Identification of effective management accounting system characteristics to support sustainable value chains: towards a conceptual model for sustainable development of firms
Sustainable growth organizations that create environmental and social efficiency in the development of economic performance would become highly competitive and strengthen their reputation in the eye of stakeholders and marketplaces. In contrast, companies lacking sustainability perspectives would be faced with difficulty in responding to government regulations, supporting stakeholders’ and the public’s demands, and complying with environmental and social performance disclosures. The study is motivated by the current practice of activity based costing (ABC) which, to date, has not recognized environmental and social costs and/or separated them from overheads to create more accurate cost information for decision-making and sustainability reporting initiatives. The literature review also demonstrates that there is a need for a conceptual model or theoretical framework for environmental management accounting (EMA) and social management accounting (SMA) to be developed for more accurate cost accounting data on environmental and social impacts. Without further research, companies appear to lack a system that accurately captures costs and provides information to support internal decision making and external disclosure initiatives. There is a need for an accounting framework or conceptual model to measure costs of improvements in society and the environment, while adding value to organizations and making them more sustainable. This study, therefore, designed a sustainability management accounting system (SMAS) combining environmental management accounting (EMA) and social management accounting (SMA) concepts and practices as a new conceptual model for sustainable growth organizations. A SMAS is also designed to expand on activity based costing (ABC) application using a cost allocation and analysis approach to create more accurate cost information while fully costing for effective decision-making and external reporting initiatives. In establishing an appropriate conceptual model, the study used mixed methods combining quantitative and qualitative research approaches to collect and analyse data to triangulate findings. Three theories—deep ecology, Marx’s labour theory of value, and stakeholder theory—were fused to examine ethical and moral obligations in identifying cost accounting data of environment and social impacts to support internal decision-making and address stakeholders’ concerns. The results of this study indicate that companies were looking for ways to improve cost identification and measurement of environment and social impacts. Companies were intending to change to new management accounting practices to separately identify and measure these costs for more effective decision-making. A Sustainability Management Accounting System (SMAS) conceptual model designed by this study would support companies to meet data accuracy needs. Applying ABC application in a design of a SMAS creates more accurate cost information, thus fully costing products to effectively enhance internal management decisions and develop tracking and reporting systems. By adopting such a system, it would support companies in becoming strong, sustainable growth organizations capable of creating economic, environmental and social value both immediately and in the future, whilst complying with government regulations and external reporting initiatives such NGER or GRI. Further research is suggested in terms of identifying effective management accounting practices for environmental and social cost dimension in service manufacturing companies to meet sustainability objectives. Further research is also suggested in terms of financial management accounting for more precise financial disclosures in addressing the concerns of stakeholders and the public.
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