Consequences of Environmental Management Accounting (Ema): The Theory Behind

Abstract

The need for Environmental Management Accounting (EMA) can be associated with the major problems of environmental degradation that lead to other concerns, such as legitimacy and competitive issues. EMA is seen as a management accounting innovation whose consequence is a boost to corporate performance. EMA can benefit the competitive position of a firm by directing the attention of its managers towards potential cost reduction or potential areas for differentiation. EMA can also help firms gain resource productivity and process efficiency, which will result in the reduction of waste and improved the financial profitability of the firm. In other words, EMA practically improves both the environmental and economic performance of a firm. However, despite all these success stories, many firms are still reluctant to take a more proactive approach to EMA, perhaps due to a perceived lack of evidence that the benefits exceed the costs of pursuing these initiatives. The findings so far may also not be generalizable since they are based on descriptive statistics rather than rigorous hypothesis testing. There has been little empirical evidence regarding the impact of EMA on the business success of the firm. This is due to prior EMA studies that have made limited use of a theory that attempts to explain the consequences of the practice. Most research has focused on descriptive work and researchers seem to be unwilling to move beyond action-based case studies in further develop the framework of EMA practice and firm performance. This has raised a concern on the need for theoretical explanation on the consequences of EMA. As it is important to gauge the effects of EMA on firm performance, this study provides a discussion of how EMA could help companies in Malaysia to enhance both their economic and environmental performance and by this to encourage firms to put EMA in practice for their sustainable growth.

Application of environmental management accounting by small and medium enterprises in South Africa

“…In most scenarios, managers are unaware of the value added by enhancing environmental performance and lessening environmental effects (IFAC, 2005;Ferreira et al, 2010;Mohamed, 2018). As a result, numerous prospects to decrease environmental costs are lost (Schaltegger, 2018;Burritt, 2004;Ariffin, 2016). This is a result of low environmental awareness, lack of stakeholders' pressure, and weak environmental laws (Susanto & Meiryani, 2019;Chathurangani & Madhusanka, 2019).…”

Environmental Management Accounting System and Value Creation: An institutional perspective

“…Research by Jamil et al (2015) that focuses on small-medium manufacturing companies shows that EMAS adoption in Malaysia is still low due to a lack of institutional pressures. This low adoption is often since the companies' discernment that sustainability issues are not vital has contributed to the moderate diffusion of EMAS adoption in Malaysia (Ariffin, 2016). There is empirical evidence that points to the fact that there are various barriers to adopting environmental management practice, such as resistance to changes among top management, lack of professional environmental information, and management failure in providing encouragement and leadership support (Mohamed & Jamil, 2018).…”

“…The organization also loss opportunities in decreasing environmental costs triggered by the flawed conventional management accounting system. Hence, EMAS represents a comprehensive management accounting system that helps companies provide internal and external stakeholders (Ariffin, 2016). EMAS adoption is a way to create value for an organization that can increase competitive advantage, enhance its market share, and improves investors' financial returns (Agustia, 2020;Zandi & Lee, 2019).…”

The barriers and drivers of environmental management accounting practices' adoption in developed and developing countries for sustainable development

“…Although the adoption of EMAPs predates over three (3) decades (Jonäll & Olson, 2008), the question of what the actual barriers and drivers to the adoption are, has not been fully addressed. As such, there has been a recent influx of studies seeking to address this question (Ariffin, 2016; Chathurangani & Madhusanka, 2019; Jamil et al, 2015; Olalekan & Ogunleye, 2017). However, empirical studies report moderate to widespread adoption of EMAPs in some parts of the world (Phan et al, 2017) and low adoption levels in others (Jamil et al, 2015; Olalekan & Ogunleye, 2017).…”