The use of environmental management accounting in listed non-financial firms: evidence from the Middle East and North Africa region
Creators: name: ASIRI, Nasser
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 350107
subject: Sustainability accounting and reporting

description: In the Middle East and North Africa (MENA) region, severe pollution is caused mainly by business and manufacturing activities in the form of power generation, fossil fuel consumption, sulphur dioxide and particulate emissions. Environmental management accounting (EMA) can enhance business environmental performance and reduce damage to the environment. To be precise, EMA generates financial and non-financial information that can be used by management to decide on how to develop a cleaner production process by applying a waste-free policy and avoiding regulatory penalties or waste in the first place, or converting waste into market-valued products. However, the issue is that EMA practices employed by businesses in the MENA region are only used at a very low level. Hence, this study aims to develop a better understanding of how to employ such practices; the factors that influence EMA practices; and perceived barriers and benefits associated with utilising them in listed non-financial firms from eight countries in the MENA region: the Kingdom of Saudi Arabia (KSA), United Arab Emirates (UAE), Kuwait, Oman, Qatar, Bahrain, Jordan and Egypt.
This research implemented two quantitative methods in two phases. The first phase involved a cross-sectional analysis of external and publicly available data collected from reliable sources (e.g. annual reports) analysed through logistic regression. This phase was designed principally to investigate the influence of profitability, market valuation, board characteristics (board independence and size), ownership structure (government and institutional structure), firm size, the environmental sensitivity of the industry and firm nationality, on the use of EMA practices. ISO 14001 certification for environmental management systems served as a proxy for EMA practices in the selected firms. The second phase involved the administration of a Web-based survey to accountants, financial managers and environmental managers, to collect internal data for testing hypotheses regarding the influence of technological capabilities, environment-focused human resources management (EFHRM) and institutional isomorphisms (coercive, normative and mimetic) on the extent to which EMA practices are implemented. Structural equation modelling was used in this phase. The survey was also intended to explore the extent to which these practices are implemented, and the perceived barriers and benefits associated with them in the sample companies. The questionnaire was distributed through the survey software Qualtrics. The analysis conducted in this thesis was grounded in the new institutional sociology (NIS) perspective of institutional theory and resource slack theory.
The analyses revealed that more basic and general EMA practices were used to a moderate extent, while advanced and more sophisticated EMA practices were used to a low extent in the selected firms. Further, the most commonly perceived barriers were related to a lack of financial incentives for participants and the cost of implementation for organisations, which hindered the use of EMA practices. Meanwhile the most commonly perceived benefits related to reduced environmental fines or other penalties (e.g. closing the business or plant, and imprisonment) faced by the selected firms and their leaders. The findings indicate that profitability, government ownership, firm size and nationality, the environmental sensitivity of the industry, technological capabilities, EFHRM, and mimetic and coercive isomorphism positively and significantly influenced the use of EMA practices. Further, the findings revealed that market valuation negatively and significantly affected EMA use. Nevertheless, board characteristics, institutional ownership and normative isomorphisms were not found to be significant factors.
This study is considered the first to empirically investigate EMA practices across the MENA region. The integration of the NIS perspective of institutional theory with resource slack theory led to the main implication of this study - that the availability of resources is vital, but they must be accompanied by effective institutional pressure that boosts organisational commitment towards the implementation and use of EMA practices in firms. Hence, institutional pressures, such as coercive pressures should be maximised by regulatory bodies in the selected MENA countries, for EMA practices to be widely accepted. Governments in the MENA region should improve environmental regulation, enhance the quality of regulation as far as its scope is concerned, enforce rules and invest more in processes required for optimal enforcement. Governments can also help with regard to lack of resources by facilitate the outsourcing of experts who can help with implementing EMA practices. They should promote eco-innovation as an attractive option for businesses by providing financial, human and technological support through collaboration with non-government partners, such as accounting associations, industry associations, research and consulting firms, and educational institutions. These kinds of collaboration can lead to better support for environmental management and EMA, via required educational programs and training to enhance employees' awareness of EMA practices.