Circular economy and accounting information: A study of the reporting of circular economy in Sweden

Background and problem: Facing today's climate crisis, companies play a key role in contributing to a sustainable change. Alternative business models have gained importance, such as circular economy, which refers to the concept of cyclical closed-loop systems. Both governments and external stakeholders are now stressing the importance of circular economy, resulting in new regulations and initiatives. Accounting information, including sustainability reporting, is an important tool for companies to communicate their sustainable actions. Thus, it is of essence for both companies and external stakeholders to gain insight into where the development of reporting sustainability is heading. Correspondingly, to what extent it is influenced by circular economy. Purpose: The purpose of this paper is to examine the development of reporting circular economy in Sweden. Specifically, to investigate the development during the last five years in which the implementation of the European Union directive and Action Plan have taken place. Method and theory: The CONI method was used in the study to extract information from accounting information, combining both a quantitative and qualitative approach. Through CONI, both disclosure quality and word frequency have been measured and evaluated. The theoretical framework consists of institutional-, stakeholder-, and legitimacy theory. Findings: There has been an increase in disclosure quality and quantity regarding the reporting of circular economy over the time period studied. The cause of this increase cannot be explained using a single variable, nor by the empirical results. Hence, its correlation with the new European Union directive or Action Plan cannot be determined. Conversely its contribution can neither be discarded. It is more likely to be the result of many contributing factors. While the terminology of circular economy becomes more frequent and recognized in society, institutional pressure might motivate companies to implement more circular economy in their reports. Furthermore, indications of industry specific characteristics influencing the reporting could be found in the sample. In addition, some specific circular economy activities could be considered more common to report by companies in all industries in the sample. Equally important, the industry that emitted the most greenhouse gases also showed the highest disclosure quality and quantity. A possible correlation could be suspected but not concluded