Abstract

This study aims to examine the effect of the environmental accounting strategy on sustainability performance and explore waste management as a mediation between environmental accounting strategy and the sustainability performance of Micro, Small and Medium Enterprises (MSMEs). Research data was collected from 194 MSMEs in East Java Indonesia through online and offline questionnaires. The data analysis is performed with PLS-SEM. The results of the study found that the MSME’s environmental accounting strategy had an effect on sustainability performance, and it was proven that MSME’s waste management mediated the effect of environmental accounting strategy on MSME sustainability performance. The originality of this research is the development of research instruments, which combine from various sources from previous researchers, GRI standards and Indonesian Government Regulations so that they can contribute Environmental Management Accounting literature and practical contributions to MSMEs and related institutions in determining sustainability performance strategies. This research implication supports the goals of the Indonesian Government’s Sustainability Development Goals (SDGs) regarding SDGs Goal number 12 Responsible consumption and production. The government needs to establish a waste management policy to improve environmental problems. The implications of future research can collect larger data and can compare the MSMEs between emerging countries. Also, MSMEs need to establish strategic Environmental Accounting so that it has an impact on sustainability performance.

Introduction

Companies produce goods or services using raw materials and other materials in the production process. As a result, it impacts material waste, product, and packaging waste. The impact on economic sustainability can reduce sales and operating profits because consumers prefer environmentally friendly products. The impact on environmental sustainability not only can reduce environmental damage such as soil and water pollution and increased global warming but also decrease in employee welfare along with a decrease in operating profit.

Moreover, management’s understanding and knowledge of environmental accounting strategies and waste management are essential in achieving business sustainability in companies, including Micro, Small, and Medium Enterprises (MSMEs). The negative impacts of MSMEs include environmental pollution from production waste. As many as five industries are the biggest producers of B3 (Toxic Hazardous Materials) waste in Indonesia, namely: the metal, chemical, electricity, sugar, and paper industries. As stated by the Deputy Chairperson of Investment in East Java, Turino Junaidi, said that the amount of MSME waste is large, but the level of investment for the waste treatment industry is still small (www.kompasiana.com). For example, from 71 SMEs making tofu in Jombang, almost all of the soybean waste is disposed of together on village roads before finally being dumped into the river. As a result, it polluted the environment in three villages and even polluted surface water and well water. (www.jatim.kompas.tv/article/126221). Therefore, the environmental problems are mostly caused by the impact of economic and social activities of companies, including Micro, Small Medium Enterprises (MSMEs). Polluted water sources, polluted air, deforested forests, and global warming have damaged the environment. People’s awareness demands the importance of protecting environmentally friendly production processes and being concerned with business continuity than the short-term goal of profit.

Conclusion and implication of the research

Indonesia is concerned with Green Accounting because MSMEs waste is quite high and poor waste management. The East Java government has the second largest MSMEs in Indonesia and has a problem with industrial waste. However, it does not take maximum responsibility for product waste and an impact on low sustainability performance. This indicates the need for an Environmental Accounting strategy to support policies to minimize environmental costs related to environmental prevention costs for waste reduction employee training, environmental prevention costs for waste recycling training, environmental detection costs for environmentally friendly product inspection, internal failure costs for waste treatment and failure costs. external for cleaning polluted environment. This research implication supports the goals of the Indonesian Government’s Sustainability Development Goals (SDGs) regarding SDGs Goal number 12 Responsible consumption and production. The government needs to establish a waste management policy to improve environmental problems. Therefore all parties, namely: entrepreneurs including MSMEs, government, private sector, communities including financial institutions have the same responsibility to carry out activities and run a business with due regard to production that is responsible for the environment and society.

Abstract

Accounting scholars are paying increasing attention to the notion of commensuration, or the translation of different objects into common metrics that make the entities that are subject to performance evaluation comparable, and the effects this has on organizational behavior. This body of research draws attention to organizations’ commensuration work, defined as the efforts that evaluated organizations expend in pursuing and dealing with resistance to commensuration, but has mainly explored how such work emerges in response to a single set of comparable metrics such as individual rankings or ratings. By contrast, we ask how commensuration work unfolds in relation to a broader assemblage of calculative infrastructures. Such infrastructures can entail multiple, inter-related performance evaluation procedures that influence organizations’ commensuration work and give rise to complex patterns of reactivity, denoting the propensity of organizations to alter their behavior as they internalize external pressures for performance evaluation. Our empirical findings underline the importance of adopting a multi-layered view of commensuration work, that entails both direct and indirect forms of reactivity, as it unfolds in relation to a broader assemblage of calculative infrastructures. We discuss the implications of adopting such a view for future research on commensuration and related research on performance evaluation.

Introduction

Accounting scholars have long taken a keen interest in the regulatory standards that govern the development of organizational accounting practices as they evolve as an integral part of broader, societal reform programs (Miller, 1991; Modell, 2014). A particular type of standardization that is gaining increasing recognition in this body of scholarship is that concerned with the notion of commensuration, or the translation of different objects into common metrics that make the entities that are subject to performance evaluation comparable (Espeland & Stevens, 1998, 2008). Accounting research exploring this phenomenon has mainly evolved along two trajectories. The first stream of research has focused on how mechanisms of commensuration, such as the categorization of qualitative phenomena into comparable metrics, come into being and govern broader populations of organizations (e.g., Crvelin & Löhlein, 2022; Mehrpouya & Samiolo, 2016; Pollock & D’Adderio, 2012; Unerman et al., 2018). The second and more substantial body of research examines how evaluated organizations respond to such mechanisms (e.g., Englund & Gerdin, 2020; Gerdin & Englund, 2019; Kolk et al., 2008; Kornberger & Carter, 2010; Llewellyn & Northcott, 2005; Scott & Orlikowski, 2012). Much of this research documents how such responses are underpinned by strong tendencies toward reactivity, or the propensity of organizations to alter their behavior as they internalize external pressures for performance evaluation (Espeland & Sauder, 2007, 2016), but also draws attention to how such reactive tendencies may be contested by actors who resist or strive to transform the mechanisms through which commensuration is brought about (e.g., Englund & Gerdin, 2020; Gerdin & Englund, 2019; Mennicken, 2013; Pollock et al., 2018; Samiolo, 2012).

Concluding Discussion

In this paper, we have asked how organizations’ commensuration work unfolds where a broader assemblage of calculative infrastructures underpins societal reform programs. We have addressed this research question in the context of Swedish central government during a period when a societal reform program aimed at enhancing the autonomy of government agencies while increasing their accountability for results was amplified by an attempt to radically increase their reporting discretion. In doing so, we have nuanced the view that the pursuit of commensuration by evaluated organizations manifests itself as a reactive response to a single, externally sanctioned set of clearly identifiable and comparable metrics which has dominated prior research on the topic (Pollock et al., 2018; Slager & Gond, 2022). Instead, what is emerging from our empirical analysis is a multi-layered view of commensuration work that recognizes that direct, reactive responses can interact with more indirect forms of reactivity that can be traced back to a broader assemblage of calculative infrastructures. In the SEA, the inter-related infrastructures provided by the NAO and the Financial Management Evaluations clearly reinforced the commensuration work unfolding within the agency and contributed to stabilizing the emerging performance reporting practices even though they were not the direct progenitors of these practices. Hence, calculative infrastructures can buttress organizations’ commensuration work and reinforce tendencies toward reactivity even though they are somewhat removed from the accounting practices that are subject to such work. As we have also seen, this entails a reciprocal relationship between commensuration and reactivity where reactive responses do not follow from a set of readily available, commensurable metrics but rather evolve as such metrics get connected to a broader assemblage of calculative infrastructures and lead to further commensuration work.

Literature Review and Hypothesis Development

Research Design

Sample Selection and Descriptive Statistics

Empirical Results

Conclusion

Reference

The business environment in which today’s companies are inserted has undergone enormous changes over the last decades caused by deregulation, increased global competitiveness, reduced costs associated with information, demand for greater diversity of products, among others. The development of new technologies, essentially linked to automation and information systems, has led to significant advances, which have had repercussions on the various organizations that make up the business fabric, affecting virtually all the departments and their areas of intervention. Companies no longer compete locally only and have come to deal with competition from companies located on other continents, embedded in distinct realities and diverse business environments. These changes have forced these organizations to implement ever more sophisticated costing systems [3]. Important decision-making within an organization, such as the placing of new products on the market or the continuation or termination of the marketing of other products or services, as well as the design and definition of the selling price, will have to be supported by reliable information regarding to their industrial cost and profitability [4]. Customer satisfaction is a key prerequisite for the viability of companies and organizations. However, customer satisfaction must be ensured by meeting their expectations, but the selling price of the product will always have to be higher than its production cost. This is a requirement that companies can-not abdicate [5]. As a consequence of the profound changes that have taken place over the last few years, there is strong pressure in the organizations to increase productivity at reduced prices, so that to obtain a method of estimating the costs of the various products produced in the same company in a rigorously and accurately way has become a strategic objective [2]. However, the mere knowledge of the costs of a particular product may not be sufficient for a company to remain competitive. There is a need to constantly improve their processes by detailing how the various activities within the company are developed in order to increase efficiency and effectiveness, which will lead to more competitive and higher quality products and services [6]. On the other hand, the selection of the costing method more appropriate to the reality of each organization can be a complex task [7], and the misallocation of indirect fixed costs, as it occur in some traditional costing systems, leads to obtaining incorrect industrial costs and may lead to misallocated management decisions [8]. The Activity-Based Costing (ABC) method has been seen as a useful tool to achieve a costing system more efficient, since it identifies and analyses the production activities that lead to the product object of the cost [9].

A cost accounting system is defined as a systematic framework used by a firm to estimate the cost of their products for measuring their profitability (Drury, 2015; Bragg, 2001; Obara and Ukpai, 2001; Romney and Steinbart, 2011; Martin, 2014). As indicated in the interviews, in this study, cost accounting systems (CAS) include the simple cost of goods sold and an inventory valuation, a breakeven analysis, a full and variable costing analysis, variance analysis (VA) and activity-based costing (ABC). Relevant literature (Evans and Bellamy, 1995; Lucey, 1996; Upchurch 2002; Anthony and Govindarajan, 2004; Lucey, 2008) emphasise that a CAS can serve as an invaluable database for understanding the full cost of resources used. Research (Hansen et al., 2009; Kwan, 2011) indicates that companies which efficiently use CAS outperform, in terms of their global competiveness, those which do not. This paper explores how cultures and local characteristics have influenced CAS. Specifically, it follows current discourses in the literature (Nagirikandalage and Binsardi, 2015; Nagendrakumar et al., 2015; Yapa and Ukwatte 2015; Adhikari et al., 2013; Adhikari and Mellemvik, 2010; Subasinghe and Fonseka, 2009) concerning accounting changes and reforms in Sri Lanka. However, regarding cultural changes, studies by Lyn and Yu (2002) indicate that resistance to organisational changes has not been an issue for successful CAS implementation. That said, most of the earlier studies have been carried out in the manufacturing industry within a developed country context (Ismail and King, 2005; Al-Eqab and Ismail, 2011) and therefore, the findings may not be applicable in a developing country context. For example, if a developing country such as Sri Lanka is to adopt a developed country’s systems, the implementation of CAS may not be, arguably, optimal because a developing country such as Sri Lanka has less developed infrastructure such as a lower accounting literacy rate, inadequate costing systems, traditional processing, less advanced technology, poor infrastructure, low adoption of IT, economic imperfections and other social, political and cultural differentials (Lyn and Yu, 2002; Carvalho et al., 2012).

Fossil fuel-based energy model has caused serious environmental problems whereas wind power development has gradually become an important way to push low-carbon energy transition. However, with increased large-scale wind power being centrally connected to the grid and replacing traditional frequency regulation units, power systems with high wind power penetration are facing a severe frequency regulation issue. In addition, the high randomness and variation of wind power lead to frequent action of traditional frequency regulation units resulting in increased abrasion of the mechanical devices and reduced operating life. Therefore, it is urgent to develop a new frequency regulation method for power systems. The Li-ion ESS has flexibility and fast response characteristic, and large-scale application of Li-ion ESS has attracted extensive attention. However, current energy storage costs are relatively high and there is no effective frequency regulation compensation mechanism for ESSs in China. Therefore, the incentive for ESS to participate in power system frequency regulation has not been established. Consequently, some energy storage stations have not been fully utilized, resulting in a waste of resources. Accounting the cost of energy storage for frequency regulation is an important step for the development of energy-saving frequency regulation compensation strategy, which can help to promote the development of ESS to participate in the frequency regulation service market. Energy storage frequency regulation cost is related to not only the technology and economy of the ESS itself but also energy storage frequency regulation strategy, system frequency fluctuation characteristics etc. Previous researches have provided useful insights in these respects. The cost of ESS is closely related to its operating life which is affected by the operating conditions (charge-discharge power, depth of discharge) [1, 2] ambient temperature and other factors. The nominal life given by the manufacturers is the test result in a specific charge-discharge mode measured by the cycle chargedischarge time. When an ESS participates in grid frequency regulation, the charge-discharge mode will not be the same as the test conditions, resulting in the ESS operating life under frequency regulation mode being very different from the data given by manufacturers. Previous cost accounting method is based on the average cost of nominal life, which is very different from the actual cost. Therefore, it is an urgent need to develop a cost accounting method for frequency regulation of ESS considering the effect of life degradation.