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2014 年 8 月第十七卷三期 • Vol. 17, No.

3, August 2014

A Literature Review on
Environmental Management
Accounting (EMA) Adoption
Christophor S. K. Tsui

Web Journal of Chinese Management Review • Vol. 17 • No 3 1

A Literature Review on Environmental Management
Accounting (EMA) Adoption
Christophor S. K. Tsui

Sustainability development is a hot issue facing corporations. Studies showed that
financial accounting could not fully support sustainability development since the highly
regulated financial accounting had specific accounting rules that resulted in incomplete
capturing and presentation of environmental costs. In the relatively less regulated
accounting application, the management accounting, studies found that environmental
costs were usually absorbed in overheads. The communication between accountants
and environmental experts were usually limited and this lead to misallocation or
incorrect calculation of environment costs. As a result, managers did not have the
correct environmental information for managing environmental costs for sustainability

To address the limitations of management accounting, environmental management
accounting (EMA) was developed. EMA could address both monetary and physical
aspects of environmental accounting. Physical EMA included the flow of water, energy,
while monetary EMA measured the costs of the firm's consumption of natural resources
and the costs for controlling or preventing environmental damages. Studies found that
EMA could help firms to identify cost savings opportunities and to develop more
efficient production processes.

The application of EMA is still having problems at firm level. Studies found that lack
of promotion on the use of EMA, lack of collaboration between accountants and
environmental management departments were major barriers of EMA adoption.
Accountants did not have sufficient training on EMA and they believed that
implementing EMA was costly. Firms have their own definitions of environmental costs,
which make collection, analysis and comparison of environmental costs difficult.
Finally, managers did not want to be held responsible for the significant environmental
costs also prohibit the EMA adoption.

Keywords: Environmental management accounting, environmental cost, physical EMA,
monetary EMA, EMA adoption

Christophor S. K. Tsui Lee Shau Kee School of Business & Administration, The Open
University of Hong Kong, Hong Kong

Our future generations will be in danger. etc).g.  If we continue with our current consumption pattern. FTSE4Good Index Series. 17 • No 3 2 1.Web Journal of Chinese Management Review • Vol.  We are currently using 50% more natural resources than the Earth can sustain. sustainable development is not a fashion but a necessity. To make our planet sustainable. Introduction In the business environment.8 planets to provide for our consumption and to store the carbon we generate from the combustion of fossil fuels. but also their environmental and social performance and they should manage and report them. published by World Wide Fund for Nature (WWF) disclosed the following alarming facts (WWF.5 planets to support our activities.  The Earth needs 1. For hundreds of years. It plays an important role in shaping many sustainability initiatives including the Global Reporting Initiative (GRI). firms have to beat their competitors without taking into considerations the impacts they have on their environment and on the society. by 2050. firms need to have radical change in the way they are doing business. The 2012 Living Planet Report. Dow Jones Sustainability Indexes. 2012):  Biodiversity has declined globally by 30% between 1970 and 2008. Elkington‟s “trip bottom line” (TBL) is often used to measure the sustainability of an organization.g. He argued that businesses should not concern only their accounting profit. Elkington explained the root cause of our unsustainable planet is from cannibals – the capitalist businesses (Elkington. shareholders) of the firms. accounting has been used to provide information to internal stakeholders (e. economic and environmental achievements of a firm. management) and external stakeholders (e.5 years to generate the natural resources that we use in a year.g.  Demand on natural resources has doubled since 1966 and we are currently using the equivalent of 1. the sustainability indices of the stock markets (e. The . people are simply taking too much from the ecosystem. we will need 2. We are likely to use up all the resources from our planet if we do not change. As economic activity grows. In meeting firms‟ primary objectives. 1997). land use change and chemical processes. that is. the primary goal of a firm is to maximize the shareholders‟ wealth. Accountants can be a catalyst to make firms to become more sustainable. making profits and to survive in the competitive market. Thus. TBL is becoming popular to assess the social.

A search on literature in Emerald Insight and Business Source Premier was performed using the following search phrases in the abstracts in academic journals and the results were presented in Table 1: (“environmental management” and “management accounting”) in abstract or (“environmental accounting” and “management accounting”) in abstract or (“environmental management” and “financial accounting”) in abstract or (“environmental accounting” and “financial accounting”) in abstract Search phrases Entries in Entries in Emerald Business Insight Source Premier “environmental accounting” 186 680 “financial accounting” 1.600 “environmental management” 1. 17 • No 3 3 focus of this paper is to identify how accounting can support better decision making in firms towards sustainable business performance.050 3.082 8. Review Method A systematic literature review is conducted on EMA adoption. This paper tries to answer the following questions: (1) What are the limitations of traditional accounting on addressing sustainability issues? (2) How accounting can support sustainability development? (3) What are the barriers in EMA adaption? 2.278 3.028 “management accounting” 1.401 “environmental management” and “financial accounting” 25 12 “environmental accounting” and “financial accounting” 56 39 “environmental accounting” and “financial accounting” or 2 8 “environmental management” and “financial accounting” “environmental accounting” and “management accounting” 3 82 “environmental management” and “management accounting” 9 75 “environmental accounting” and “management accounting” or 10 43 “environmental management” and “management accounting” “environmental accounting” and “management accounting” or 0 49 “environmental management” and “management accounting” or “environmental accounting” and “financial accounting” or “environmental management” and “financial accounting” Table 1 Results in a search survey in Emerald Insight and Business Source Premier on 15 April 2013 .Web Journal of Chinese Management Review • Vol.

3.Web Journal of Chinese Management Review • Vol. Accounting is broadly classified in to management accounting and financial accounting. creditors and regulators). 1997 Production and Operations Management 2001 Social Responsibility Journal 2011 Table 2 List of selected articles from academic journals Before looking at the relationship between accounting and sustainability development. The selected journals were then reviewed in detail. 2010. financial accounting is regulated by international and local . investors. Financial accounting is used for producing financial statements to serve the information needs of external stakeholders (e. After selecting the articles from the search survey. 2007. It is never possible to collect a full population of articles by this method because the abstracts may be absent from the database and also depend on the subscription of the individual journal articles by the library. Auditing & Accountability Journal 2002(2). The search in the full text was not performed because it generated a large amount of articles and the search on the subject was also not performed because it could only look at the classification of the subjects. 2011 Accounting Forum 2000 Accounting. it is important to point out the limitation of this study.g. The objective of financial accounting is to provide standardized information on the firm‟s financial performance. 2004 Critical Perspectives on Accounting 2003 EuroMed Journal of Business 2010 ISO Management Systems 2009 Journal of Banking and Finance 2002 Journal of Cleaner Production 2003.) of the firms. etc. management) and external stakeholders (e. It is possible that some relevant articles may be missed from this study. investors.g. Furthermore. The verification process resulted in 22 journal articles being reviewed (see table 2). shareholders. a review on the abstracts of the articles were performed in order to verify the appropriateness of articles in answering the research questions. Organizations and Society 2006 Business Strategy and the Environment 2001. 17 • No 3 4 The abstracts were searched because it was assumed that the main themes of an article can be found in the abstract. Accounting and Sustainability Development Accounting has been used to provide information to internal stakeholders (e.g. 2006(4) Management Accounting 1996. Articles from the following academic journals Year Accounting.

Society is „a series of individual “social contracts” between members of society and society itself‟ (Gray et al. However. 2001). rules. Failure to meet the expectations will result in the removing the firm‟s „license to operate‟ and affect its long-term survival (Deegan. 2003. The reporting of environmental costs in financial accounting is usually limited to those that can be separately identified like pollution control equipments. The environmental performance of TBL could be managed by accounting based methods of management and control (Bennett et al. poor communication between managers with the accounting and environmental management functions (Deegan. misallocation and underestimation of environmental costs. Environmental costs cannot be completely presented in financial statements and result in distortions in the calculations for improvement options (UNDSD. 1992).Web Journal of Chinese Management Review • Vol. Environmental performances of companies are becoming the new social contracts between companies and the society. 2003. 1996). Management accounting is developed to serve the information needs of internal management of the firm. UNDSD.. 17 • No 3 5 accounting standards as well as local laws and regulations. In the past. 2011) which felt into the major functions of management accounting. These contracts define the rights and responsibilities of the parties in that relationship and also create the risks and opportunities for companies. 2001). Epstein. For example in China. 2002). Epstein. Dalian government ordered relocation of a chemical plant after . The European Union (EU) called for a „redefinition of accounting concepts. Management accounting should become an integral part of the modern environmental management process. Thus. In 1992. etc. There are a number of reasons that make management accountants difficult to collect and evaluate environmental costs effectively (Burritt. 2002. 1996. UNDSD. profitability was the highest priority for companies and managers seldom pay intension to minimize their organizations‟ environmental impacts and to manage their environmental costs (IFAC. 2004). conventions and methodology so as to ensure that the consumption and use of environmental resources are accounted for as part of the full cost of production and reflected in market prices‟ (European Commission. Pollution. global warming and climate change have get people‟s attention and people are becoming more demanding on companies‟ environmental performances. Management accounting practices and information is tailor- made to address specific organizational culture and specific management needs. conventional management accounting pays little or no attention to attributing environmental costs to an organization's operations (Deegan. These limitations typically include the allocation of environmental costs to overhead accounts. 2001).. Donaldson & Dunfee. 1996. fines. financial accounting cannot provide relevant information in improving the social and environmental aspects while supporting cost reductions. 2005).

Gauthier.Web Journal of Chinese Management Review • Vol. This starts the development of environmental accounting.. Deegan. 2000). Schaltegger & Burritt. 2002). including its performance with regard to environmental issues‟. Birkin & Woodward. 2003.1 Environmental Accounting Environmental accounting covered national income accounting. 1999. 2000. Gray and Bebbington suggested that environmental accounting included the following:  Accounting for contingent environmental liabilities/risks  Accounting for asset re-valuations and capital projections as they relate to the environment  Cost analysis in key areas such as energy. financial accounting and management accounting (USEPA. Gray et al. In the context of environmental accounting. waste and environmental protection  Investment appraisal to include environmental factors  Development of new accounting and information systems to cover all areas of . & Martel (1997) explained accountability within the context of environmental accounting as „the obligation imposed on a manager (leader. 2000. Other researchers also gave different definitions for environmental accounting at different periods (see Bartolomeo et al. Changes to accounting are necessary to support sustainable development. 17 • No 3 6 thousands of Dalian residents protested in the street (BBC News. It could be applied at a firm. there was consensus that environmental accounting had to consider both monetary and physical environmental information for internal management and external reporting. therefore.. 3. Accountability. 1996. Leblanc. regional or national level (Bennett & James. administrator. 1995). Gray & Bebbington. Although their definitions differ. in accordance with certain explicit or implicit conditions. 2001. the resources with which he or she has been entrusted. etc) by the law or a regulation or contract to demonstrate that he or she has managed or controlled. 1997. 2011). Farley. USEPA. a company must account for its overall performance. Environmental accounting provided environmental-related information to internal and external stakeholders of a company which could discharge the accountability of the firm. Bennett & James. It explicitly considered environmental impacts caused by organizational activities (Burritt et al.. 1995). requires disclosure of the information deemed necessary to account for the company‟s performance with respect to the issues and objectives previously established.

) are used by management accountants and managers for long time to evaluate production efficiency. and to allocate product costs. while wearing an “environmental” hat that opens the eyes for hidden costs.‟ (Bouma & Correlje. EMA integrates two of the main principles of sustainable development: environment and economics. 2001) Staniskis and Stasiskiene (2006) suggested that EMA supports the internal management and . IFAC. However.‟ (UNDSD. It helps to significantly improve corporate decision-making. volume of water used.g. the physical data is usually considered independent of the monetary data in their decision making process.Web Journal of Chinese Management Review • Vol. Management accountants can apply their expertise and skills to improve the quality of environment-related information in decision-making on investment appraisal. weight of raw material used. etc. The relationship between accounting and environmental accounting is shown in Figure 1. The United Nations Division for Sustainable Development (UNDSD) suggested that EMA „is simply doing better. Figure 1 Accounting and environmental accounting Source: Adapted from Burritt et al. 2003) Birkin (1996) indicated that „EMA is a straightforward development of management accountancy‟. 2005). more comprehensive management accounting. 2000. 2001) Physical measures (e. weight of wastes. capital budgeting and strategic management (Everett & Neu. (2002) 3. 17 • No 3 7 environmental performance  Assessing the costs and benefits of environmental improvement programs  Developing accounting techniques which express assets and liabilities and costs in ecological (non-financial) terms. to assess process performance.2 Environmental Management Accounting (EMA) Environmental management accounting (EMA) is a subset of environmental accounting which is the „accounting systems and techniques that provide decision-makers and management with financial and non-financial information about the firm or organization and its environment. (Gray & Bebbington.

‟ (IFAC. analysis. 17 • No 3 8 decision making process through various techniques of cost allocation. full-cost accounting.Web Journal of Chinese Management Review • Vol.‟ (UNDSD. While this may include reporting and auditing in some companies. performance measurement and business analysis. Besides using for identify internal and external costs. It provides data mainly for internal decision making on both environmental and financial performance which belongs to the scope of traditional management accounting. Deegan (2003) considered EMA was the collection. and strategic planning for environmental management. Figure 2 Role of EMA in decision-making process (Source: Staniskis & Stasiskiene. environmental management accounting typically involves life-cycle costing. and use of environmental cost information for the purpose of supporting environmental management systems and environmental reporting to interested parties. The role of EMA in decision making process is illustrated in Figure 2 below. UNDSD defined EMA as „a combined approach which provides for the transition of data from financial accounting and cost accounting to increase material efficiency. financial accounting and environmental management system. benefits assessment. 2005) These definitions suggested that EMA could provide appropriate accounting data to assist management in making environmental related decisions. 2006) Jasch (2003) suggested that EMA was a fusion between management accounting. EMA includes both monetary and physical aspects of environmental accounting. . reduce environmental impact and risk and reduce costs of environmental protection. it can also be used to allocate these costs within existing and emerging environmental and sustainability accounting frameworks. 2001) Another definition of EMA from the International Federation of Accountants (IFAC) was „the management of environmental and economic performance through the development and implementation of appropriate environment-related accounting systems and practices.

which in turn help the managers to set environmental targets and report its environmental performance. It reflects the „relevant cost‟ of organizations. Hahn & Schaltegger (2002) developed an environmental accounting system framework which is introduced next section (see Figure 3).Web Journal of Chinese Management Review • Vol. 17 • No 3 9 Physical EMA data includes the flow of energy. water. In this regard. Figure 3 Environmental accounting systems framework (Source: Burritt. Burritt. Usually managers do not link up physical data with monetary data in their decision making process and will make unsound purchasing decisions. traced and treated environmental costs and associated revenues (or cost . energy) and materials and other costs that the company pays for controlling or preventing environmental damages and also for clean up and waste treatments. Physical EMA requires the company to trace resources and materials inputs and outputs and to ensure none of them are unaccounted for. and allows the company to assess and report the physical aspects of its environmental performance.1 Monetary Environmental Management Accounting (MEMA) MEMA tracked. materials and wastes which is essential to the identification of different environmental aspects. Monetary data refers to the costs that the company pays for the consumption of natural resources (e. water.g. 2002) 3.2. Hahn & Schaltegger. physical EMA should be linked to monetary EMA by supplying the required information on the amounts of resources used and wastes generated to assess the purchase costs. The physical information will be used to create environmental performance indicators (EPIs).

17 • No 3 10 savings) that enabled management to improve environmental performance (Schaltegger & Burritt.2 Physical Environmental Management Accounting (PEMA) PEMA was an internal management tool that discloses organizational environmental impacts in physical units (e.2..  A tool for direct and indirect control of environmental consequences. 3.3 External Monetary Environmental Accounting and Reporting (EMEA) EMEA used the same conventions and principles as conventional financial accounting but with an environmental focus. etc. Schaltegger & Burritt. 2000). and  A tool with a close and complementary fit to the set of tools being developed to help promote ecologically sustainable development. MEMA focused on the financial aspect of organizational activities that had environmental impacts and managers could use the MEMA information to set achievable goals and targets (Burritt et al.Web Journal of Chinese Management Review • Vol.2. EPEA was the integration of environmental information into accounting records and systems. indirectly. EPEA focused on preparing annual reports with environment-related information or stand-alone environmental reports for external stakeholders. 2002. the Global Reporting Initiative (GRI) issued Sustainability . According to Schaltegger and Burritt (2000). 2000). 3.  A measurement tool that is an integral part of other environmental measures such as eco-efficiency.  An accountability tool providing a neutral and transparent base for internal and. For example. 3. It was also a control and monitoring device for environmental accountability. greenhouse gas produced in tones). external communication.2.  A decision-support technique concerned with highlighting relative environmental quality.g. it served as:  An analytical tool designed to detect ecological strengths and weaknesses. how to treat contingent environmental liabilities. Managers could use EMEA to decide how to measure environmental assets.4 External Physical Environmental Accounting and Reporting (EPEA) Gray and Bebbington (2001) argued that financial accounting useful in reporting environmental performance and in the collecting and analyzing the consumption of resources and materials.

Ad hoc Ex post assessment of Post investment Ex post Post information relevant assessment of assessment of investment environmental costing individual short term assessment of decisions projects environmental physical impacts environmental investment appraisal Future Routine Monetary Environmental Physical Long term oriented generated environmental long term environmental physical information operational budgeting financial budgeting environmental (flows) Monetary planning (flows and planning environmental capital stocks) budgeting (stocks) Ad hoc Relevant Monetary Relevant Physical information environmental costing environmental environmental environmental (e. Burritt.g. Physical environmental information like greenhouse gas emissions was reported in sustainability reports. 17 • No 3 11 Reporting Guidelines (often refers as G3.. of energy flow capital impact information variable costing.g. etc. environmentally accounting accounting absorption costing.Web Journal of Chinese Management Review • Vol. Hahn and Schaltegger (2002) further developed the EMA framework which considered four information needs of making management decisions:  Monetary or non-monetary information. It enabled stakeholders to understand and compare organizations‟ sustainability performance.1 Guidelines) that guided organizations to voluntarily report the firm‟s sustainability performance.  Time frame: Is the decision looking into the future or measuring the past?  Length of time frame: Short-term or long-term?  Routineness of information provision: Regular or ad hoc? Monetary/ Physical MEMA PEMA Short-term focus Long-term focus Short-term Long-term focus focus Past/present Routine Environmental cost Trend analysis Material and Environmental oriented generated accounting (e. project impacts investment product mix with investment appraisal production constraint) appraisal Table 3 EMA Framework (Source: Burritt et al. activity based costing) revenues. special orders. Base on the environmental accounting systems framework. induced costs. 2002) Past oriented EMA tools identifies material costs and energy inefficiencies which .

costs of permits to operate a facility. Externalities are costs borne by the society as a whole rather than those who cause the costs and enjoy the benefits (Schaltegger & Burritt. Schaltegger & Burritt.e. 2000). Gale (2006b) further suggested that polluting companies pay three times for non-product output (i. Future oriented EMA tools give information on expected wastes. 2001). 1995). 2003. two types of environmental costs exist – private or internal costs and externalities or societal costs (Deegan. Epstein (1996) reported that many organizations underestimated product costs because they did not have systems for accurately accumulating environmental costs. With the combination of past and future oriented EMA tools.. and the loss of goodwill if environmental disasters occur. Many environmental related costs are dispersed across business functions and these costs surface after management decisions are made and their scales are underestimated. wastes and emissions) that represents inefficient service delivery and operations. Private or internal costs are “costs that directly impact a company‟s bottom line” (USEPA. 1998). emissions. In general. Environmental costs are usually managed at a low priority until end-of-pipe costs or economic benefits of managing them become evident (Graff et al. Such costs are usually not reflected in a company‟s account. society. managers can make proper decision on investment project appraisals and long term financial planning. it is impractical to do so (Schaltegger & Burritt. 1995).3 Environmental Costs As explain earlier. energy and materials. environmental costs include all costs in relation to organizational activities have environment impacts. 2004). fines levied by government agencies. 2000. costs of cleanup and disposal. whereas externalities or societal costs “encompass the costs to individuals. employee education and awareness.. and the environment for which a company is not accountable” (USEPA. Gale (2006a) found that environmental costs under EMA could be at least twice as much as would normally be reported. Chinander (2001) explained the cause of such treatment . and litigation fees. UNDSD. Explicit costs are the direct costs of modifying technology and processes. Environmental costs can further be classified into explicit costs and implicit costs (Atkinson et al. But what actually makes up the environmental costs? Ideally..Web Journal of Chinese Management Review • Vol. Implicit costs are closely related to the monitoring of environmental issue such as administration costs and legal fees. 17 • No 3 12 helped managers to find rooms for improvement. However. 3. managers and accountants need to manage the firm‟s environmental performance and their first step is usually concentrating on managing the environmental costs. 2000).

. classified and allocated. a major manufacturer of chemical. These include cost reductions. electronic and health care products used material flow cost accounting to improve its positive product ratio by 10% in three years time (Kokubu et al. Benefits of EMA There are many benefits associated with EMA applications. International standards are developed for environmental management like ISO14000 series of certification from the International Organisation for Standardisation (ISO). improved product pricing. attraction of human resources. These international standards provided a framework on how to manage an organization‟s environmental performance and created the need of EMA in key management decision making processes (Gray & Bebbington.‟ With environmental management. Baxter International and Interface Inc. 4. Japan analyze their environmental costs by materials flow cost accounting (MFCA). Correa Ruiz. 2009). BS7750 from the British Standards Institute. The costs of wasted materials and energy are identified and reported separately at all stages of the production. environmental costs which were previously grouped under overheads were now separately identified. had lagged effects with long latency periods. Many companies in developed countries like US. & Carrasco Fenech (2007) found that management accounting practices was a facilitator for continuous improvement of environmental performance. developing and implementing policies and strategies to improve that position and in changing management systems to ensure ongoing improvement and effective management. Albelda Perez. Gray and Bebbington (2001) defined environmental management as „the range of responses by companies to environmental issues in reviewing their environmental position. allowing for advanced cost analysis and possible cost reductions to occur. The analysis of monetary depends on the information available on the resource flows. stakeholders can assess the performance of the companies in reducing or minimizing their environmental impacts. For example. and less visible. 3. With EMA.4 EMA and Environmental Management There is tight linkage between EMA and environmental management. compliance with environmental legislation. MFCA is a conventional process costing exercise based on mapping of material flows and energy flows within an organization. and employee involvement. In Japan. 17 • No 3 13 was due to environmental impacts were hard to see.Web Journal of Chinese Management Review • Vol. and reputational improvements. communication with interested parties. Nitto Denko. 2001). saved approximately $14 million .

.Web Journal of Chinese Management Review • Vol. A survey on Japanese companies discovered that the practice of linking eco-efficiency measurement with EMA information was incomplete and eco-efficiency information was underutilized due to inadequate public promotion (Burritt & Saka. GRI G3. 2010). Setthasakko (2010) found that accountants in Thailand did not have sufficient environmental knowledge and experience. Determinants of EMA Adoption Ferreira et al. Wei.. 17 • No 3 14 and $12 million per year. EMA enabled firms to develop more efficient processes and also lead to process innovation (Ferreira et al.g. EMA requires collaboration and actions by different functions. media or internal stakeholders who were managers who perceived the importance of good environmental and sustainability performance for short-term risk management or longer term strategic objectives (Bennett et al. 5. Jalaludin. such as financial management and environmental management but no logical relationship had been established between them (Bartolomeo et al. Managers would choose some indicators from a set of generic sustainability indicators (e. then managers needed key performance indicators from EMA to monitor their performance. 2005). In Malaysia. respectively from the use of EMA (Hansen & Mowen. In the study of the EMA adoption in the pulp and paper industry in Thailand. This restricted the integration of environmental issues to existing accounting practices. 6. if sustainability initiatives are caused by managers' own decisions. 1999). . Sulaiman. On the other hand. The initial pressure for companies to account for their environment would come from external stakeholders like pressure groups.1) and EMA would be developed to suit the particular information needs of the external stakeholders. This correlates with the discussion other studies (see Wilmshurst & Frost. 2011). & Ahmad (2011) found that training and accounting body membership affects the adoption of EMA. EMA would be more likely to be a continuous information management system that supported internal reporting purpose. Accountants in Thailand did not consider themselves as leaders in creating EMA in organizations. Burritt. Barriers of EMA Adoption EMA is not likely to success if promotion is inadequate. (2010) found that the key driver of EMA use was industry. 2006). & Monroe (2011) found that social structural influences and organizational contextual influences motivated the development of EMA for waste management in local governments in Australia. They further suggested that companies would use a flexible EMA system if they needed to satisfy the information need of external stakeholders.

environmental performance and ultimately to achieve sustainable development. 1996). . Conclusion The discussions above show that current financial accounting practices cannot truly support in managing environmental issues of sustainability development because many environmental costs are not considered under the highly regulated financial reporting standards. In the study of EMA applications in Thailand‟s pulp and paper industry. Environmental cost information from environmental management accountants indicated that making the investment would ensure supply but at a higher price. Adams. managers were unwilling to adopt EMA as they were not willing to be held responsible for significant environmental costs. On the other hand. Lodhia. 7. Gale (2006a) reported that after looking at the “true environmental costs”. Many managers believed that implementation of EMA was costly and they also incorrectly believed that customers were more focused on quality and lower prices than environmental responsibility.Web Journal of Chinese Management Review • Vol. 2003). the US Clean Air Act amendments and a corporate commitment to reduce the emissions of volatile air pollutants presented Dow Chemical with a choice of investing $3m in the necessary pollution control technology or to shut down the operation (Baker. identifying and evaluating environmental cost data difficult. 2002. the managers of a paper mill in Canada who participated in the research project questioned the validity of EMA methodology and the managers decided not use EMA. 17 • No 3 15 2001. management accounting practices are more flexible and managers can use environmental management accounting techniques to better manage the firms‟ environmental costs and to improve the firms‟ production processes. Finally. Dow‟s management representatives persuaded industrial customers it was investing in the product‟s long-term viability by remaining ahead of impending legislation and as a result they accepted an environmental price premium. Setthasakko (2010) found that companies had their own definitions of environmental costs which made firms found collecting. In 1990. The application of IFAC/ UNDSD EMA guidelines was voluntary and companies use their own definitions of environmental costs.

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