Compromising Strategy and Legitimacy Gap in Environmental Performance Reporting: A Case Study at The Rajawali company

Abstract

This article aims to analyze how companies strive to understand their social environment expectations. Environmental performance reporting is used as the phenomenon in this article to better understand the dynamics of social relations and their effect on company legitimacy. This article employs a theoretical framework consisting of legitimacy theory as the main framework supported by other social system-oriented theories such as PET, institutional theory, and stakeholder theory as parts of the legitimacy theory framework. This study uses an interpretive qualitative method for data collection and analysis. This article shows that it is not easy for companies to gain legitimacy from stakeholders. Legitimacy is highly subjective depending on the party observing companies. In addition, different understanding on environmental performance reports as an external communication tool often occurs. Consequently, a very detrimental legitimacy gap for companies occurs as well. Therefore, the identification process of stakeholder expectations plays an important role in bridging the gap. This article explains the strategies used by the Rajawali company in minimizing different understandings with the government in terms of environmental performance reports.