Abstract:
This study explores the way and the extent to which listed companies in Sri Lanka manage
environmental costs through their management accounting (MA) systems.Applying
Mixed Method Research approach; data were collected from 42 listed companies
representing five industry sectors in Sri Lanka, through a survey followed by discussions
with financial executives and environmental officers of companies. Further, it reviewed
National Environmental Act of Sri Lanka for legislation enacted for sampled companies.
The main tools of analysis were frequency tables for quantitative data, and qualitative
data were analyzed linking them with quantitative analysis and, thus providing expressive
detailed interpretations for the phenomena under investigations. Findings indicate
that even though all companies are bounded by legislation to take environmental
management (EM) initiatives to prevent and control pollution, the MA systems of most
companies have not been improved accordingly to incorporate environmental costs and
related performance measures. All companies used to take EM measures by making
adjustments to existing financial accounting/MA systems which were initiated mainly to
facilitate regular business activities. These practices thus, demonstrate lower potential
for companies in managing EM costs. Competencies of MA techniques considered differ
one to another in managing EM costs, showing greater importance for traditional MA
techniques like budgeting, products costing than modern MA techniques like kaizen
costing, balanced scorecards. Conversely, the Plantation sector shows greater ability in
managing environmental costs through their activity based costing systems implemented
by all in the sector. It suggests companies to establish appropriate accounting systems
and performance measures which are capable of identifying and managing environmental
costs precisely. It also suggests improving awareness among all personnel including
accounting staff on how to manage environmental costs through such systems ensuring
legal compliances, profitability and survival of the business.
