The Association Between Environmental Strategies and Sustainability Performance in The Context of Environmental Management Accounting

Abstract

The study aims to explain the relationship between environmental strategies and sustainability performance in the context of sustainability accounting.  It explains modeling the transformation process and outlining why and how strategies affect sustainability performance through accounting information which is focused on environmental priorities. The hypotheses were tested using the partial least squares approach and additional analyses were conducted for more details. The analysis suggests that environmental strategies have a positive association with sustainability performance and the proposed framework obtains adequate goodness-of-fit statistics.  It also finds that the effect of strategy on sustainable development was enhanced by environmental accounting data. The paper suggests that environmental strategies are associated with sustainability performance that could serve as a specific knowledge for decision making at companies to improve their organizational performance. It also has important implications for managerial processes by illustrating the potential of environmental accounting to improve sustainable development.

Keywords

• Sustainability performance,environmental strategies,environmental management accounting,accounting approach,partial least squares

References

1. Abdul-Rashid SH, Sakundarini N, Ghazilla R.A.R. and Thurasamy R. (2017), The impact of sustainable manufacturing practices on sustainability performance: Empirical evidence from Malaysia, International Journal Operational Production Management, 37,182-204.
2. Adams,A.C., Muir, S. and Hoque, Z. (2014), Measurement of sustainability performance in the public sector. Sustainability Accounting, Management Policy Journal, 5, 46-67.
3. Adams, C. A. and McNicholas, P. (2007). Making a difference: sustainability reporting, accountability and organizational change. Accounting, Auditing & Accountability Journal, 20(3), 382-402.
4. Albelda, E. (2011), The role of management accounting practices as facilitators of the environmental management”, Sustainability, Accounting, Management and Policy Journal, 2(1), 76-100.
5. Alewine, H.C. and Stone, D.N. (2013), How does environmental accounting information influence attention and investment? International Journal of Accounting & Information Management, 21(1), 22-52.
6. Alewine, H.C. (2010), A model for conducting experimental environmental accounting research”, Sustainability Accounting, Management and Policy Journal, 1(2), 256-291.
7. Alt, E., Diez-de-Castro, E. and Llorens-Montes, F. (2015). Linking employee stakeholders to environmental performance: The role of proactive environmental strategies and shared vision, Journal of Business Ethics, 128(1), 167-181.
8. Aragon-Correa, J.A., Hurtado-Torres, N., Sharma, S. and Garcia-Morales, V.J. (2008), Environmental strategy and performance in small firms: resource-based perspective, Journal of Environmental Management, 86(1), 88-103.

9. Aragon-Correa, J.A. and Rubio-Lopez, E.A. (2007) Proactive corporate environmental strategies: Myths and misunderstandings. Long Range Planning, 40, 357-381
10. Arjaliѐs, D.L. and Mundy, J. (2013). The use of management control systems to manage CSR strategy: a levers of control perspective. Management Accounting Research, 24 (4), 284-300.
11. Ball, A. (2005), Environmental accounting and change in UK local government, Accounting, Auditing & Accountability Journal, 18(3), 346-373.
12. Bansal, P. and Roth, K. (2000), Why companies go green: a model of ecological responsiveness, Academy of Management Journal, 43(4), 717-736.
13. Bansal, P. (2005), Evolving sustainability: a longitudinal study of corporate sustainable development, Strategic Management Journal, 26 (3), 197-218.
14. Bartolomeo, M., Bennet, M., Bouma, J., Heydkamp, P., James, P. and Wolters, T. (2000), Environmental Management Accounting in Europe: Current Practice and Future Potential, The European Accounting Review, 9 (1), 31-52.
15. Bebbington, J. and Gray, R. H. (2001), An account of sustainability: Failure, success and a reconceptualization, Critical Perspectives on Accounting, 12, 557–588.
16. Bhupendra, K. V. and Sangle, S. (2015). What drives successful implementation of pollution prevention and cleaner technology strategy? The role of innovative capability, Journal of Environmental Management, 155, 184-192.
17. Bouten, Lies and Hoozee, S. (2013) On the interplay between environmental reporting and management accounting change, Management Accounting Research, 24 (4), 333-348
18. Brown, J. (2009), Democracy, sustainability and dialogic accounting technologies: taking pluralism seriously, Critical Perspectives on Accounting, 20(3), 313-334.
19. Brundtland, G.H. (1987), Our Common Future: Report of the World Commission on Environment and Development, Oxford University Press
20. Burritt, R.L. (2012), Environmental performance accountability: planet, people, profits. Accounting, Auditing & Accountability Journal, 25, 370-405.
21. Burritt, R.L., Schaltegger, S. and Zvezdov,D. (2011). Carbon management accounting: explaining practice in leading German companies. Australian Accounting Review, 21, 80-98.
22. Wijethilake, C., Munir, R. and Appuham, R. (2016) Environmental Innovation strategy and organizational performance: enabling and controlling uses of management control systems, Journal of Business Ethics, (in press)
23. Caiado, R.G.G., Quelhas,O.L.G., Nascimento,D.L.M., Anholon, R. and Filho, W.L. (2018) Measurement of sustainability performance in Brazilian organizations, International Journal of Sustainable Development & World Ecology, 25(4), 312-326
24. Chenhall, R. H. (2003), Management control systems design within its organizational context: Findings from contingency-based research and directions for the future, Accounting, Organizations and Society, 28, 127-168
25. Christ, K. L. and Burritt, R. L. (2013). Environmental management accounting: the significance of contingent variables for adoption. Journal of Cleaner Production, 41, 163-173.
26. Claver-Cortés, E., Molina-Azorín, J.F., Pereira-Moliner, J. and López-Gamero, M.D. (2007), Environmental strategies and their impact on hotel performance, Journal of Sustainable Tourism, 15, 663-679.
27. Clemens, B.N. and Bakstran, L. (2010), A framework of theoretical lenses and strategic purposes to describe relationships among firm environmental strategy, financial performance, and environmental performance, Management Research Review, 33 (4), 393-405,
28. Comoglio, C. and Botta, S. (2012). The use of indicators and the role of environmental management systems for environmental performances improvement: a survey on ISO 14001 certified companies in the automotive sector, Journal of Cleaner Production, 26(1), 92-102.
29. Cullen, D. and Whelan, C. (2006), Environmental Management Accounting: The State of Play, Journal of Business & Economic Research, 4(10), 1-6.
30. Dascalu, C., Caraiani, C., Lungu, C.I., Colceag, F. and Guse, G.R. (2010), The externalities in social environmental accounting, International Journal of Accounting and Information Management, 18(1), 19-30.
31. De Villiers, C. and Van Staden, C.J. (2006). Can less environmental disclosure have a legitimising effect? Evidence from Africa. Accounting, Organizations and Society, 31, 763-781.
32. Debnath, S. and Accountants, C. (2012), Environmental management accounting: an overview of its methodological development, International Journal of Business Insights & Transformation, 5(1), 44-57.
33. Deegan, C. (2002), Introduction: the legitimising effect of social and environmental disclosures – a theoretical foundation, Accounting, Auditing & Accountability Journal, 15(3), 282-311.
34. Delai I. and Takahashi, S. (2011). Sustainability measurement system: a reference model proposal. Social Responsibility Journal, 7, 438-471.
35. Derchi, G.B., Burkert, M. and Oyon, D. (2015), Environmental management accounting systems: a review of the evidence and propositions for future research, in Epstein, M. and Ferrell, A.M. (Eds), Accounting and Control for Sustainability, Emerald Group Publishing Limited, Bingley, 197-229
36. Eiadat, Y.; Kelly, A.; Roche, F.; Eyadat, H. (2008), Green and competitive? An empirical test of the mediating role of environmental innovation strategy, Journal of World Business, 43, 131-145.
37. Elkington, J. (2004). Enter the Triple Bottom Line. In A. Henriques, & J. Richardson (Eds.), The Triple Bottom Line: Does It All Add Up? London: Earthscan.
38. Elkington, J. (1998), Cannibals with Forks: The Triple Bottom Line of 21st Century Business; New Society Publishers: Gabriola, BC, Canada.
39. Epstein, M. and Buhovac, R. (2010). Solving the sustainability implementation challenge, Organisational Dynamics, 39(4), 306-315.
40. Epstein, M. and Widener, S. (2011). Identification and use of sustainability performance measures in decision making. The Journal of Corporate Citizenship, 40(Winter), 43-73.
41. Etzion, D. (2007). Research on organizations and the natural environment,1992–present: a review. Journal of Management, 33(4), 637– 664.
42. Ferreira, A., Moulang, C. and Hendro, B. (2010). Environmental management accounting and innovation: an exploratory analysis. Accounting, Auditing & Accountability Journal, 23, 920-948.
43. Figge, F. and Hahn, T. (2013). Value drivers of corporate eco-efficiency: Management accounting information for the efficient use of environmental resources, Management Accounting Research, 24(4), 387-400.
44. Figge, F., Hahn, T., Schaltegger, S., and Wagner, M. (2002). The sustainability balanced scorecard—Linking sustainability management to business strategy. Business Strategy and the Environment, 11, 269-284.
45. Fiksel, J., Mcdaniel, J. and Mendenhall, C. (1999). Measuring progress towards sustainability principles. Process and Best Practices. Ohio: Battelle Memorial Institute.
46. Gale, R. (2006), Environmental costs at a Canadian paper mill: a case study of environmental management accounting (EMA), Journal of Cleaner Production, 14(14), 1237-1251.
47. Gond,J.P., Cabantous,L. and Krikorian, F. (2017) How do things become strategic? ‘Strategifying’ corporate social responsibility Strategic Organization, DOI: 10.1177/1476127017702819
48. Gray, R. H. and Milne, M. J. (2002). Sustainability reporting: Who’s kidding whom? Chartered Accountants Journal of New Zealand,81, 66–70
49. Gunarathne, N. and Lee, K.H. (2015), Environmental management accounting (EMA) for environmental management and organizational change, Journal of Accounting & Organizational Change, 11(3), 362-383.
50. Hair, J., Black,W., Babin, B., .Anderson, R. and Tatham, R. (2006). Multivariate Data Analysis, Pearson Education, Upper Saddle River, NJ.
51. Hansen, D.R. and Mowen, M.M. (2005), Environmental Cost Management, Management Accounting, Thomson-South-Western, Mason, OH, 490-526.
52. Hart, S. L. and Dowell, G. (2010). A natural-resource-based view of the firm: Fifteen years after. Journal of Management, 37(5), 1464–1479.
53. Hart, S.L. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20(4), 986- 1014.
54. Haugh, H.M. and Talwar, A. (2010). How do corporations embed sustainability across the organization? Academy Management Learning Education, 9 (3), 384-396.
55. Henri, J. F. and Journeault, M. (2010). Eco-control: The influence of MCS on environmental and economic performance. Accounting Organizations and Society, 35(1), 63-80.
56. Herbohn, K. (2005). A full cost environmental accounting experiment. Accounting, Organizations and Society, 30, 519-536.
57. Hines, R. (1991). On valuing nature. Accounting, Auditing and Accountability Journal, 4(3), 27–29.
58. Hopwood, A. (2009). Accounting and the environment. Accounting, Organizations and Society, 34(3-4), 433-439.
59. IFAC (2005). International Guidance Document: EMA. International Federation of Accountants, New York.
60. Ismail, K. and Isa, C.R. (2011), The role of management accounting systems in advanced manufacturing environment, Australian Journal of Basic and Applied Sciences, 5(9), 2196-2209
61. Hyrslová, J. and Hájek, M. (2006) Environmental Management Accounting in Czech Companies that have Implemented Environmental Management Systems (in) Sustainability Accounting and Reporting, 433-456.
62. Journeault, M. (2016), The influence of the eco-control package on environmental and economic performance: a natural resource-based approach, Journal of Management Accounting Research, 28(2), 149-178.
63. Klassen, R.D. and Whybark, D.C. (1999). The impact of environmental technologies on manufacturing performance. Academy of Management Journal, 42, 599-615.
64. Klassen, R.D. and McLaughlin, C.P. (1996), The impact of environmental management of firm performance, Management Science, 42(8), 1199-1214.
65. Kocmanová A, Pavláková-Dočekalová M, Škapa,S. and Smolíková,L. (2016), Measuring corporate sustainability and environmental, social, and corporate governance value added. Sustainability. 8, 945.
66. Labuschagne, C., Brent, A.C. and Van Erck, R.P. (2005), Assessing the sustainability performances of industries. Journal of Cleaner Production, 13 (4), 373-385
67. Lamberton, G. (2005), Sustainable sufficiency – an internally consistent version of sustainability, Sustainable Development, 13(1), 53-78.
68. Larrinaga-Gonzalez, C., Carrasco-Fenech, F., Caro-Gonzalez, F. J., Correa-Ruiz, C., and Paez-Sandubete, J. M. (2001). The role of environmental accounting in organizational change: an exploration of Spanish companies. Accounting, Auditing & Accountability Journal, 14(2), 213-239.
69. Larrinaga-Gonzalez, C. and Bebbington, J. (2001), Accounting change or institutional appropriation? A case study of the implementation of environmental accounting, Critical Perspectives on Accounting, 12(3), 269-292.
70. Lewis, G. J. and Harvey, B. (2001). Perceived Environmental Uncertainty: The Extension of Miller’s Scale to the Natural Environment. Journal of Management Studies, 38, 201-233.
71. Linnenluecke,M.K. and Griffiths, A. (2013). Firms and sustainability: mapping the intellectual origins and structure of the corporate sustainability field. Global Environmental Change. 23 (1), 382-391
72. Lodhia, S. and Hess, N. (2014). Sustainability accounting and reporting in the mining industry: current literature and directions for future research. Journal of Cleaner Production, 84, 43-50.
73. Lozano R. (2015). A holistic perspective on corporate sustainability drivers. Corporate Soc Responsibility Environmental Management, 22, 32-44.
74. Luzzini D, Brandon-Jones E, Brandon-Jones A and Spina G. (2015). From sustainability commitment to performance: the role of intra- and inter-firm collaborative capabilities in the upstream supply chain. International Journal Production Economy, 165, 51-63.
75. Maas,K., Schaltegger S. and Crutzen, N. (2016). Integrating corporate sustainability assessment, management accounting, control, and reporting. Journal of Cleaner Production. 136, 237-248.
76. Mákelá, M. (2017). Trends in environmental performance reporting in the Finnish forest industry. Journal of Cleaner Production, 142, 1333-1346.
77. Mathews, M. R. (1997). Twenty-five years of social and environmental accounting research: Is there a silver jubilee to celebrate? Accounting Auditing and Accountability Journal, 10(2), 481-531.
78. Maunders,K.T., and Burritt, L.R. (1991) Accounting and Ecological Crisis, Accounting, Auditing & Accountability Journal, 4(3), DOI:10.1108/09513579110003277
79. Milne, M.J. and Gray, R. (2013). W(h)ither ecology? The Triple Bottom Line, the Global Reporting Initiative, and Corporate Sustainability Reporting. Journal of Business Ethics, 118, 13-29.
80. Milne, M.J. and Grubnic, S. (2011). Climate change accounting research: keeping it interesting and different. Accounting, Auditing & Accountability Journal, 24, 948-977.Mokhtar, N., Jusoh, R. and Zulki, N. (2016), Corporate characteristics and environmental management accounting (EMA) implementation: evidence from Malaysian public listed companies (PLCs), Journal of Cleaner Production, 136, 111-122.
81. Morioka, S.N. and Carvalho, M.M. (2014). Measuring sustainability in practice: exploring the inclusion of sustainability into corporate performance systems in Brazilian case studies. Journal of Cleaner Production, 136, 123–133.
82. Owen, D. (2008). Chronicles of wasted time? A personal reflection on the current state of, and future prospects for, social and environmental accounting research. Accounting, Auditing & Accountability Journal, 21(2), 240-267.
83. Parker, L.D. (1997), Accounting for Environmental Strategy: Cost Management, Control and Performance Evaluation, Asia-Pacific Journal of Accounting, 4(2), 145-173.
84. Passetti, E., Cinquini, L., Marelli, A. and Tenucci, A. (2014). Sustainability accounting in action: lights and shadows in the Italian context. British Accounting Review, 46, 295-308.
85. Perego, P. and Hartmann, F. (2009), Aligning performance measurement systems with strategy: the case of environmental strategy, Abacus, 45(4), 397-428.
86. Pérez, E.A., Ruiz, C.C. and Fenech, F.C. (2007), Environmental management systems as an embedding mechanism: a research note, Accounting, Auditing &Accountability Journal, 20(3), 403-422.
87. Pondeville, S., Swaen, V. and Ronge, Y. D. (2013). Environmental management control systems: the role of contextual and strategic factors. Management Accounting Research, 24, 317-332.
88. Roca, L.C. and Searcy, C. (2012). An analysis of indicators disclosed in corporate sustainability reports. Journal of Cleaner Production, 20, 103-118.
89. Rodrigue, M., Magnan, M. and Boulianne, E. (2013). Stakeholders’ influence on environmental strategy and performance indicators: a managerial perspective. Management Accounting Research, 24,301–316.
90. Russo, M. V. and Fouts, P. A. (1997). A resource-based perspective on corporate environmental performance and profitability. Academy of Management Journal, 40(3), 534-559.
91. Schaltegger, S. and Burritt, R.L. (2000), Contemporary Environmental Accounting: Issues, Concepts and Practice, Greenleaf Publishing, Sheffield.
92. Schaltegger, S. and Csutora, M. (2012). Carbon accounting for sustainability and management. Status quo and challenges. Journal of Cleaner Production, 36, 1-16.
93. Schrettle S, Hinz A, Scherrer-Rathje M, and Friedli T. (2014). Turning sustainability into action: explaining firms’ sustainability efforts and their impact on firm performance. International Journal of Production Economy, 147, 73-84.
94. Sharma, S. (2014). Competing for a sustainable world: Building capacity for sustainable innovation. Sheffield: Greenleaf Publishing.
95. Shields, D. and Boer, G. (1997), Research in environmental accounting, Journal of Accounting & Public Policy, 16(2), 117-23.
96. Silvestre, W.J., Antunes, P., Amaro, A. and Leal Filho W. (2015). Assessment of corporate sustainability: study of hybrid relations using Hybrid Bottom Line model. International of Sustainable Development &World Ecology. 37-41.
97. Silvestre, W.J., Antunes. P. and Leal Filho W. (2016). The corporate sustainability typology: analysing sustainability drivers and fostering sustainability at enterprises. Technological and Economic Development of Economy, 24(2), 1-21
98. Solovida,G.T. and Latan, H. (2017), Linking environmental strategy to environmental performance: Mediation role of environmental management accounting, Sustainability Accounting, Management and Policy Journal, 8(5), 595-619.
99. Spence, C., Husillos, J. and Correa-Ruiz, C. (2010). Cargo cult science and the death of politics: a critical review of social and environmental accounting research. Critical Perspectives on Accounting, 21(1), 76-89.
100. Spence, L.J. and Rinaldi, L. (2014). Governmentality in accounting and accountability: a case study of embedding sustainability in a supply chain. Accounting, Organizations and Society, 39, 433-452.
101. Thomson, I.(2007).Mapping the terrain of sustainability accounting.In: Unerman, J.,Bebbington,J.,O’Dwyer,B.(Eds.),Sustainability Accounting and Accountability, Routledge.
102. Tinker, T. and Gray, R. (2003) Beyond a critique of pure reason: From policy to politics to praxis in environmental and social research, Accounting, Auditing & Accountability Journal, 16(5), 727-761
103. Tregidga, H., Milne, M. and Kearins, K. (2014). (Re)presenting ‘sustainable organizations’. Accounting,Organizations and Society, 39, 477-494.
104. Wagner, M. and Schaltegger, S. (2003), How does sustainability performance relate to business competitiveness?, Greener Management International, 44, 5-16.
105. Wagner, M. and Schaltegger, S. (2004). The effect of corporate environmental strategy choice and environmental performance on competitiveness and economic performance: an empirical study of EU manufacturing. European Management Journal, 22 (5), 557-572.
106. Wilmshurst, T.D. and Frost, G.R. (2001). The role of accounting and the accountant in the environmental management system. Business Strategy and the Environment, 10(3), 135-147.
107. Wu,Z. and Pagell M. (2011). Balancing priorities: decision-making in sustainable supply chain management. Journal of Operations Management, 29(6), 577-590.
108. Yongvanich, K., and Guthrie, J. (2006). An extended performance reporting framework for social and environmental accounting. Business Strategy and the Environment, 15(5), 309-321.