Environmental management accounting system and value creation : an institutional perspective

Abstract

The emergence of environmental issues has increased environmental protection awareness among society and pushed organizations to become environmentally responsible. To comply with the current environmental enactment and rulings, many companies currently consolidate environmental matters into their strategic corporate plan through the adoption of a comprehensive Environmental Management Accounting System (EMAS) to create more values. However, a lack of understanding on the pressures persuading EMAS adoption within the organizations has reduced the urgency for the company to adopt the EMAS. This paper aims to explain the management's behavioral issues towards EMAS adoption and how this behavior would lead to value creation. This paper describes the relationship between the acceptance of EMAS adoption and value creation based on the Institutional theory. The institutional approach addresses the role of institutional actors on the behavior of companies and their employees towards environmental aspects. Stakeholders are consistently pressuring for more ethical and responsible business conduct. The institutional theory highlights various institutional pressures with EMAS adoption, including coercive pressure, normative pressure, and mimetic pressure. Other than these pressures, this paper also highlighted several barriers to adopting environmental practices in the organization. From the institutional perspective, this paper discussed two behavioral barriers that affect EMAS adoption, namely attitudinal barrier and management barrier. Management barriers such as failure of the management in providing encouragement and leadership support, little awareness of management practices related to environmental and social sustainability, and a narrow-minded manager were found to be leading contributors who will tend to defer investments in EMAS adoption. Literature also highlights attitudinal barriers as another contributor to the low EMAS adoption. Attitudinal barriers refer to a low urgency of an accounting system for environmental costs and employee resistance to change. The attitudinal barrier also arises when employees have a closed mind and a lack of readiness to learn a new system. Lack of awareness and attitudes of employees that do not prioritize accounting for environmental costs seems to be a substantial barrier to EMAS adoption. EMAS adoption could be hindered due to resistance from the employees that have been passionate about their old approach of undertaking things. There also has resistance to change among top management in incorporating the formal environmental practices in their organization. Thus, this paper further argues how these barriers could moderate institutional pressure on EMAS adoption concerning value creation.