Towards a conceptual design for environmental and social cost identification and measurement system

Purpose – The purpose of this paper is to identify an effective management accounting system using sustainability accounting concepts for environmental and social cost measurement to add shareholder value. Suggestions from literature show that there is a need for a conceptual framework for environmental management accounting (EMA) and social management accounting (SMA) practices to be developed. This study therefore designs a conceptual model for a sustainability management accounting system (SMAS) combining EMA and SMA practices to create more accurate cost information of environment and social impacts. A SMAS also expands on activity based costing (ABC) application to help in the cost analysis and allocation of environment and social impacts. By applying a SMAS, companies generate more accurate cost information thus fully costing products for internal management decision and reporting purposes. Design/methodology/approach – This study used mixed methods combining quantitative and qualitative research approaches to collect and analyse data to triangulate findings. Findings – The results of the study indicate that companies are intending to change to new management accounting practices while looking for ways to improve cost identification and measurement of environment and social impacts. Research limitations/implications – This study is limited to Australian non-service manufacturing companies. As a SMAS is a new holistic management accounting approach, it provides companies with a way to create economic, environmental, and social value both immediately and in the future. Originality/value – This study designs a SMAS conceptual model to contribute to the literature. By having a SMAS, companies could create more accurate cost information while fully costing products to effectively enhance management decisions on cost savings and greenhouse gas emission reductions.