CORPORATE SUSTAINABILITY REPORTING TRANSFORMATION: A CRITICAL VIEW ON LEGITIMACY THEORY

Purpose – This paper aims to critically analyse the provisions of legitimacy theory and assess its relevance in the context of transitioning from voluntary sustainability disclosure to mandatory reporting under defined international and European standards. Design/methodology/approach – The research employs a theoretical analysis of legitimacy theory concepts and their application to sustainability reporting practices. The study examines the implications of the adoption of European Sustainability Reporting Standards (ESRS) and International Financial Reporting Standards (IFRS S1, S2) for organizations’ legitimation strategies. The methodological basis of the study is a dialectical approach and a systematic method of studying the issues of additional disclosure of sustainability-related information. The study uses the method of analytical research and generalisation of the content of scientific publications in the field of legitimacy theory, sustainability reporting and related areas (stakeholder theory, institutional theory). Such interdependent methods of cognition as analysis and synthesis, combined with logical analysis, are used to critically examine the provisions of the legitimacy theory, highlight its problematic aspects and relevance in the context of changing regulatory environment. Findings – The research confirms that legitimacy theory remains a relevant analytical framework for explaining sustainability disclosure practices despite the shift to mandatory reporting. The standardization of sustainability reporting formalizes societal expectations regarding ESG transparency and significantly enhances the importance of such reporting as a tool for ensuring business legitimacy. However, legitimacy theory has certain limitations in the new regulatory paradigm, including insufficient attention to internal organizational processes necessary for compliance with new standards. Practical implications – Companies use public disclosure of sustainability-related information in annual or other publicly available reports (such as sustainability reports) as a tool of legitimation in order to gain, maintain, or repair their legitimacy. Changes in social expectations and regulatory environment in which companies operate necessitate a review of legitimation strategies. This involves a shift from the symbolic strategies that have been widely used to substantive strategies that provide for changes in companies’ actual operating policies and increase their contribution to the achievement of sustainable development goals. Ukrainian companies preparing for mandatory sustainability reporting would benefit from an understanding of the theoretical underpinnings of such disclosure in order to develop effective legitimisation methods. Originality/value – The paper provides a unique perspective on the application of legitimacy theory in the context of the evolving sustainability reporting landscape, particularly the transition from voluntary to mandatory disclosure regimes. It contributes to the theoretical understanding of corporate motivations for sustainability disclosure and offers insights into how legitimation strategies are changing in response to new regulatory requirements.