Environmental management accounting in local government: Functional and institutional imperatives

AuthorWei Qian,Roger L. Burritt,Gary S. Monroe
DOIhttp://doi.org/10.1111/faam.12151
Date01 May 2018
Published date01 May 2018
Received: 19 August 2015 Revised: 18 August 2016 Accepted: 3 October 2016
DOI: 10.1111/faam.12151
ORIGINAL ARTICLE
Environmental management accounting in local
government: Functional and institutional
imperatives
Wei Qian1Roger L . Burritt2Gary S. Monroe3
1Universityof South Australia, Adelaide, South
Australia,Australia
2Universityof Kassel, Kassel, Germany
3Universityof New South Wales, Sydney, New
SouthWales, Australia
Correspondence
WeiQian, School of Commerce, Division of Busi-
ness,University of South Australia, SA 5001,
Australia.
Email:wei.qian@unisa.edu.au
Abstract
The challenge of using environmental management accounting
(EMA) tools such as full-cost accounting to improve waste and
recycling management has been acknowledged for over a decade.
However, research on assessing and understanding local govern-
ment use of EMA, especially broader levels of EMA, is lacking.
This study investigates the link between the nature and drivers of
EMA practice for waste and recycling services based on a survey
conducted with local governments in New South Wales, Australia.
The study finds that although social and organisational factors are
related to the uptake of EMA, local governments are subject to
stronger functional demands than institutional pressures in their
use of more expansive EMA such as indirect and external costs
and impacts. This implies that the use of EMA in local government
is viewed more as an adaptive activity to cope with functional
challenges and achieve efficiency,than as an institutional imperative
to achieve social acceptance.
KEYWORDS
contingency theory,environmental management accounting, institu-
tional theory,local government, waste and recycling management
1INTRODUCTION
Public sector organisations have increasingly been encouraged to take greater environmentalresponsibility (Frost &
Seamer, 2002). Recent attention has been given to the use of environmental accounting, particularly environmental
management accounting (EMA) to support environmental decision-making bylocal g overnment(Ball, 2005; Qian, Bur-
ritt, & Monroe, 2011). As local governmentis in a better position than central and state governments to make progress
on sustainable development at the community level,it has potential to be at the vanguard of the development of EMA
(Ball & Craig, 2010). One of the essential environmental services provided bylocal government is waste and recycling
management financed through council rates and levies (Ball, 2005; Lewis, 2000). This study investigates the uptake
148 c
2018 John Wiley & Sons Ltd wileyonlinelibrary.com/journal/faam FinancialAcc & Man. 2018;34:148–165.
QIAN ET AL.149
of different levels of EMA for local government waste and recycling services and functional and institutional factors
associated with such uptake.
With increasing threats of waste disposal to long-term sustainability and the declining financial health of local gov-
ernment, various calls have been made to broaden collection of waste information. These include promotion of life-
cycle assessment and integration of economic and environmental costs into waste management in Europe (European
Commission, 2009); full-cost accounting for waste and recycling services in the USA (USEPA, 1997); and introduction
of charges reflecting full economic and environmental costs of waste disposal in Australia (AESDSC, 1992). Yet,col-
lection and use of EMA information remains a challenge, particularly for less-visible costs such as waste and recycling
flows, future clean-up costs and environmental impacts of disposal alternatives hidden in overheads (USEPA, 1995;
Qian et al., 2011). Combining monetary, physical, hidden and externalcosts and impacts adds further layers of com-
plexity.
Tounderstand EMA development in organisations, Parker(1997) and Qian and Burritt (2009) suggested the use of a
contingencylensasanorganisation's structural arrangementsand management procedures can be subject to the con-
texts in which it operates. These contextscan involve an immediate technical environment where functional demands
persist, and a wider social environment where institutional pressures form. For example,Qian and Burritt (2009) and
Christ and Burritt (2013) claimed that the level of engagement of an organisation with EMA tools depends on differ-
ent functional contingencies such as service complexity,environmental uncertainty and strategic priority. Getting the
right fit with these functional demands allows the organisation to improve efficiency and reach targeted performance
(Chenhall, 2003). In contrast, Ball (2005) and Ball and Craig (2010) used institutional theory to exploresocial imper-
atives such as social environmental movements and cultural expectations. Theyconceptualized EMA changes within
a wider institutional environment which they contended has shaped an organisation's environmental behaviour and
commitments.
In practice, it is likely that technical rationales and institutional influences coexist in driving EMA development
(Qian et al., 2011), and their relative strengths (Scott, 1995) may influence the use of a broader or narrower EMA.
Bouma and van der Veen (2002) stressed that the diverse contextualelements should be studied together to under-
stand complex EMA issues such as those applied in managing waste and recycling services. For local government,
institutional pressures could be stronger because of the need to maintain social legitimacy for the provision of pub-
lic services. Nevertheless, with the introduction of New Public Management, public sector organisations are seen to
move towards performance-driven management settings, strengthening technical demands for efficiency (Broadbent
& Guthrie, 2008). Research to date provides no indication of or agreement on the relative roles of functional and insti-
tutional imperatives for EMA development in the public sector.These roles need to be examined if messages for EMA
development in local governmentare to emerge.
A survey is used to collect data in New South Wales(NSW) Australia. Australia is among the highest generators of
waste per capita in the developedworld. Its landfills receive around 22 million tonnes of waste each year and per capita
waste generation has increased at an annual rate of 5% (ABS, 2011). Since the government introduced the National
Strategy for Ecologically Sustainable Development(NSESD) in 1992 and embraced the importance of accounting tools
for waste management (AESDSC, 1992), government spending on waste management has been over$2.2 billion each
year (ABS, 2011). Australianlocal government has actively responded to the NSESD call with 86% of total capital spent
on solving increasingly complexwaste and wastewater problems (ABS, 2004). As such, focussing on EMA development
for waste and recycling services in Australia is of use to policy developmentin this area.
This study makes two contributions. First, investigation of different levels of EMA use in the context of
waste and recycling management provides a foundation for better practical policymaking. Past studies examine
EMA use with either a narrower or broader level of information. Examples include narrow monetary-oriented
EMA (Bartolomeo et al., 2000; Frost & Seamer, 2002), broader physical (e.g. material) flow analysis and costing
(Strobel & Redmann, 2002), and most broadly, hidden costs and external life-cycle measures (Ferreira, Moulang,
& Hendro, 2010; Qian et al., 2011). These differences in the dimensions and levels of EMA have not previ-
ously been theoretically anchored and may have led to oversimplified policy suggestions for waste and recycling
management.

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