Abstract
Social accountability of organizations has been intensely discussed in the recent past. As a means of being accountable organizations pursue many environmental management strategies in addition to other strategies. In order to analyze these strategies various models that trace the development of corporate environmental management have been suggested. However, without supportive greener accounting tools and techniques environmental strategies will not succeed. But there is limited guidance and analysis of how the vital accounting aspects can be integrated with environmental development to sustain corporate environmental strategies. This chapter aims to provide an integrated framework to facilitate the adoption of environmental management with the help of accounting in pursuit of corporate social accountability.
The framework suggests that the development of environmental management in an organization is evolutionary from compliance to leading edge stages. Initially driven by compliance, these strategies will later generate competitive advantage for an organization while ensuring social accountability. To reach the leading edge stage, environmental strategies should encompass all the significant environmental domains while engaging stakeholders on a regular basis. In this process accounting for environmental management (Environmental Management Accounting) with the provision of requisite information will act as the common thread that connects and sustains these practices. By providing useful practical and theoretical contributions the integrated framework adds a new accounting dimension to the existing discussions on how corporate environmental management strategies can be developed over time.
Keywords
- Stakeholder Management
- Environmental Strategy
- Environmental Domain
- Environmental Management Practice
- Secondary Stakeholder
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsReferences
Banerjee, S. B. (2001). Managerial perceptions of corporate environmentalism: Interpretations from industry and strategic implications for organizations. Journal of Management Studies, 38(4), 489–513.
Bartolomeo, M., Bennett, M., Bouma, J., Heydkamp, P., James, P., & Wolters, T. (2000). Environmental management accounting in Europe: Current practice and future potential. The European Accounting Review, 9(1), 31–52.
Benn, S., & Bolton, D. (2011). Key concepts in corporate social responsibility. London: Sage.
Bennett, M. J., Bouma, J., & Walters, T. (2002). Environmental management accounting: Informational and institutional developments. (Ed), Dordrecht: Kluwer.
Bennett, M., & James, P. (1998). Environment related management accounting: Current practice and future trends. Greener Management International, 17, 33–51.
Berry, M. A., & Rondinelli, D. A. (1998). Proactive corporate environmental management: A new industrial revolution. Academy of Management Executive, 12(2), 38–50.
Bhargava, S., & Welford, R. (1996). Corporate strategy and the environment: The theory. In R. Welford (Ed.), Corporate environmental management (pp. 13–26). London: Earthscan.
Burnett, R. D., & Hansen, D. R. (2008). Eco-efficiency: Defining a role for environmental cost management. Accounting, Organizations and Society, 33, 551–581.
Burritt, R. L. (2004). Environmental management accounting: Roadblocks on the way to the green and pleasant land. Business Strategy and the Environment, 13, 13–32.
Burritt, R., Hahn, T., & Schaltegger, S. (2002). Towards a comprehensive framework for environmental management accounting: Links between business actors and environmental management accounting tools. Australian Accounting Review, 12(2), 39–50.
Buysse, K., & Verbeke, A. (2003). Proactive environmental strategies: A stakeholder management perspective. Strategic Management Journal, 24, 453–470.
Carroll, B. A., & Shabana, K. M. (2010). The business case for corporate social responsibility: A review of concepts, research and practice. International Journal of Management Reviews, 12(1), 85–105.
Certified Management Accountant (CMA). 1995. Implementing Corporate Environmental Strategies Management Accounting Guideline (MAG) 37. Ontario: Society of Management Accountants of Canada.
Clarkson, M. B. E. (1995). A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review, 20(1), 92–117.
Colby, M. E. (1991). Environmental management in development: The evolution of paradigms. Ecological Economics, 3, 193–213.
Crane, A., & Matten, D. (2007). Business ethics. New York: Oxford University Press.
Deegan, C. (2003). Environmental management accounting: An introduction and case studies for Australia. Sydney: Institute of Chartered Accountants in Australia.
Delmas, M., & Toffel, M. W. (2004). Stakeholders and environmental management practices: An institutional framework. Business Strategy and the Environment, 13, 209–222.
Dias-Sardinha, I., Reijnders, L., & Antunes, P. (2002). From environmental performance evaluation to eco-efficiency and sustainability balanced scorecards. Environmental Quality Management, 12(2), 51–64.
Doody, H. (2010). Environmental sustainability: Tools and Techniques. The Society of Management Accountants of Canada, the American Institute of Certified Public Accountants and the Chartered Institute of Management Accountants.
Drury, C. (2004). Management and cost accounting. New Delhi: Thomson Learning.
Environmental Protection Agency (EPA). (1995). An introduction to environmental accounting as a business management tool: Key concepts and terms. EPA: Washington.
Epstein, M. J., & Roy, M. (2003). Improving sustainability performance: Specifying, implementing and measuring key principles. Journal of General Management, 29(1), 15–31.
Epstein, M. J., & Wisner, P. S. (2001). Using a balanced scorecard to implement sustainability. Environmental Quality Management, 11(Winter), 1–10.
Federal Environmental Agency (UBA). (2003). Guide to corporate environmental cost management. Berlin: German Environment Ministry.
Figge, F., Hahn, T., Schaltegger, S., & Wagner, M. (2002). The sustainability balanced scorecard: Linking sustainability management to business strategy. Business Strategy and the Environment, 11(5), 269–284.
Fonseka, K. B. M., Manawaduge, A. S. P. G., & Senarathne, D. S. N. P. (2005). Management accounting practices in quoted public companies in Sri Lanka. Colombo: Chartered Institute of Management Accountants of Sri Lanka.
Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston: Pitman Publishing.
Freeman, A. M., III. (2002). Environmental Policy Since Earth Day I: What have we gained? Journal of Economic Perspectives, 16(1), 125–146.
Gibson, K. C., & Martin, B. A. (2004). Demonstrating value through the use of environmental management accounting. Environmental Quality Management, 13, 45–52.
Godschalk, S. K. B. (2010). Does corporate environmental accounting make business sense? In S. Schaltegger, M. Bennett, R. L. Burritt, & C. Jasch (Eds.), Environmental management accounting for cleaner production (pp. 249–265). Netherlands: Springer.
Gouldson, A., & Murphy, J. (1998). Regulatory realities: The implementation and impact of industrial environmental regulation. London: Earthscan.
Gray, R., Bebbington, J., & Walters, D. (1993). Accounting for the environment. London: Paul Chapman Publishing.
Gunarathne, N., & Lee, K. H. (2015). Environmental Management Accounting (EMA) for environmental management and organizational change: An Eco-Control approach. Journal of Accounting & Organizational Change, 11(3).
Hart, S. L. (1995). Natural-resource-based view of the firm. Academy of Management Review, 20(4), 986–1014.
Henri, J. F., & Journeault, M. (2010). Eco-control: the influence of management control systems on environmental and economic performance. Accounting, Organisations and Society, 35, 63–80.
Henriques, I., & Sadorsky, P. (1996). The determinants of an environmentally responsive firm: An empirical approach. Journal of Environmental Economics and Management, 30(3), 381–395.
Hilton, R. W., Ramesh, G., & Jaydev, M. (2008). Managerial accounting: Creating value in a dynamic business environment. New Delhi: Tata McGraw-Hill.
Ilinitch, A. Y., Soderstrom, N. S., & Thomas, T. E. (1998). Measuring corporate environmental performance. Journal of Accounting and Public Policy, 17, 383–408.
International Federation of Accountants (IFAC). (2005). International guidance document: Environmental management accounting. New York: IFAC.
Kaplan, R. S., & Atkinson, A. A. (1998). Advanced management accounting. New Delhi: Pearson.
Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard: Measures that drive performance. Harvard Business Review, 1992(January-February), 71–79.
Kaplan, R. S., & Norton, D. P. (1993). Putting the Balanced Scorecard to Work. Harvard Business Review, 1993(September– October), 134–147.
Kokubu, K., & Kitada, H. (2012). Material flow cost accounting and conventional management thinking: Introducing, a new environmental management accounting tool into companies. A paper submitted to the IPA Conference in 2012.
Lee, K. H. (2011). Motivations, barriers, and incentives for adopting environmental management (Cost) accounting and related guidelines: A study of the Republic of Korea. Corporate Social Responsibility and Environmental Management, 18, 39–49.
Moller, A., & Schaltegger, S. (2005). The sustainability balanced scorecard as a framework for eco-efficiency analysis. Journal of Industrial Ecology, 9(4), 73–83.
Mross, D., & Rothenberg, S. (2006). Formulation and implementation of environmental strategies: A comparison between U.S. and German printing firms. New York: Printing Industry Center at RIT.
Newton, T., & Harte, G. (1997). Green business, technicist kitsch. Journal of Management Studies, 34(1), 75–98.
Niven, P. (2002). Balanced Scorecard Step-by-Step: Maximizing performance and maintaining results. New York: John Wiley & Sons.
Phillips, R. A., Berman, S. L., Elms, H., & Johnson-Cramer, M. E. (2010). Strategy, stakeholders and managerial discretion. Strategic Organization, 8(2), 176–183.
Porter, M. E., & van der Linde, C. (1995). Toward a new conception of the environment-competitiveness relationship. Journal of Economic Perspectives, 9(4), 97–118.
Preston, L. E. (1990). Stakeholder management and corporate performance. Journal of Behavioral Economics, 19(4), 361–375.
Qi, G., Zeng, S., Tam, C., Yin, H., & Zou, H. (2013). Stakeholders’ Influences on corporate green innovation strategy: A case study of manufacturing firms in China. Corporate Social Responsibility and Environmental Management, 20, 1–14.
Robbins, P. T. (2001). Greening the corporation: Management strategy and the environmental challenge. London & Sterling, VA: Earthscan.
Roome, N. (1992). Developing environmental management systems. Business Strategy and the Environment, 1, 11–24.
Rugman, A. M., & Verbeke, A. (1998). Corporate strategies and environmental regulations: An organizing framework. Strategic Management Journal, 19(4), 363–375.
Sakai, K. (2007). Ricoh’s approach to product life cycle management and technology development. In S. Takata & Y. Umeda (Eds.), Advances in life cycle engineering for sustainable manufacturing businesses (pp. 5–10). Netherlands: Springer.
Schaltegger, S., & Burritt, R. (2000). Contemporary environmental accounting. Sheffield: Greenleaf.
Schaltegger, S., & Burritt, R. (2006). Corporate sustainability accounting. In S. Schaltegger, M. Bennett, & R. Burritt (Eds.), Sustainability accounting and reporting (pp. 37–59). Dordrecht: Springer.
Soonawalla, K. (2006). Environmental management accounting. In A. Bihami (Ed.), Contemporary issues in management accounting (pp. 380–406). New York: Oxford University Press.
Sroufe, R., Montabon, F., Narasimhan, R., & Wang, X. (2003). Environmental management practices: A framework. Greener Management International, 40, 23–44.
Strobel, M., & Redmann, C. (2002). Flow cost accounting, an accounting approach based on the actual flows of materials. In M. Bennett, J. Bouma, & T. Wolters (Eds.), Environmental management accounting, informational and institutional developments (pp. 67–82). Dordrecht: Kluwer.
United Nations Division for Sustainable Development (UNDSD). (2001). Environmental management accounting: Procedures and principles. New York: UNDSD.
Valor, C. (2005). Corporate social responsibility and corporate citizenship: Towards corporate accountability. Business and Society Review, 110(2), 191–212.
Wilmshurst, T. D., & Frost, G. R. (2001). The role of accounting and the accountant in the environmental management system. Business Strategy and the Environment, 10, 135–147.
Xiaomei, L. (2004). Theory and practice of environmental management accounting. Experience of implementation in China. International Journal of Technology Management and Sustainable Development, 3(1), 47–57.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Appendix: EMA Techniques
Appendix: EMA Techniques
1.1 Accounting for Energy, Materials, Water and Waste
According to Bennett and James (1998) accounting for energy and materials is the tracking and analysis of all flows of energy and substances into, through and out of an organization. When organizations realize the importance of energy costs, they can follow a piecemeal approach (in-house initiatives) or a comprehensive approach (top-down approach) or even a combination of them (Gray et al., 1993). Due to the wide range of approaches possible, there is no single hard and fast rule for accounting for energy, but any accounting system should attempt to separately identify different types of energies used, relate these costs to the causes of costs, highlight the energy costs in cost reports, etc. The same is applicable when accounting for materials, water and waste.
1.2 Material Flow Cost Accounting
MFCA is a tool for quantifying the flows and stocks of materials in processes or production lines in both physical and monetary units (Kokubu & Kitada, 2012; Strobel & Redmann, 2002). MFCA has been developed based on the principles of mass balance. Accordingly, mass balance implies that the amount of inputs should be consistent with the sum of desirable and no-desirable output (refer Fig. 2). MFCA incorporates both PEMA and MEMA by quantifying material flows and stocks in a process or processes in terms of both physical and monetary units.
In MFCA waste is valued at the same rate as the good output, it thereby brings the cost of waste to the attention of the management immediately for requisite action. The benefits of MFCA are evident from both economic and environmental perspectives. From an economic perspective, MFCA identifies the material in both physical units and in monetary units along with their progress through an organization. From an environmental perspective, the reduction of the consumption of materials and energy reduces the undesirable waste outflows from an organization.
1.3 Environmental Capital Budgeting
Capital budgeting is the process of making long-term decisions that involve cash flows beyond the current year (Hilton, Ramesh, & Jaydev, 2008). When environmental considerations are taken into account explicitly in the long-term decision making process, environmental oriented capital budgeting takes place. It is therefore necessary to fully consider environmental costs, cost savings, and revenues in evaluating a potential capital investment (Environmental Protection Agency (EPA), 1995). As Gray et al. (1993) suggest, as the world is becoming more environmentally sensitive, non-environmentally sensitive income streams will be difficult to obtain, leading to early abandonment of projects. Environmental capital budgeting offers financing as well as investment benefits to an organization. Financing benefits such as easy approval and soft financing terms for capital investment projects and investment benefits such as informed decision making are the results of such environmental capital budgeting techniques.
1.4 Life Cycle Accounting
Life-cycle costing estimates and accumulates costs over a product’s entire life cycle (Drury, 2004). According to EPA (1995), life-cycle accounting assigns and analyzes the product or project-specific costs within a life-cycle framework including usual, hidden, liability, and less tangible costs. However, it will be difficult to conduct a comprehensive life cycle assessment of products or projects (Gray et al., 1993). Yet, accountants and other professionals can contribute to life cycle assessment by bringing in financial implications of existing activities and potential future options.
1.5 Environmental Activity Based Costing
Activity-based costing is a two-stage procedure used to assign overhead costs to various cost objects accurately (Hilton et al., 2008; Kaplan & Atkinson, 1998). Despite the fast diffusion of ABC, many companies around the world still use traditional volume-based overhead allocations systems (Fonseka et al., 2005). In a traditional overhead absorption costing system, environmental related costs can be hidden (Burritt, 2004; Gibson & Martin, 2004; IFAC, 2005). It is necessary to bring environmental costs to the attention of corporate stakeholders (EPA, 1995). This necessitates the allocation of environmental costs to the appropriate accounts by allocating them to those who generate them (Soonawalla, 2006).
1.6 Sustainability Balanced Scorecard (SBSC)
Balanced Score Card (BSC) has been promoted as a balanced performance measurement system that overcomes the limitations in conventional performance management. BSC has also been suggested as a strategic management tool as well (Kaplan & Norton, 1992, 1993, Niven, 2002). BSC encompasses four perspectives, namely, financial, customer, internal business and learning and growth. As these perspectives act as only a template, BSC has been suggested as an effective tool to incorporate economic and environmental (and social) dimensions (Dias-Sardinha, Reijnders, & Antunes, 2002, Epstein & Wisner, 2001, Figge, Hahn, Schaltegger, & Wagner, 2002, Moller & Schaltegger, 2005). The environmental (and social) integration into a conventional BSC to make it a sustainable BSC can be achieved in different ways (refer Figge et al., 2002 for more information).
Rights and permissions
Copyright information
© 2015 Springer International Publishing Switzerland
About this chapter
Cite this chapter
Gunarathne, A.D.N. (2015). Fostering the Adoption of Environmental Management with the Help of Accounting: An Integrated Framework. In: Rahim, M., Idowu, S. (eds) Social Audit Regulation. CSR, Sustainability, Ethics & Governance. Springer, Cham. https://doi.org/10.1007/978-3-319-15838-9_15
Download citation
DOI: https://doi.org/10.1007/978-3-319-15838-9_15
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-15837-2
Online ISBN: 978-3-319-15838-9
eBook Packages: Business and EconomicsBusiness and Management (R0)