Eco-control : an investigation into any relationship between environmental performance indicators, accounting and financial performance

Abstract

Purpose: The aim of this study was to analyse and investigate any direct effect, whether positively or negatively, of eco-control on economic performance. This study also investigated whether there is any indirect effect, positively or negatively, of eco-control on economic performance, through environmental performance. Design: The objectives of this study were achieved through a questionnaire addressed to the Financial Controller of each Manufacturing company taking part in the study. Findings: The study ascertains that a positive relationship exists between Environmental Performance Indicators and Economic Performance through the introduction of eco-control constructs. However such positive relationship is not significant. Furthermore, this study reveals that there is a direct effect of eco-control on economic performance as well as an indirect effect of eco-control on economic performance through environmental performance. This is greater for firms (a) facing greater environmental exposure, (b) dealing with greater public visibility, (c) reflecting greater environmental concern, (d) facing more pressure from stakeholders, and (e) reflecting larger size. Conclusions: Certain local manufacturing companies have recognised the importance of environmental issues, mainly due to the new local regulations and market oriented conditions. Despite this increase in awareness in recent years, in local manufacturing companies such awareness is still at an initial stage. Although there still may be a lack of awareness about environmental management accounting, different environmental issues are already being analysed by some manufacturing companies. Organisations can benefit if such a methodology is implemented. The importance of environmental activities and related issues explain the value and usefulness of eco-control in supporting environmental performance, which in turn has a positive influence on economic performance. Value: In the absence of extensive local research on the subject, this study should support a further enhanced system of eco-control and encourages the manipulation of environmental matters within Management Control Systems.