing in various forms,these discourses clustered around win-win-solutions,attempting to offer corporations a way to reduce their per-ceived social and environmental impacts without sacrific-ing financial results. The progressive façade ofcorporations privileges the idea that technology can beharnessed to remediate the negative social and environ-mental impacts of continuous expansion of productionand find more sustainable ways to operate.3

Shareholders are, however, not the only stakeholders ofcorporations. Growing public awareness of biodiversityprotection, climate change, and other social and environ-mental issues have made broader sustainability concernsan inherent challenge for corporate management (seeBansal & Hoffman, 2012; Bebbington & Larrinaga, 2014;Crane, Matten, & Spence, 2008). Corporations are engagingwith various elements of corporate social responsibility,with the advancements of CSR committees, green productlines, and featured philanthropic contributions. Corporatesustainability reporting diffused swiftly since the turn ofthe millennium and most multinational corporations haveprovided external disclosures about the social and environ-mental impacts of their operations for years (Bebbington,Unerman, & O’Dwyer, 2014). However, an often heardcomplaint is that corporations only engage with environ-mental and social issues on a symbolic level. Throughomitting negative information and highlighting positiveimpacts, these organizations seek to appear sociallyresponsible and environmentally friendly. In sustainabilityreports corporations avoid addressing the fundamentallyunsustainable underpinnings of their operations. Wedefine these types of activities as critical to the develop-ment of the corporation’s reputation façade. In regard tosocial and environmental reporting, the reputation façadeis couched in terms of social and environmental stewardship.Corporate talk, decisions, and actions focus on providingevidence of philanthropy, corporate citizenship, and acommitment to caring for the environment and the lessfortunate.

As discussed by Brunsson, the key to maintaining thesethree façades, and using corporate talk, decisions, andactions in a counter-coupled way to satisfy conflictingstakeholder demands, is to establish these discourses in aparallel form that is not too transparent to conflictingstakeholders. We conjecture, therefore, that corporationswill maintain relatively more coupled talk, decisions, and

3 While our analysis is focused on social and environmental innovationwithin the progressive façade, we recognize that other progressive façadescould be built by corporations. For example, a company talking aboutcutting-edge operational technologies could be characterized as putting ona progressive façade. Other façades are beyond the scope of this study.

actions within each façade and that their talk, decisions,and actions across façades will provide relatively more evi-dence of the counter-coupling within organized hypocrisy.In the following section we present an empirical illustra-tion of how the ideas of organized hypocrisy and organiza-tional façades can be applied to corporate sustainabilityreporting research. For this purpose, we focus on the finan-cial and sustainability disclosures and reporting of twovery large and highly visible U.S.-based multinational oiland gas corporations, Chevron and ConocoPhillips, in theperiod from 2004 to 2006 during which the ANWR billwas introduced.

Organized hypocrisy, organizational façades, andcorporate sustainability reporting: ANWR as anempirical illustration

Located in Northern Alaska, the Arctic National WildlifeRefuge (ANWR) is the largest single protected wildernessarea in the United States. It is the object of considerabledebate, as a designated area of its coastal plain allegedlypossesses a large supply of oil and other natural resources.Congressional authorization is required before energy-related production activities can take place in this area.Economic arguments of job creation and reduced depen-dency on foreign energy sources are forwarded by propo-nents of allowing energy production in this area, voicedprincipally by multinational oil companies and someAlaska Aboriginal communities. Groups opposed to open-ing ANWR to energy production activities, mainly environ-mentalists and some Alaska Aboriginal communities, raiseconcerns over issues of biodiversity protection and respectfor human rights, most notably rights regarding Aboriginalculture and tradition. The debate over ANWR has takenplace since 1977, with its last intensive episode occurringbetween 2004 and 2006. During this period, drilling in des-ignated areas was proposed, debated, and voted on by theU.S. Senate through what was popularly referred to as the‘‘ANWR Bill’’, although no definitive conclusion wasreached.

Because corporate actions that continue to promote oiland gas exploration are difficult to reconcile with sustain-ability narratives, the debate over ANWR is an excellentcontext for exploring how corporations engage in orga-nized hypocrisy and utilize different façades to manageconflicting stakeholder demands. We are particularly inter-ested in the oil and gas companies’ position and discourseon biodiversity protection, human rights and indigenouspeople, since these constitute the major social and envi-ronmental issues at stake.

Data and methods

Our period of interest is from 2004 to 2006 as it corre-sponds to the period during which the ANWR Bill wasintroduced and (re)debated. We focused on two very largeand highly visible U.S.-based multinational oil and gas cor-porations: Chevron and ConocoPhillips. These companiesprovide typical cases (Yin, 2009) of influential commercialorganizations within the industry. These two companies


represent approximately 30% of the market share in the oiland gas industry during that period.4 While their revenuesdepend mostly on non-renewable hydrocarbon reserves,their voluntary disclosures highlight their will to protectand respect biodiversity, fragile environments and humanrights. Also, both companies explicitly disclosed having busi-ness operations in Alaska. Examining these specific corpora-tions can provide interesting insights, as they both withdrewfrom the Arctic Power lobbying group that was focused onopening up the ANWR.5 Despite seeing these companies astypical cases, our study does not claim that interpretationspresented here apply directly to the broader oil and gasindustry nor commercial organizations more generally. Ourintent is to illustrate how organized hypocrisy and organiza-tional façades can be utilized to enhance our understandingof corporate sustainability reporting practices.

Our qualitative data consists of annual reports, sustain-ability reports, websites and shareholder resolutions pub-lished by the two case firms. Eleven annual reports andstand-alone sustainability reports for the years ending2003, 2004 and 2005 (because they were published in2004, 2005 and 2006, respectively) were collected in total.We also examined the corporate webpages for the period2004 to 2006 using a website specializing in archives(www.archive.org). Both firms had website archives avail-able. Each webpage was visited once per archived month6

to ensure the broadest coverage of disclosure possible. Thereports and websites were examined through a qualitativecontent analysis (Bryman & Bell, 2003), for which we uti-lized Atlas.ti software (Atlas.ti, 2004) primarily to aid inorganizing the data and providing a structure to data analy-sis. Codes were generated by the authors from the analysisof the ANWR case and the review of corporate documents.After reviewing and adjusting the coding, a narrative strat-egy for data analysis (Langley, 1999) was then applied toanalyze the disclosure content, resulting in a portrayal ofthe type of information disclosed in each code. The codesand their associated quotations were thereafter grouped intomain categories according to common themes (O’Dwyer,2004). The four major categories that emerged from thegrouping were operational activities, corporate environmen-tal protection, human rights and indigenous people, andpolitical strategy. Data were analyzed both within andacross categories to identify trends, prevalent issues, andpossible inconsistencies. The original data were constantlyrevisited during the analysis to ensure that all statementswere understood and properly applied in their originalcontext.

Overall, despite the use of Atlas.ti software, the inter-pretations presented in the following discussion wereformed through an iterative process, in which several

4 As an indication of the market share, we computed the 3-year averageproportion of our sample firms’ revenues over the overall total revenues ofall firms with the same Standard Industrial Classification (SIC) codes.

5 The third major member of the Arctic Power lobbying group was Exxon,which was the only one to remain in the group as of 2005. Hence, forconsistency purposes, we focused on the two exiting members, Chevronand ConocoPhillips.

6 The specialized website does not systematically archive all webpagesevery month. We examined the corporate websites for each availablemonth.

rounds of interpretation and sense-making from differentperspectives were performed over an extended time-per-iod. We utilize organized hypocrisy (Brunsson, 1989,2007) and organizational façades (Abrahamson &Baumard, 2008) as the theoretical lenses through whichour interpretations of the corporate disclosures are made.From this, we sought to draw insights for the broader dis-cussion about the role of corporate sustainability reportingin societies. Analytically, we have distinguished corporatetalk, decisions and actions based on the way the case com-panies present their disclosure statements. Talk is under-stood to include descriptive disclosures, genericstatements, and broad commitments that are presentedwithout any concrete plans or details of implementation.Decisions consist of future-oriented statements, whichhave a tangible and to some extent detailed outline offorthcoming activities. Finally, actions are implied by dis-closures, which depict something that has already beendone or is currently in process. In making interpretationsand presenting our findings, we acknowledge that ourstudy relies on corporate self-disclosures and perhaps pro-vides only a particular understanding of corporate actions.

Findings: corporate talk, decisions, and actions

Rational façade: Business sustainabilityA rational façade is an overarching façade which posits

that oil and gas companies are sustainable from a core eco-nomic stakeholder perspective. The imperative of maxi-mizing profit and shareholder value are strong features ofthe capitalist market economy prevailing in the UnitedStates. Accordingly, the case companies express how thecreation and maximization of shareholder value is theirpredominant goal:

At ConocoPhillips, we welcome the relentless challengeof raising shareholder value. In 2005, we strived to meetthat challenge by delivering good operating and finan-cial performances, while investing in strong, value-building opportunities.

[ConocoPhillips, 2005a, p. 4, emphasis added]

Not only was 2003 one of our best years ever, but wealso built a solid foundation that should enable us todeliver sustained, strong performance into the futureand continue to achieve our long-stated goal to be No.1 in total stockholder return among our peer group.

[Chevron, 2003a, p. 2, emphasis added]

Relatedly, an essential element of the capitalist econ-omy is the constant need to grow. Companies are expectedto maximize their growth opportunities and highlight thatthey will keep on doing so into the foreseeable future.Striving for future opportunities and higher revenues isinterlinked with shareholder value. We observe this rela-tion in the rational corporate discourse:

We feel we are uniquely positioned for creating valueand growth—with a strong financial position, an inte-grated and balanced portfolio of legacy assets, a well-defined and sustainable growth plan, and expandingaccess to resource-rich opportunities around the world.We are focused on continuous improvement in every-

http://www.archive.org


thing we do, and driven to deliver on our promises andmeet the ongoing challenge of creating superior share-holder returns.

[ConocoPhillips, 2004a, p. 7, emphases added]

In practice, the core business of our case companies isthe production of non-renewable hydrocarbons. To securetheir long-term economic viability, the oil and gas compa-nies need to ensure that they will have at their disposalnewly discovered oil fields for future drilling. Within therational façade, the case companies may seek to highlightsuch efforts potentially to convince shareholders of thepositive future outlook the organizations have in respectto oil reserves:

The company’s long-term competitive position, particu-larly given the capital-intensive and commodity-basednature of the industry, is closely associated with thecompany’s ability to invest in projects that provide ade-quate financial returns and to manage operatingexpenses effectively. Creating and maintaining aninventory of projects depends on many factors, includ-ing obtaining rights to explore for crude oil and naturalgas, developing and producing hydrocarbons in promis-ing areas, drilling successfully, bringing long-lead- timecapital-intensive projects to completion on budget and onschedule, and operating mature upstream propertiesefficiently and profitably.

[Chevron, 2005a, p. 26, emphases added]

Likewise, obtaining future drilling rights is related topolitical decision-making and regulatory developments.Here, the talk of our case companies suggests they seekto avoid further regulation by engaging in lobbying anddirect funding to suitable candidates. When explaininghow contributions are attributed to the political candi-dates, corporations indicate that business interests areweighted in the selection of the funded candidates.

Chevron makes contributions to political candidatesand political organizations that support economic devel-opment, free enterprise and good governance. In deter-mining our support of candidates, we consider theirprior voting records on issues of importance to Chevron,their leadership or committee assignments, whetherthey generally have a pro-business philosophy, andwhether the company or our employees have a constit-uent relationship.

[Chevron, 2004b, p. 38, emphases added]

[. . .], the U.S. employee political action committee(PAC), are guided by the following criteria: the candi-date’s integrity and character; leadership potential;positions on issues and voting record; relevance to com-pany operations; nature and strength of the candidate’selection opposition; and the candidate’s access to othersources of financial assistance.

[ConocoPhillips, 2004b, p. 15, emphasis added]

In addition, ConocoPhillips offered general statementsabout its political strategies without explicitly stating theissues they support or oppose (ConocoPhillips, 2005b).Chevron revealed its political strategy through speechesfrom its top executives about the development of the U.S.

national energy policy. It first highlights a misalignmentbetween environmental and energy policies, by whichsome environmental policies preclude energy develop-ment (Chevron, 2005c). The firm then presses governmentrepresentatives to align environmental policies with thecountry’s strategic energy objectives and calls for the‘‘open[ing of] areas currently off-limits, for the environ-mentally responsible exploration and development of oiland gas’’ (Chevron, 2005b, emphasis added). In this politi-cal strategy, economic concerns for energy developmentappear to outweigh environmental considerations,although the firm seems to make an attempt at presentingthe economic development as compatible with environ-mental protection. In this form, corporate talk fits withinthe rational façade as the firm highlights how it seeks toensure that it will have new oilfields and associated futurecash flow at its disposal in the future.

We also observed that the corporate actions are coupledwith corporate talk in this rational façade. For instance, ourcase companies discussed committing extensive invest-ments to oil and gas exploration and seeking new waysto extract resources from underground. They present thesemeasures as required to ensure that sufficient financialreturns and shareholder value are created for the corefinancial stakeholders.

These systems are aimed at achieving top operatingperformance and ensuring that we direct our $10 billion2005 capital and exploratory budget toward the highest-quality opportunities with the greatest potential to cre-ate future growth and stockholder value.

[Chevron, 2004a, p. 15, emphasis added]

As the world’s need for oil and natural gas continues toexpand, ConocoPhillips is growing to meet that needwith a portfolio of new energy investments. However,we recognize that our growth is sustainable only if wecontinue to deliver increasing value, along with provid-ing greater energy supply. Therefore, our growth plansare highly disciplined and tightly focused on the goalof building a strong, diversified foundation of value-gener-ating asset.


Progressive façade: Social and environmental innovation andreform

In contemporary society, operating with a mere rationalfaçade no longer suffices to satisfy the requirements of dif-ferent stakeholder groups and future-oriented market par-ticipants. As evidence of environmental challenges andclimate change mounts, corporations argue that new tech-nological solutions are needed in order to fulfill futureenergy needs. For these purposes, we suggest that oil andgas companies have an incentive to develop and maintaina future-oriented progressive façade. Abrahamson andBaumard (2008, p. 445) discuss how elements of a progres-sive façade must ‘‘not only fit the norms of rationality, butalso mirror norms of progress’’. The need to better managethe externalities caused by the production is imperative inthe oil and gas industry (Pulver, 2007). We observe that theprogressive façade of our case firm suggests that business


goals, shareholder value, and future growth can be inte-grated with environmental and social improvements:

Functioning in tandem with business units around theworld, ConocoPhillips’ corporate staffs are rising to thechallenge of enhancing shareholder value througheffective support of company operations. They aredelivering on commitments in regard to legal compli-ance, safety and environmental requirements, sustain-able development, technology and business support, andemployee development.


ChevronTexaco has a 125-year history of rising to chal-lenges and creating opportunities. Today, we areresponding to the new energy equation by leveraging ourstrengths: a high-impact exploration and developmentprogram; a commitment to safe, efficient and environ-mentally sound operations; the application of technologyto maximize the value of our existing assets anddevelop promising new energy sources; and the crea-tion of partnerships that benefit our company, our com-munities and, of course, our many customers around theworld.

[Chevron, 2004a, p. 1, emphases added]

A progressive façade offers and emphasizes the poten-tial for reform. In an oil and gas industry setting, challengesrelated to the core business are acknowledged, but are rep-resented as manageable using proactive tactics. Similarly,future initiatives are presented as potential avenuesthrough which encountered challenges will be solved andpossible environmental and social consequences will bemitigated.

The first phase of this effort is a project to identify andgather more comprehensive information about the com-pany’s exploration and production operations aroundthe globe in legally designated protected areas, includ-ing those in World Conservation Union categories I–IV. With this information, we will be able to betterassess the implications of operating in protected areasat the earliest stages of project planning and implementappropriate mitigation measures.

[Chevron, 2004b, p. 58, emphasis added]

Systematic approaches produce positive ideas whichare agreeable to most stakeholders. The companies discusshow human rights and fragile environments will berespected in the future, as the corporations have imple-mented new policies, committed to progressive guidelinesor have begun to formulate a strategy. Alternatively, envi-ronmental and social issues are portrayed as risks whichwill be managed in a proactive way. The ANWR is an exem-plary case in that both companies describe biodiversityand human rights concerns as manageable issues:

Human Rights and Community Engagement – Ourreview identified these two issues as being of particularand increasing importance to ChevronTexaco. Buildingon our existing policy framework, we are developing acorporate Human Rights Statement to provide additionalguidance on conducting our operations in a mannerconsistent with universal human rights principles. We

are planning to test implementation of the statementin the coming year.

[Chevron, 2004c, emphases added]

We continue to build on our knowledge of sustainabledevelopment. For example, we are currently studyingthe issues of human rights, water management and biodi-versity to weigh company and stakeholder perspectives,benchmark best practices and determine appropriatefuture steps.


In these disclosures we note that progressive talk anddecisions regarding the future are emphasized. Thisimplies in our setting that the progressive reform doesnot deal with the core economic activity of the firm, theoil and gas production itself. The underlying fundamentaloperating logic of the oil and gas industry appears toremain beyond discussion. The case firms talk of acknowl-edging environmental protection, sustainable develop-ment and social issues, but these will be dealt with inthe future through implementing voluntary guidelines,studying alternative initiatives, or following some guidingprinciples:

Recognizing there is always room for improvement, thecompany plans to continue to identify additional oppor-tunities for expanded implementation of the [Voluntary]Principles [of Security and Human Rights].


We posit that the progressive façade may serve to high-light how the firms will be increasingly sensitive to theplanet through the use of new and innovative technologiesthat are less intrusive and more energy efficient. Likewise,the progressive façade is employed to show they areinvesting in and experimenting with alternative energysources like wind and solar.

Advancing energy technologies in ways that are market-driven and economically sound is an integral part ofresponsibly supplying energy. As part of our compre-hensive energy development strategy, we are activelypursuing investments in alternative and renewable tech-nologies, energy efficiency, cleaner fuels, gas-to-liquids,and a variety of other promising, practical energy solu-tions.


In a similar vein, we note actions regarding the develop-ment of alternative energy sources; however, the scale ofthese actions remains rather minimal when compared toChevron’s $10 billion annual exploratory budget(Chevron, 2004a).

Since 1999, Chevron has invested approximately $60million in renewable energy projects, includingwind, solar and geothermal energies. We will continueto take a case-by-case approach to funding particularprojects but, as part of our expanded renewableenergy strategy, we expect to invest approximately $50million a year on renewable energy projects in the nearterm.



Reputation façade: Social and environmental stewardshipThe third façade identified by Abrahamson and

Baumard (2008) is labeled a reputation façade. We main-tain that for our case companies in the ANWR context, thereputation façade relates to social and environmentalstewardship. This façade would thus underline how envi-ronmental protection and consideration of social issuesoccupy a significant space in corporate operations. Thecompanies highlight how they care about the earth andthe people who live on it by expressing a commitmentto protecting the environment and human beings.Whereas the progressive façade speaks of reform, inwhich environmental and social issues are to be takeninto account within business decisions, we observe thereputation façade as portraying environmental and socialquestions as the values that drive the way corporationsoperate.

Protecting people and the environment is a core value forChevron.


ConocoPhillips is committed to protecting the health andsafety of everybody who plays a part in our operations,lives in the communities in which we operate or uses ourproducts. (. . .) We will not be satisfied until we succeedin eliminating all injuries, occupational illnesses, unsafepractices and incidents of environmental harm from ouractivities.

[ConocoPhillips, 2004b, p. 23, emphases added]

Beyond these broad commitments toward environmen-tal protection, specific concerns for biodiversity protection,one of the key environmental issues in the ANWR, areexpressed:

Biodiversity is the life support system of the planet, andits loss impacts all people. All aspects of society, includ-ing business, have a responsibility to conserve biodiver-sity, to encourage sustainable use of biologicalresources, and to promote equitable sharing of biodi-versity benefits. ConocoPhillips’ HSE policy currentlyguides the company in protecting the natural environ-ment and biodiversity wherever it operates. The companyis studying the biodiversity issue and plans to develop astrategy for providing a consistent way to protect andconserve biodiversity.

[ConocoPhillips, 2004b, p. 36-37, emphases added]

Moreover, specific and more focused initiatives for bio-diversity protection are provided in the case companies’sustainability reports and on their websites, possibly toexemplify the means taken to address the issue. Forinstance, ConocoPhillips (2004a, 2004b) describes how itconducts exploring and drilling explorations with greatenvironmental care in arctic regions. It explains this careby the need to protect ecosystems:

The tundra of the Alaska North Slope and northwestRussia hold vast oil reserves and also are importantand sensitive ecological systems. ConocoPhillips recog-nizes stakeholders’ interest that any development bedone in a manner that protects the environment.


We view this talk as elevating biodiversity to be a pri-mary consideration for the company. Moreover, in thiscase the disclosures highlight how oil and gas corporationspresent themselves as knowledgeable of the biodiversityissues surrounding their activities in Alaska and elsewhere.

ANWR is, however, not only a matter of environmentalprotection but also a matter of respecting the rights andinterests of the refuge’s neighboring Alaska Aboriginalcommunities. As mentioned earlier, some indigenousgroups support oil development while other groups areopposed to it, but all groups are concerned with the protec-tion of their human rights, especially their culture and tra-ditions. Our case corporations use their reports to expresstheir commitment to human rights protection. In additionto these broad commitments, specific concerns are alsoexpressed for indigenous people. These concerns are for-mulated in terms of a pledge to act respectfully towardthese stakeholders:

Respecting the rights, traditions, livelihoods and culturalattributes of indigenous and other local communities.


Respecting indigenous communities is an important partof addressing the company’s community impact.


At the heart of these talks is an apparent commitmentto protect the cultural heritage and local traditions of theindigenous people living in the areas where the firms oper-ate. Conoco even reports on its commitment to work withAlaska Aboriginals specifically:

ConocoPhillips engages with residents surrounding ouroperations on issues that affect their lifestyle, landand culture, particularly when there is the potential toimpact indigenous communities. On the Alaska NorthSlope, the company employs subsistence representa-tives and village liaisons to promote clear and opencommunication, and consult with elders and subsistencehunters, scientists and traditional experts.

[ConocoPhillips, 2004b, inside cover page, emphasesadded]

Collectively, this talk seems to highlight how oil and gasfirms portray themselves as knowledgeable of the humanrights issues surrounding their operations. Their voluntaryreporting is utilized to build a reputation façade, based onthe assumption that these companies are sensitive to thesocial issues surrounding the ANWR context.

In addition to sustainability reports, we observe thatwebsites are also utilized to construct the reputation faç-ade. Our analysis shows that both firms have webpagesshowing their awareness of environmental issues and theircommitment to environmental protection. They also gobeyond general statements of environmental concern toemphasize the attention given to biodiversity protection.For instance, in its Alaska Charter and Sustainable Develop-ment 2006 Report, ConocoPhillips mentions repeatedly itscommitment to protect Alaskan land and wildlife(ConocoPhillips, 2006). It also highlights the funding it pro-vides to Earth Energy Partners, a community partnership


promoting ‘‘key fish and wildlife habitats conservation inAlaska’’ (ConocoPhillips, 2006).

Again, as is the case with progressive façade, the funda-mental underlying tenets of the oil and gas industry’s coreactions are not discussed. The actions within social andenvironmental stewardship appear to relate to achievableoutcomes, such as making charitable contributions andencouraging the education of minorities. Similarly, the talkwithin their reputation façade acknowledges global socialand environmental challenges and highlights the messagethat the companies attempt to take broad stakeholderdemands into account.

Discussion

Brunsson (2007) argues that corporations engage inorganized hypocrisy when seeking to manage conflictingstakeholder demands and social pressures, as evidencedsuccinctly in the following two quotes from our casecorporations:

As a commercial enterprise, we have a responsibility todeliver strong financial performance, thus creating valuefor our stockholders. At the same time, we recognize thatwe can, and should, create broader economic value forour stakeholders and that we do so in a variety of ways.

[Chevron, 2003b, emphases added]

We live and operate in a world of needs and demands.The world needs more energy, more economic growthand more opportunity for development. Yet the worlddemands that these needs are not filled at the expenseof the environmental and social systems we depend onfor survival.

[ConocoPhillips, 2003, emphases added]

Under Brunsson’s reasoning (also Lipson, 2007), organi-zations counter-couple their talk, decisions, and actions toattempt to satisfy the inherent stakeholder conflictsimbedded in statements presented above. We foundBrunsson’s theoretical ideas helpful in analyzing the inter-nally inconsistent disclosures of the two prominent oil andgas companies studied. Drawing on Abrahamson andBaumard (2008), we supplemented Brunsson’s theorizingon organized hypocrisy with the framework of organiza-tional façades. We argued that corporations constructand maintain several discrepant façades focused towardplacating the demands of heterogeneous stakeholdergroups.

Nevertheless, as suggested by Brunsson, organizationscannot satisfy all the conflicting demands stakeholdersset upon them. Based on our exploratory analysis, we sug-gest that organized hypocrisy is more likely to take placeacross the façades, as in the following example in whichprogressive talk is countered with a discussion of rationalactions:

[. . .] we’re serious in our efforts to pursue promisingalternatives to supplement the traditional oil and gasresources that will be the mainstay of energy supplywell into the future.

[ConocoPhillips, 2005a]

Furthermore, the incompatibility of reputation talk andrational actions is illustrated by the following reply, whichthe board of Chevron gave to a shareholder resolutionrequiring the company to provide further reporting onthe potential environmental damage that could occur fromdrilling in protected and sensitive areas, such as theANWR:

ChevronTexaco’s case-by-case approach makes mostsense to balance economic and environmental businessneeds. Our stockholders have derived value from oil andgas production from historic and existing Companyoperations in protected areas. Continued major globalexpansion of the number and size of protected areasthat prohibit natural resource development has thepotential to foreclose much needed oil and gas produc-tion and thus poses risks for future stockholder value.

[Chevron, 2005d, p. 42–43]

We are not claiming, however, that organizational talk,decisions, and actions are always incompatible. Instead,based on our analysis we envision that the organizationsestablish and maintain several discrepant organizationalfaçades, within which their talk and decisions are largelyin line with their respective actions. However, consistentwith Brunsson’s idea of organized hypocrisy, our datapoints toward differences between corporate talk andactions becoming more apparent when exploring corpo-rate reporting across façades. Nonetheless, this observationremains largely speculative, since our dataset limits ourpossibility to explore and discuss this issue in more detail.Further research on this matter is therefore welcome.

The organizational façades identified in this paper aredifferent in nature. The rational façade follows the marketlogic and most of the actions identified from the corporatedisclosures fall within this façade. Most of the talk, deci-sions, and actions consistent with a rational façade arefound in the corporate annual reports. Innovation andreform are central features of the progressive façade,which includes general commitments, future-orienteddecisions and potential actions. Finally, the reputation faç-ade focuses on corporate image and can be characterizedby broad statements and general commitments, whichare seldom followed by concrete decisions and tangibleactions. Both progressive and reputation façades featuremore commonly in the corporate sustainability reports inour analysis.

Although we have presented the three façades as sepa-rate, we do not consider their boundaries to be so clear-cutand hence individual corporate statements and activitiescan be argued to be a part of at least two alternative faç-ades. More specifically, some façades are closer to eachother; that is, rational and progressive façades have com-mon features and thus fewer contradictions and incompat-ibilities are found between them. Similarly, the progressiveand reputation façade share some assumptions and fea-tures. Among the three façades described by Abrahamsonand Baumard (2008), we identified more incompatibilitiesbetween the rational and reputation façades in our casefirm disclosures. In fact, the progressive façade has thepotential to serve as a mediating façade that bridges theother two. As such, the progressive façade may serve to


limit the risk for organized hypocrisy to be exposed, andtherefore reduce the need for a corporation to engage inmeta-hypocrisy.

7 It is also worth bearing in mind that work based on signaling orlegitimacy theory often uses only a limited range of information regardingcorporate activities as the basis of analysis.

Conclusions

The possible role that corporate sustainability disclo-sures can play in any transition toward a less unsustain-able society remains unclear. Spence (2007, p. 875), forinstance, remains skeptical and notes that due to the per-vasive nature of the business case, ‘‘the transformativepotential of [social and environmental reporting] wouldappear to be severely limited’’. The interpretation pre-sented in this paper suggests that within the currently pre-vailing societal and institutional context the prospects ofsustainability reports developing into substantial disclo-sures is severely limited by organized hypocrisy. As notedby Brunsson, organizations do not necessarily choose toengage in organized hypocrisy. Rather, the contradictingelements and expectations within their social and institu-tional environment may practically force organizations toresort to hypocrisy, which also provides corporate manag-ers with a solution for managing conflicting stakeholderdemands. Thus, organized hypocrisy and developingrational, progressive and reputation façades could be ben-eficial to corporations or they would not persist. Thesepractices allow corporations to frame their commitmentto sustainability as economically beneficial (rational faç-ade), embracing of new technologies (progressive façade)and sensitive to society and the environment (reputationfaçade). The adoption of sustainability reporting standards,in essence, may institutionalize the reporting of thesepractices, and, thus, the use of organized hypocrisy andorganizational façades (see Archel et al., 2011; Malsch,2013).

However, whether organized hypocrisy and organiza-tional façades are also beneficial for the broader societyis debatable. Christensen et al. (2013) argue that aspira-tional talk could provide a way through which new ideasare born, and Abrahamson and Baumard (2008) purportthat organizational façades may allow needed space fororganizations to innovate and improve the realities of theircontributions to society. Therefore, they maintain thatmore tolerance of corporations not walking the talk isneeded. ‘‘The tricky issue here, of course, is whether themotive behind hypocrisy is to conceal an unpleasant truthor to reduce the difference between current and aspira-tional reality’’. (Christensen et al., 2013, p. 385). We main-tain that engagement-based longitudinal case studies canbe useful in providing further insights on this matter.Engaging with organizations and interacting with actorsinside them may help researchers gain more detailedviews on how talk, decisions, and actions are designedand executed in an organizational setting. Interpretive casestudies also can seek to draw on multiple data sources,through which the origins of talk, decisions, and actionsmight be traced. Moreover, detailed case studies may allowresearchers to pay more attention to the roles of humanactors in constructing and maintaining organizationalfaçades, as prior work has shown that organizational

champions and other individuals influence how voluntarysocial and environmental disclosure practices develop inan organization (see Contrafatto, 2014). Case studies maytherefore be used to explore whether organized hypocrisyhelps individual actors find space to improve an organiza-tion’s social and environmental record, thereby realizingthe potential benefits of organized hypocrisy and relatedcounter-coupling of talk, decisions, and actions.

As noted earlier in this paper, prior research has soughtto explain corporate voluntary social and environmentaldisclosure practices mainly through two competing theo-retical framings: those viewing voluntary disclosures assignals to investors and those arguing that voluntary dis-closures are used for impression management and legiti-macy purposes. Based on our discussion regardingorganized hypocrisy and organizational façades, we main-tain that neither signaling theory nor impression manage-ment theory is sufficient for producing a comprehensiveunderstanding of corporate disclosure behavior. Our caseanalysis provides evidence that in this circumstance corpo-rate reporting provides avenues for both signaling andimpression management. Both can be described as strate-gic tools that are available to the organization for manag-ing conflicting stakeholder demands.7 Drawing on thework of Brunsson (2007) and Abrahamson and Baumard(2008), we suggest that organizations are bound to continueto engage in organized hypocrisy, including establishing andmaintaining several discrepant organizational façades.Although this conclusion implies that further studies arealso likely to build explanations around both signaling andlegitimacy theories, we concur with the general conclusionof Unerman and Chapman (2014) that richer and morenuanced theoretical frameworks are needed to furtherenhance our understanding of the complex nature of corpo-rate sustainability and sustainability reporting.

In addition, we believe that this stream of sustainabilityresearch will benefit from explicitly acknowledging andassessing the impact of the broader societal context on cor-porations’ talk, decisions, and actions. When consideringan organization’s sustainability options within the broadersocietal context, the situation may leave an individualorganization with little choice but to engage in organizedhypocrisy and establish discrepant organizational facadesfor this purpose. We contend that neither signaling theorynor legitimacy theory adequately acknowledges this possi-bility as well, which implies that there are significant lim-itations in the approaches currently dominating social andenvironmental reporting research. Accordingly, futureresearch on corporate disclosure practices will benefitfrom new theoretical approaches, which would not onlyacknowledge but also allow taking the complexity of thesocio-institutional elements (Contrafatto, 2014) intoaccount when attempting to make sense of corporatesocial and environmental reporting.

Malsch (2013) eloquently points out that corporationsand the broader business sector also affect how the regula-tory and socio-political context evolves. Hence, the very


context argued to force organizations and corporate man-agers to resort to organized hypocrisy is partially (andincreasingly?) being shaped by vested interests. It seemslikely that the developments within regulatory and institu-tional contexts play a key role in determining whether ornot corporate sustainability reporting has a meaningfulrole to play in the aspired transition toward a less unsus-tainable society, as implied in the developments of inte-grated reporting (see Van Bommel, 2014). Similar tosignaling theory and legitimacy theory, Brunsson offersonly limited insights on these questions, and we thereforeencourage scholars to draw on diverse theoretical framingsto explore the role of power and power relations in thedevelopment of corporate social and environmentalreporting regimes (see Tregidga et al., 2014).

Research in sustainability reporting can benefit fromadditional research using the concepts of organized hypoc-risy and organizational façades. They can be utilized, forexample, to help reconcile contradictory research findingsregarding the moral justification and contradictory roles ofsustainability efforts within corporations. Brunssonexpresses this potential complexity by stating (Brunsson,2007, p. 132–133):

Hypocrisy can be seen as ‘a tribute that vice pays to vir-tue’. Morality does not necessarily gain from the cessa-tion of hypocrisy. If we have previously talked andmade decisions that were more moral than our actions,then the cessation of hypocrisy means that we are nowtalking and making decisions that are as immoral as ouractions. For example, hypocrisy makes it possible for acompany with a polluting production and product(e.g. a car producer) to establish environmental plansand to decide upon environmental goals. Withouthypocrisy, it would admit that its operations were envi-ronmentally hazardous, that it planned to continuethese operations, and it would have to defend them asbeing necessary and unavoidable. Then many peoplewould probably think that the company polluted notonly the physical environment but the moral environ-ment as well.

The theoretical and empirical illustration included inthis study is an initial step in the consideration of orga-nized hypocrisy and organizational façades as substantivecontributions to our collective understanding of corporatesustainability and sustainability reporting. We hope ourwork will generate new opportunities for sustainabilityresearch that situates organizations’ management of con-flicting stakeholder demands within the constraints of cur-rent societal and institutional arrangements. Our studyfocused on the development and application of these con-structs to social and environmental accounting researchand provided an empirical case example. Much moreempirical work is needed to examine the applicability ofthese conceptual notions to other settings, perhaps byinvestigating Brunsson’s assertion that talk and decisionsare principally used to manage spectator stakeholderdemands, while the use of actions can be reserved for themanagement of those stakeholders who are most directlyinvolved with the organization. Work is also needed todevelop the idea that organizational façades serve as

strategic tools for managing conflicting stakeholderdemands. Future research could explore whether andhow a progressive façade may serve to mediate betweenthe contradictory talk, decisions, and actions presentbetween the rational and reputation façades. Definingcharacteristics of rational, progressive, and reputation faç-ades may vary by societal and institutional setting andorganizations may develop different façades in order tomanage other sets of stakeholders. Perhaps by acknowl-edging the organized hypocrisy embedded within corpo-rate sustainability talk, decisions, and actions, a moreconstructive dialogue can develop that improves corpora-tions’ sustainability reporting and challenges their justifi-cations for actions undertaken to meet only the marketdemands of core stakeholders.

Acknowledgments

The authors wish to thank Editor-in-Chief ChristopherChapman, Guest Editor Jeffrey Unerman, two anonymousreviewers, Nils Brunsson, Carmen Correa (discussant atthe 35th EAA Annual Congress), Bruno Oxibar (discussantat the 32ème AFC Congrès), Sherron Roberts and the partic-ipants of the 22nd International Congress on Social andEnvironmental Accounting Research in Saint Andrews,the 4th GECAMB Conference on Environmental Manage-ment and Accounting (Portuguese CSEAR Conference) inLeiria, the 2011 Conference of the American AccountingAssociation’s Public Interest Section Mid-Year Meeting inChicago, the 32ème Congrès de l’Association Francophonede Comptabilité (AFC) in Montpellier, the InternationalWorkshop on The Role of Business in Society and the Pur-suit of the Common Good at ESSEC Business School in Cer-gy, the 2012 Alternative Accounts Conference in QuebecCity, the 35th European Accounting Association AnnualCongress in Ljubljana and research workshops and semi-nars at Seoul National University, Pusan National Univer-sity, Aston Business School, the University of Ottawa, theConservatoire National des Arts et Métiers (CNAM), theUniversité de Nice Sophia Antipolis, the University of Cen-tral Florida, the University of Maastricht, Dongguk Univer-sity, HEC Lausanne, Yonsei University, and ConcordiaUniversity for their valuable comments and feedback onearlier versions of this paper. Charles Cho also acknowl-edges the financial support provided by the Fonds Québéc-ois de la Recherche sur la Société et la Culture (FQRSC), theSocial Sciences and Humanities Research Council of Canada(SSHRC) and the ESSEC Research Centre (CERESSEC).Matias Laine acknowledges the financial support providedby the Academy of Finland (project 250478). MichelleRodrigue acknowledges the financial support provided bythe Université Laval’s Programme de soutien à la recherchede la Faculté des sciences de l’administration and the Écolede comptabilité.

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