Environmental management accounting: the significance of contingent variables for adoption

Abstract

Environmental management accounting (EMA) has received increasing interest in recent years and has been promoted as a means by which the business community can more easily manage its environmental and associated economic performance. Yet despite increasing interest, theoretically informed projects concerning the current state of EMA development remain scarce. The research presented here aimed to extend current knowledge by investigating whether organisational context could be used to develop a greater understanding of EMA use by Australian organisations. Drawing on contingency theory, a research framework was developed that sought to identify the circumstances under which organisations were more likely to engage with EMA activities, both now and in the future. In order to test this framework a web-based survey of Australian accountants in business was conducted. The data suggested present and future EMA use was associated with environmental strategy, organisational size and environmentally-sensitive industries. Contrary to expectation organisational structure was not found to be associated with accountants' perceptions of EMA use in their organisations. These findings support the potential of contingency-based research to further current knowledge and understanding of the reasons behind EMA development.

Introduction

As the business world endeavours to respond to increasing pressure from various stakeholders to reduce the impact of its activities on the physical environment, the need for new techniques to assist managers in meeting the challenge of environmental sustainability becomes apparent. One method suggested as being able to align corporate activities with the environmental agenda more closely is Environmental Management Accounting (EMA). EMA incorporates a number of techniques and tools designed to assist organisations in recognising and managing their environmental impacts. These tools include, but are not limited to: environmental cost accounting; full cost accounting; life-cycle costing; environmental life-cycle budgeting; environmental capital investment appraisal; total quality environmental management; and material and energy flow accounting (Schaltegger et al., 2012; Yakhou and Dorweiler, 2004).

EMA provides a pragmatic response to criticism that conventional management accounting has failed in its ability to provide explicit consideration of environmental issues with environmental costs frequently ‘hidden’ in general overhead accounts and potential environmental benefits often downplayed or ignored (Jasch, 2003; Papaspyropoulos et al., 2012; Xiaomei, 2004). By providing data on the physical and financial elements of environmental performance, it has been suggested EMA will provide information that can be used by corporate management to assess opportunities for economic and environmental improvement (Gale, 2006; Schaltegger and Burritt, 2000). With environmental degradation expected to maintain its prominence on both the national and international stage, it has become clear that failure to collect data on the environmental impacts associated with business operations will result in information that is insufficient to serve the needs of corporate management as they strive to meet the changing requirements of the contemporary marketplace (Jasch, 2003).

While substantial effort has been devoted to normative arguments and commentary extolling the benefits to be obtained from the ‘greening’ of management accounting, a small but growing academic effort has been extended to investigating EMA in practice (Burritt, 2004; Ferreira et al., 2010). However, theoretical explanations for the current state of EMA development are still lacking (Bouma and van der Veen, 2002; Qian et al., 2011). Motivated by the need for theory informed explanations concerning EMA in practice, the present study offers an empirical survey-based project that seeks to extend current knowledge about the organisational characteristics behind EMA development.

Drawing on contingency theory, a research framework was developed incorporating a number of contextual variables that were accessible from existing management accounting and environmental accounting literature. Though underutilised in EMA research, recent studies have demonstrated contingency theory to have considerable potential to further current knowledge concerning EMA practice and development (Bouma and van der Veen, 2002; Qian et al., 2011). Through the utilisation of a questionnaire-survey this study sought to obtain a greater understanding of contingent factors influencing and expected to influence EMA in organisations. In doing so the following research question was examined:

(RQ1) What do accountants perceive as the present and future roles of EMA in the organisation in which they are employed?

The remainder of this paper is arranged as follows. Sections 2 The potential benefits to be obtained from EMA activities, 3 Empirical evidence concerning EMA in practice contain discussion concerning the benefits to be obtained from EMA activities and an overview of empirical evidence on EMA in practice. Section 4 reviews the development of the research framework that was investigated. This is followed by sections on the methods employed in the research, and the data analysis. The paper then concludes with discussion of the results and overall conclusions, including suggested directions for future research.