Sustainability and management control: A systematic Literature review
by
Johannes Postema
University of Groningen Faculty of Economics and Business
Master thesis
MSc Business Administration: Organizational & Management Control
Supervisor: Dr. H.J. van Elten Co-assessor: Drs. A. Rehman Abbasi
Wordcount: 9297
februari, 2015
Celebesstraat 36a 9715 JH Groningen
06 1256 5553 jjpostema@gmail.com student number: s232 0 126
2 Abstract
This paper aims to discuss literature about sustainability and management control. The goal of the paper is also to discover shifts in literature and provide directions for future research. The paper is a review of literature in sustainability accounting from five journals. The paper led to the conclusion that there is a growing interest in sustainability in accounting and also rich in information in literature about sustainability in management controls. There is however a gap in research about the relation between sustainability management controls and the actual performance of organizations on an economic and sustainable level. Another direction for future research is to get a better understanding on what influences organizations before they decide to follow a sustainability strategy while this review shows that there is focus on the change process and management controls but a little on what drives organizations to start a sustainability strategy. Limitations of the research are that the number of journals is limited and a group of ‘top’ and ‘very good’ rated journals is ignored. Another limitation is that the methodology is not based on a well cited paper.
Keywords : Sustainability, management control, Triple Bottom Line, Social- and Environmental Accounting
3
Table of Contents
1. Introduction ... 4
2. Methodology ... 7
2.1 Step 1: selecting research questions, databases and appropriate search terms ... 7
2.2 Step 2: applying practical screening criteria: Inclusion and exclusion ... 9
2.3 Step 3: applying methodological screening criteria ... 10
2.4 Step 4: Synthesizing ... 11
3. Results ... 13
3.1 Bibliographical data ... 13
3.2 Most prominent themes from the analysis and synthesis ... 14
3.3 MC practices ... 15
3.4 Change ... 18
3.5 Levels of sustainability... 20
4. Conclusion ... 23
4.1 Conclusion ... 23
4.2 Implications ... 24
4.3 Limitations ... 24
5. References ... 26
4
1. Introduction
Sustainability is a hot topic on the organizational agenda since 95% of the large organizations in Europe and the USA find sustainability important (Giddings, Hopwood & O’Brien, 2002). However, difficulties seem to arise in the integration of sustainability in organizational practices since organizations policies are often dominated by economic goals instead of sustainable goals (Parker, 2011). This paper therefore aims to contribute to a better understanding of the integration of sustainability in organizations.
It is necessary here to clarify what is meant by sustainability. Sustainability is often presented as the intersection between three sectors: economy, environment and society (Giddings et al, 2002).
In accounting literature about sustainability there is often referred to the Triple Bottom Line (Elkington, 1997). In 1994, John Elkington introduced the Triple Bottom Line as an accounting framework for the measurement of sustainability. The triple bottom line focuses not only on the economic value of organizations, but also on the social and environmental value that organizations add or destroy (Elkington, 2004). To provide guidance for organizations in striving for sustainability, the Global Reporting Initiative (GRI) released guidelines for sustainability accounting in organizations (Lamberton, 2005). In their guidelines for sustainability the GRI describes the three dimensions of the Triple Bottom Line (GRI, 2002). The Economic dimension consists of economic impacts on different stakeholders such as customers, employees and the public sector. The environmental dimension encompasses according to GRI environmental impacts on for example energy, materials, transport, emissions. The social dimension consists according to the GRI framework of labour practices, human rights, effects on society and product responsibility. This encompasses social aspects such as health and safety of employees and customers, child labour, impacts on community and diversity.
In order to improve sustainability in organizations, management control systems can play a major role because previous research shows that management control helps to support strategy (Kober, Ng & Paul, 2007) and shapes the behaviour of personnel (Ahrens and Chapman, 2007). So, if an organization desires to follow a sustainable strategy and/or wants the behaviour of personnel to contribute to sustainability, Management control can play a role. It is necessary here to clarify what is meant by management control. According to Chenhall (2003) the terms Management accounting, Management control and organizational control are sometimes used interchangeably. Chenhall (2003) defines Management control as a broad term that encompasses Management accounting.
Management control consists of management accounting practices such as budgeting or product costing and other controls such as personnel controls (Chenhall, 2003). Another definition comes from Malmi and Brown (2008) who state that management control includes all the devices and systems
5 which are used by managers to ensure that the behaviours and decisions of their employees are in line with the organisation’s objectives and strategies. So, following Chenhall (2003), Malmi and Brown (2008), Kober et al. (2007) and Ahrens & Chapman (2007), Management control plays a role in ensuring that organizations do what they are supposed to do. Management control can therefore also play a role in the integration of sustainability in organizations.
It is necessary to give an overview of the current state of literature in the field of sustainability and accounting. A recent literature review in the field of sustainability and management accounting is the work from Burrit and Schaltegger (2010). According to Burrit and Schaltegger (2010) the role of accounting should be on the one hand the detection of problems in sustainability and on the other hand the detection of tools and to guide management. They provide a base in which they describe three approaches for the accounting and reporting of sustainability. Based on literature Burrit and Schaltegger (2010) state that management decision making and awareness raising contributes to the development of sustainability accounting and reporting. Another recent literature review comes from Parker (2011) who gives a broad overview of social and environmental accounting research from the period of 1988 – 2008. Parker shows that there has been a shift in focus in the social and environmental accounting research. The focus of literature from the period of 1988 until 2003 is dominated by environmental, where there is lack of focus on social and the combination of social and environmental literature.
The period from 2004 until 2008 shows a more balanced focus on both environmental and social accounting research. Parker (2011) showed that the published articles in this period of time are for 35 % focused on social aspects, 30 % on environmental aspects and 35 % on both social and environmental aspects. This means that there has been a shift in emphasis on sustainability accounting research over the years. Apart from this shift in emphasis Parker (2011) also addresses that organizations’ policies are mostly dominated by economic agenda’s. Policies from organizations that seem to contribute to Social and Environmental Accounting are often reactive and focused on self- interest (Parker, 2011). This is substantiated by this quote from Parker (2011):
‘The win-win alliance between the social, environmental and economic agendas is often promulgated but conceals an underlying ongoing privileging of the economic.’ – Parker (2011)
The view from Parker (2011) that sustainability in organizations is often focused on self- interest is also supported by recent work from Bebbington and Johnson (2013). In their editorial they briefly discuss publications in the field of sustainability in relation to management accounting.
Bebbington and Johnson (2013) address that organizations experience difficulties in moving beyond the economic aspect to focus on the environmental and social aspects of the Triple Bottom Line.
6 Bebbington and Johnson (2013) also state that accounting literature seems to only focus on one aspect of sustainability to encompass the whole concept.
The goal of this paper is to get a better understanding of the integration of sustainability in management control. Previous research shows that there are several publications about sustainability in relation to management control (Parker, 2011, Burrit and Schaltegger, 2010 and Bebbington &
Thomson, 2013). These studies provide a base for the integration of sustainability in management controls. In order to get a better understanding of how sustainability is integrated in Management control and in order to give more guidance to practioners in the field a literature review is performed.
The paper is organized as follows. The next chapter will focus on the methodology of the research and decisions that have been made. The chapter with the results describes the bibliographical data and the three main themes of the papers which have been reviewed. The conclusion chapter consists of the key findings of the review and presents a future research agenda. This conclusion section also places the review in a larger perspective and discusses the limitations of the research as well as the practical implications.
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2. Methodology
This chapter describes the used methodology for the review. This chapter starts with describing what methodology is used and on what literature this is based. In the section that follows there will be focus on the steps of the methodology and the choices and considerations that are made will be explained.
A decent literature review is based on a good methodology. Previous literature review publications in leading journals provide not much support in determining the methodology. However, what most authors of the literature reviews do provide is an overview of which sources are used for the review and why. Often there are also some search terms provided which were used to search through the sources. Most literature reviews follow a thematically structure, based on previous work or based on the recurrent themes from the articles found. See for examples: Mertins, Salbador & Long (2013), Chenhall, (2003) or Berry et al. (2009). So, in conclusion, previous research does not provide much support for the shaping of the methodology for the literature review. Therefore there is chosen to use a less prominent paper with an extensive description of the methodology in order to provide direction in the methodology. The paper that provides this extensive description is a recent literature review from Stechemesser & Guenther (2012). In their work they review literature in order to come to a definition of carbon accounting. The paper from Stechemesser & Guenther (2012) forms the base for the methodology of this literature review. The steps from the methodology Stechemesser & Guenter (2012) are enriched with input from other authors.
The four steps which Stechemesser & Guenther (2012) describe in their review are as follows: The first step is to select research questions, databases and appropriate search terms. The second step is to determine which articles are included and excluded in the research. The third step is to screen the papers and follow a review protocol and the fourth step is to synthesize the findings.
2.1 Step 1: selecting research questions, databases and appropriate search terms
Reviewing management literature is an iterative process of definition, clarification and refinement.
This means that by repeating and refinement there are slowly results shaped and patterns build.
Because reviewing management literature is an iterative process it is according to Tranfield et al.
(2003) recommended to use a more conceptual approach instead of a defined research question as base for the review. Following the introduction of this thesis, the goal is to clarify what literature says about how social and environmental accounting information is used in management control.
Journals
The goal of the research is to get a better understanding of how Social and Environmental Accounting information is used in management control. According to Parker (2011) there are a few journals which
8 provide fruitful articles on the topic of Social and Environmental Accounting. Parker (2011) describes four sources that are primarily focused on publishing interdisciplinary accounting research and are also leading publishers of Social and Environmental Accounting research. The four sources described by Parker (2011) are: Accounting, Auditing & Accountability Journal (AAAJ), Accounting Forum (AF), Critical Perspectives on Accounting (CPA), and Accounting, Organizations and Society (AOS). These journals are according to the SOM-criteria also rated as ‘top’ or ‘very good’ journals which ensures a certain quality of the articles. One of the articles which was the motivation for this research was The work from Bebbington & Thomson (2013) published in Management Accounting Research. This journal therefore seems relevant for this research and is also rated as a ‘very good’ journal. Therefore this journal is added as another source of validated knowledge. By adding this journal there are five journals which form the main sources for the review:
- Accounting, Auditing & Accountability Journal (AAAJ) - Accounting Forum (AF)
- Critical Perspectives on Accounting (CPA) - Accounting, Organizations and Society (AOS) - Management Accounting Research (MAR)
The search in the five journals and the application of the inclusion and exclusion criteria, which will be described in the following part of this methodology section, led to 28 relevant publications for the analysis. Due to the boundaries in time of this research and that a deeper qualitative analysis suits the goal of the review better, there is chosen to limit the search to these five journals. This limitation in number of journals led to a limitation in number of papers for the review which makes place for a deeper analysis with a more qualitative approach. A deeper analysis is not possible within the boundaries of this research if more journals would have been used. These considerations led to ignoring other SOM-rated ‘TOP’ or ‘Very Good’ journals. In the conclusion section of this paper there will be a further elaboration on this point.
Search terms
In order to get articles that describe how Social and Environmental Accounting information is used in management control, there are a few search terms defined. The search terms are based on the different aspects from social accounting, environmental accounting and management control.
The goal is to get a better understanding of what literature says about the integration of Sustainability accounting information in management control. Therefore there is searched for articles which described something about that process. In total there were 8 keyword combinations used to search for relevant articles in the different journals. The keywords are: Management accounting and
9 management control in combination with the keywords: social, environmental, sustainability and accountability. This led to search term combinations such as: Management accounting and Sustainability.
The search was limited to title, keywords and abstract to get the most relevant articles. If the search terms are not in the title, Keywords or abstract it can be assumed that the article is not about the topic and therefore not relevant for the review. The search is executed on www.sciencedirect.com and www.emeraldinsight.com.
2.2 Step 2: applying practical screening criteria: Inclusion and exclusion
According to Stechemesser & Guenther (2012) the next step in the reviewing process is the inclusion and exclusion of articles. The methodology of an extensive literature review from Luft & shields (2003) also shows that an important step is to determine what criteria are met to include or exclude an article for the review. The more precise this is described, the better the reproducibility of the review. The goal of this review is to get a better understanding of how SEA information is used in management control.
Therefore the articles which are included in the review describe the use of an aspect of Social or Environmental accounting information in a form of management control. So, an article that draws conclusions about management controls to improve products resulting from environmental considerations based on accounting information is included in the research. An article that draws conclusions about the same topic but not based on accounting information is excluded from the review.
The articles that where included are articles that describe the use of Social and Environmental Accounting information in Management control. An important group of the included articles describes the integration of sustainability in management control frameworks such as Simons’ Levers of Control (Simons, 2000). Another important group that is included for the review are a group of case studies which describe management control aspects in organizations. In the results section of this paper there will be further elaborated on the articles that were included for the review.
Articles which only described something about sustainability accounting but not about how this is used in management control were excluded. As well as articles which only described something about management control but not in relation to sustainability. Some articles could be included or excluded based on the keywords or abstract. If there was doubt about the relevance of the article there was a more thorough reading of the content of the article. There were several articles found with the search terms which were interesting but were less relevant for the research.
10 The search term ‘social’ in relation to ‘control’ also led to a large group of articles about social controls.
This group of articles described something about the use of social groups to control the organization, comparable to the ‘personnel’ and ‘culture’ controls as for example described by Merchant and van der Stede (2013). Even though social control in this way might be interesting and could be used to contribute to sustainable performances of organizations, it does not provide more insight about how sustainability accounting information is used in management control systems.
Another important group that is excluded from the review is related to the search term: ‘environment’.
This search term let to a lot of articles about the organizational environment instead of ‘the environment’ from a sustainable point of view.
Another important group of articles which is excluded from the review is related to the search term:
‘accountability’. This search term led to some articles about accountability in the context of ‘keeping someone accountable’ in relation to a control mechanism. Articles about keeping someone accountable as in keeping a person or organisation responsible for its actions (Cooper & Owen, 2007), and which were not explicitly related to sustainability were also excluded for the review.
Another important group which was excluded was articles focused on external reporting. The goal is looking for ways in which sustainability accounting information is used in management control practices in organizations. Therefore the articles that were merely focused on external reporting or disclosures are also excluded. As well as articles about politics and government practices to influence civilians behaviour.
2.3 Step 3: applying methodological screening criteria
The inclusion and exclusion process has provided a number of articles which describe something about the relation between SEA information and management control. Following Stechemesser and Guenther (2012) the next step is to use a review protocol to examine the articles. This step is meant to extract the most important information from the articles as a preparation for the synthesize step.
In line with Denyer and Tranfield (2007), the goal of this step is to identify themes, perspectives, ideas and/or concepts from each study. The information from the individual studies forms the input for the synthesizing step.
The review protocol which is used to get the key findings, themes etc. is comparable to the review protocol from Stechemesser and Guenther (2012). The first section is about bibliographic data of each publication. The second section is about the background of the publication, such as its methodology and the investigated country. The last section of the protocol consists of information about the specific topic like the aspect of sustainability described or the type of management control researched in the
11 papers. The protocol was entered into ‘Excel’ to provide an overview of the key information of the articles. The review protocol looked as follows:
Title Authors Journal year pages
Type of research and method Context of the study
- Industry - Country
Which aspect of SEA is described
What definition of sustainability is used in the article?
What gradation/levels of integration does the article describe?
What does the article describe about the gap between sustainability reporting and internal practices?
What does the article describe about the change process towards a more sustainable organization?
What are the key findings?/main conclusions other
In order to analyse the articles in a systematic way, there where first 10 articles read to determine recurrent themes in the articles. These themes are added to the review protocol in order to analyse all the 28 articles on these themes. This provided a base for a structural review of the articles.
2.4 Step 4: Synthesizing
The fourth step of the reviewing process is data synthesis. This step is the value adding activity from a literature review as it produces new knowledge (Crossan and Apaydin, 2010). Tranfield et al. (2003) describe that the main activity in the data synthesizing is to identify categories emerging from the data and make constant comparisons between the individual articles. Based on the data derived from the thirth step there are 7 themes identified which are described in the ‘results’ section of this review.
12 Denyer and Tranfield (2006) discuss different types of synthesis. The type of synthesis which is used for this review is the Meta-ethnography. This type of synthesis encompasses an comparative textual analysis. The focus of meta-ethnography is according to Denyer and Tranfield (2006) on interpretation and not merely analysis.
A weakness of this approach is according to Denyer and Tranfield (2006) that the form and direction of the review is dependent on the interpretation of the investigator. Another researcher might have entirely different conclusions from the same articles reviewed. Researcher bias seems to be more of an issue in this approach than in other approaches. In order to prevent this bias as much as possible the steps from the research and synthesis are described as thorough as possible. This will enhance the reproducibility of the study and outcomes (Crossan and Apaydin, 2010).
This chapter has described the method with the steps used in this review. The next chapter presents the key findings from the literature review.
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3. Results
The previous chapter described the used methodology of the review. In the following chapter the main results of the review are described. The results of the review are organized as follows: first there is a description of bibliographical data with several tables which provide information about the type of publications the search led to. Second there will be a description of the most prominent themes which followed from the analysis and synthesis.
3.1 Bibliographical data
The first search with the six search terms in the five journals led to 548 results. Table 1 shows the quantity of articles found per search term combination. As the table shows the search term combinations with the term ‘sustainability’ led to 18 from the 548 results. The application of inclusion and exclusion criteria and the exclusion of doubles led to 28 articles for analysis and synthesis. Table 2 reveals that the main sources for the review are the journals Management Accounting Research and Accounting, Auditing and Accountability.
Table 1: the number of articles found per search term combination Search term:
Search term:
Management accounting Management control
sustainability 13 5
social 183 83
environmental 73 30
accountability 100 61
Table 2: the number of articles per journal
Journal Number of articles used
Management accounting research 10
Accounting, Organizations and Society 3
Critical Perspectives on Accounting 3
Accounting, Auditing and Accountability Journal 10
Accounting Forum 2
14 Table 3 shows the years of publication of the articles. The table shows that 18 of the 28 articles are published in the period from 2010 until 2013. The table also shows that all the publications in the year 2013 are from the journal Management Accounting Research.
Table 3: number of articles per journal per year of publication.
Publications per journal:
Year of
publication: Total MAR AOS CPA AAAJ AF
1976 1 1
1995 1 1
1996 1 1
1997 1 1
2005 2 1 1
2007 3 1 2
2008 1 1
2010 6 2 3 1
2011 3 3
2012 1 1
2013 8 8
3.2 Most prominent themes from the analysis and synthesis
In this section the most prominent themes from the analysis and synthesis will be discussed.
These themes are derived from the reading of ten articles and then applied in the review protocol in order to perform a structural review of the publications. The articles describe different aspects of sustainability and the integration in management control.
Between the boundaries of this research, there will be three themes discussed. These themes focus on the relation between sustainability and management control. Table 4 shows that from the 28 publications there are 12 who describe an gap between internal practices and external reporting.
Although this is an interesting theme in sustainability accounting, this review only focuses on internal practices. Therefore there are three themes discussed in this review, namely: levels of sustainability, the change process and management control practices. In the next three chapters the results of the analysis on these themes will be discussed.
15 Table 4: Number of articles per theme
Theme: Number of articles
Levels of integration/sustainability 5
Change process 6
Gap reporting and internal practices 12
Management control practices 13
3.3 MC practices
The goal of this review is to get a better understanding of what literature says about the use of sustainability accounting information in Management Control. Organizations use management control systems to ensure that organizations do what they are supposed to do as is elaborated on in the introduction of this paper. As seen in table 5, in 13 of the 28 articles there was a description of management control practices. Table 5 gives an overview of the publications and the outline of the management control practices of these 13 articles describes.
Table 5: articles on the management control systems for sustainability
Authors What do the authors describe about management control systems?
Arjaliès, D., & Mundy, J.
(2013)
Based on the levers of control (Simons, 2000), providing 4 types to manage Corporate Social responsibility strategy.
Bowen, F., & Wittneben, B.
(2011)
It is difficult to measure, report and communicate emissions
Chung, L. H., & Parker, L. D.
(2010)
Strategic opportunities for social and environmental action in the Hospitality industry. (e.g. quantification of environmental costs and savings,
environmental training programmes) Contrafatto, M., & Burns, J.
(2013)
Case study
Tone at the top, Sustainability department, key sustainability measures, sustainability formally integrated in strategic planning which leads to formal rules and routines.
Durden, C. (2008)
Case study
Authors propose a framework to achieve sustainability by: Identification of stakeholder groups and social responsibility goals which are translated into a measurement and monitoring framework.
Ferreira, A., Moulang, C., &
Hendro, B. (2010)
Use of environmental management accounting (e.g. classification of
environment-related cost, environmental impact analyses of products) leads to process innovation.
Figge, F., & Hahn, T. (2013) Integration of eco-efficiency in the value based financial perspective (Du- pont analysis)
Gond, J., Grubnic, S., Herzig, C., & Moon, J. (2012)
Interactive use of control systems and tight coupling of management and sustainability control systems enable sustainability practices. (Based on Levers of control, Simons, 2000 )
16
Henri, J., & Journeault, M.
(2010)
Integration of environmental issues by: 1 developing performance
indicators, 2 use indicators to monitor compliance, support decision-making and for external reporting, 3 define specific goals for environmental
expenses, incomes and investment, 4 linking environmental goals to rewards.
Mir, M. Z., & Rahaman, A. S.
(2011)
Case study
Definition of measures and indicators of environmental performance, based on input from various stakeholders groups. Annual environment action program and a five year plan to support long-term focus. (e.g. provision of training, integration of environmental duty in business planning)
Pérez, E. A., Ruiz, C. C., &
Fenech, F. C. (2007)
4 catalysts lead to intangible assets which enhance environmental
performance: Training and awareness building, continuous environmental improvement, integrating stakeholders interests, and, organizational learning
Rodrigue, M., Magnan, M., &
Boulianne, E. (2013)
Case study
Environmental performance indicators used as interactive and diagnostic controls. Beliefs system (Simons, 2000) is used for the integration of stakeholders influences.
Virtanen, T., Tuomaala, M., &
Pentti, E. (2013)
Case study
Performance measurement systems in relation to sustainability and the role work motivation
The 13 articles describe different aspects and themes in relation to sustainability and management control. There are some key findings which emerge from the analysis of these 13 publications which will be described in this paragraph
The Levers of Control framework from Simons (2000) is used in three of the fourteen publications which describe management control practices. In their research about the role of Management Control systems in managing Corporate Social Responsibility, Arjaliès & Mundy (2013) collect data from eight French companies. They use the levers of control framework to get a better understanding of the use of management control systems, rather than the existence of accounting tools to manage corporate social responsibility. The main findings of the research from Arjaliès and Mundy (2013) are that interactive processes play a key role in the successful implementation of Corporate Social Responsibility and this interaction is enhanced by formal processes for sharing good practices. Gond et al (2012) provide a framework based on the Levers of Control and the level of integration (of sustainability in management control) to define eight configurations. Based on the Simons’ framework they distinguish between the interactive or diagnostic role of controls. This research from Gond et al. (2012) confirms the view from Arjaliès & Mundy (2013) that the interactive use of controls contributes to sustainability strategy. The third study which uses the Levers of Control
17 framework from Simons (2000) is the case study from Rodrigue, Magnan, & Boulianne (2013). The case site uses the diagnostic, interactive and beliefs levers of control (Simons, 2000) to implement stakeholders views in the environmental performance indicators. The three publications which use the Levers of Control framework are from the years 2012 and 2013. This could mean that there is a slightly increasing interest in using the Levers of Control framework in sustainability accounting research.
From the 13 publications which focus on management controls there are five case studies. The case studies are rich in information about management control practices to integrate sustainability in the management control practices. Contrafatto & Burns(2013) performed an case study in an Italian multinational organisation. The study provides insights into a lot of management accounting and control practices. Contrafatto & Burns (2013) conclude that sustainability became a more important prat of the value creation of the organization by the continual interaction of sustainability rules and routines. Durden (2008) performed his case study in an New Zealand manufacturing company. The main conclusions of this research are that in that specific company the theme sustainability was more an external image factor rather than an internal factor which influences the practices of the organization. Mir & Rahaman (2011) performed a case study in an Australian energy company. The study provides evidence for a relation between environmental and economic values in this specific company. Rodrigue, Magnan & Boulianne (2013) performed a case study in a large multinational organization. The main conclusions of this research are that at the research site Environmental Performance Indicators stimulate a sustainable strategy. Also the influence of stakeholders is considered and formally regulated in order to achieve sustainability. Virtanen, Tuomaala & Pentti (2013) performed a case study in Finland in a company in the process industry. The study shows that at the research site the performance measurement systems to direct managerial behaviour contribute to sustainability development. This study is also the only study in this research which extensively describes the role of work motivation in achieving sustainability.
Management accounting and control does also involve financial information. Figge & Hahn (2013) and Henri & Journeault (2010) both provide approaches which combine financial and sustainability approaches. Figge & Hahn (2013) extend the DuPont analysis with eco-efficiency in order to provide tools to calculate the effects of decisions on the environment. Henri & Journeault (2010) research they provide guidance in the integration of environmental issues in the control systems. This is linked with financial results through indicators such as the inclusion of environmental expenses, incomes from material scrap and reduction of material costs.
18 As the table shows the most publications which describe management control practices are from the period 2010 until 2013. There are only two from the thirteen publications which describe management control practices from before 2010.
This section has reviewed literature which elaborated on the topic of management control practices.
In the next section the publications which describe change processes will be described.
3.4 Change
Six of the 28 publications draw conclusions about the change process towards sustainability in organizations and the role of management accounting and control in that process. In table 6 there is an overview provided with these six publications.
Table 6: articles which describe accounting change
Publication Main conclusions about what enables change towards sustainability Ball, A. (2007) Social movement pressures in combination with
Opportunities to invest in sustainable options Birkin, F., Edwards, P.,
& Woodward, D.
(2005)
Total paradigm of accounting needs to be changed in order to achieve sustainability. A conscious cultural evolution that respects the breadth of sustainability is needed.
Bouten, L., & Hoozée, S. (2013)
Change is Interacting processes of Environmental Reporting and Environmental management accounting. Change is fostered by:
- Environmental disturbances - Top management commitment
- Presence of an environmental champion
Contrafatto, M., &
Burns, J. (2013)
(case study)
Change is a combination of formal and informal controls. This rich study also describes the importance of the tone at the top, external pressures and the role of a sustainability department which promotes a ‘sustainability era’.
Gond, J., Grubnic, S., Herzig, C., & Moon, J.
(2012)
Sustainability accounting change is described by an configuration approach with 8 configurations. Change towards a more sustainable organization will be enhanced if the use of control systems moves from diagnostic towards interactively and the
19 integration of technical, social and cognitive modes enhance the integration of sustainability in strategy.
Use of control systems, from diagnostic towards interactively
Factors in the Technical, social and cognitive modes of integration cause a better integration of sustainability in strategy
Pérez, E. A., Ruiz, C. C.,
& Fenech, F. C. (2007)
Training and awareness building, continuous environmental improvement, integrating stakeholders’ interests and organizational learning enhance six intangible assets, which improve environmental performance.
In the six articles there is focus on different aspects of change. Where some describe merely the circumstances which cause organizations to develop policies for change, other articles focus on the actions which are employed after the decision is made to change. Ball (2007) describes the circumstances which causes organizations to change, a combination of pressures and opportunities.
Four of the six publications which focus on the change process describe the role of the interactive processes between sustainability reporting and sustainability management accounting (Bouten & Hozée, 2013, Contrafatto & Burns, 2013, Gond et al., 2012 and Pérez, Ruiz and Fenech, 2007). These authors all state that a more sustainable organization will not only be achieved by merely reporting practices but if the reporting interacts with management accounting and control practices.
The case study from Contrafatto & Burns (2013) gives insight in a large number of factors which enhanced the change towards more sustainability in an organization. Not only the interaction between reporting and accounting is described by these four publications, there is also focus on the interaction between formal and informal controls. According to the four publications formal actions and meetings seem to contribute to knowledge sharing, shaping of the culture and awareness about sustainability.
The work from Bouten & Hozée (2013) and the case study from Contrafatto & Burns (2013) both underpin the role of top management in the change process. Bouten en Hozée (2013) conclude that besides environmental disturbances and the presence of an environmental champion the commitment of Top management plays a major role. The case study from Contrafatto & Burns (2013) shows that the commitment of the CEO to sustainability was the base for a lot of sustainability policies and achievements in the case study organization.
The importance of increasing knowledge about sustainability as a major factor in the change process is underpinned by four of the six publications. Contrafatto & Burns, 2013, Gond et al., 2012 and Pérez, Ruiz and Fenech, 2007 describe aspects such as a sustainability department and the training
20 of staff as interventions to contribute to the change process. This view is supported by Birkin, Edwards
& Woodward (2005) who state that in order to achieve sustainability, a thorough understanding of the breadth of sustainability is needed.
From the 28 publications there are only two which focus on what causes the will to change. The publications are rich in describing management controls and the change process once the decision to strive for sustainability is made. There is however not much focus on what contributes to the will of organizations to change. The two publications that do describe aspects that contribute to the will to change are from Ball (2007) and Bouten & Hoozée (2013). The decision to strive for sustainability is fostered by pressures from social movement and opportunities to invest in sustainable options (Ball, 2007) and by environmental disturbances and the presence of an environmental champion (Bouten &
Hoozée, 2013).
This section described the six articles that elaborated on the change process towards sustainability. In the next section the publications that distinguish levels of sustainability will be described.
3.5 Levels of sustainability
From the 28 articles, there are five publications who define different levels of sustainability in relation to management accounting and control. By levels of sustainability is meant that there is a distinction between the role of sustainability in the management accounting and control practices. The levels often vary between no consideration for sustainability to fully integrated sustainability in the management control. Five of the 28 publications make such a distinction. The goal of the review is to get a better understanding of sustainability and management control. The distinction in levels forms an important part of the reviewed literature since there are five articles which make such a distinction.
A better understanding of the levels contributes to a better understanding of sustainability in management control. The five publications and their levels they distinguish between are described in table 7.
Table 7: publications which distinguish in levels of sustainability integration.
Authors of the publication Number of levels Levels distinguish between:
Burritt, R. L., & Schaltegger, S. (2010) 3 What drives the sustainability strategy:
companies strategy, external forces or both?
Dillard, J., Brown, D., & Marshall, R.
S. (2005)
3 Importance of environmental issues in the organizational strategy
21 Gond, J., Grubnic, S., Herzig, C., &
Moon, J. (2012)
8 Control system integration, the diagnostic versus interactive use of management control systems and sustainability control systems
Milne, M. J. (1996) 4 Decision approaches to environmental
resources
Pérez, E. A., Ruiz, C. C., & Fenech, F.
C. (2007)
3 Environmental embeddedness in organizations
As seen in table 7, Pérez, Ruiz & Fenech (2007) draw conclusions on the process of the integration of sustainability in organisations. They describe four catalysts for change which enhance six different intangible assets. These six intangible assets contribute on their turn to the embeddedness of sustainability in organisations. Pérez, Ruiz & Fenech (2007) define three different levels of environmental embeddedness, namely: primary, visible and advanced. The intangible assets are used as indicators to determine which level of sustainability embeddedness the organization has achieved.
For the primary level there is awareness of employees and environmental knowledge, skills and expertise of the employees. The visible level includes, on top of the indicators of the primary level, the commitment of managers, cross functional coordination and communication, and integration of environmental issues in the strategic planning process. The advanced level of environmental embeddedness can only be achieved if there are also sustainability related management accounting practices in the organization. The management accounting practices, like cost systems, capital budgeting and scorecards ensure the long-term embedding process (Pérez, Ruiz & Fenech, 2007).
There is also a notion of the interactive nature of the intangible assets (or indicators). Pérez, Ruiz &
Fenech (2007) acknowledge that the use of management accounting practices enhances the commitment of managers and vice versa.
Another distinction in levels is provided by Gond, Grubnic, Herzig, & Moon (2012) who use the levers of control (Simons, 2006) and the level of integration (of sustainability in management control) to define eight configurations. In the paper from Gond et al. (2012) the use and the integration is central for the classification. A control system can be used as an diagnostic system to correct actors actions or as an interactive system to focus actors attention towards strategic objectives (Gond et al.
2012). With integration is referred to the overlap between Sustainability control systems (SCs) and Management control systems (MCs). This results in a configuration varying from configuration A in
22 which there is a low integration of SCs in MCs and both the MCs as the SCs are used in a diagnostic way until configuration H in which there is a high integration of SCs in MCs and both the MCs and SCs are used in an interactive way.
Burrit and Schaltegger (2010) define three types of sustainability accounting development. The three types are: inside out, outside in and twin track. The inside out approach is primarily based on the strategy of the organisation. The role of sustainability accounting and communication is to support decision making to achieve sustainability through the organization. The outside in type is more driven by the external reporting. The role of sustainability accounting in this type is to serve the expectations of external parties. The twin track type combines the inside out and outside in approach. This approach seems according to Burrit and Schaltegger (2010) to optimally approach for awareness generation and problem solving around sustainability issues.
These three examples provide insight in the distinction in levels of sustainability in management accounting and control. This chapter has provided results about the bibliographical data, the change process, management accounting and distinction in levels of sustainability. The next chapter will further elaborate on the conclusions of the review.
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4. Conclusion
The final section of this paper addresses the key findings and provides directions for future research. This section also encompasses the implications and the limitations of the review.
4.1 Conclusion
The study is a systematic review of literature about the use of sustainability information in management control. The findings provide insight in 28 publications about this theme in the period of 1976 until 2013. There are five ‘Top’ or ‘Very Good’ SOM-rated journals used as a source for the review.
The results in this paper describe three major themes which followed from the analysis. The first theme which emerged from the review was the change process towards sustainability. Change towards a more sustainable strategy is enabled by different factors. Each publication describes different factors which enable change. The second theme was sustainability in relation to management control practices. There are a lot of different aspects of management accounting and control described in relation to sustainability. Especially the case studies from the review provide a rich source for examples of management accounting and control practices for sustainability. The third theme which is described in the results is the distinction in levels of sustainability in management control. The levels vary from a level of minimal sustainable strategy to a level were sustainability plays a central role in management control of organizations
The results show that research in the field of sustainability and management control provides information about management control practices but fails to make the connection between management control efforts and the actual performance of organizations. The results show that there is a large group of publications focusing on the change process towards sustainability and that there is a large group of publications focusing on management control practices. However, the relation between change or management controls and organizational performance on a social, environmental or economic scale is however hardly described in the reviewed literature. The relation between sustainability management control and the actual performance would be an interesting avenue for future research since organizations find it hard to integrate sustainability and often promulgate the economic performance above sustainable performance (Parker, 2011). Further research about the connection between sustainability management control efforts and actual performance can therefore contribute to insight in this relation.
The past years show an increase in the attention for research in sustainability in management control. Eighteen of the twenty-eight articles from this review are published in the period 2010 until 2013. This could be partly caused by a growing interest in the theme (Bebbington & Thomson 2013).
Also, a special sustainability edition of the journal Management Accounting Research contributes to
24 this trend with 8 articles in the year 2013. Therefore there can be a cautious conclusion that there is a growing interest in research in the field of sustainability in relation to management control at least in the five journals that have been reviewed.
The articles from the review provide a lot of information about the control practices and the change process. However, there is mostly attention for the change process and management controls once the decision is made to follow a sustainable strategy and only slight attention for what factors contribute to the decision to strive for sustainability. Only two of the twenty-eight publications describe aspects such as pressure from external parties (Ball, 2007) and environmental disturbances (Bouten & Hoozée, 2013) which contribute to the organizations decision to strive for sustainability. An avenue for future research is therefore to focus on what drives organizations to start striving for sustainability.
4.2 Implications
As the results section of this paper shows, it is the interactive use of management controls which stimulates the change process and maintenance of sustainability. These findings can be used for accounting practioners in the field who strive for a more sustainable strategy in their organization.
The review can also provide guidance for managers and accountants who want to achieve more sustainability. This review is very rich in examples of management controls, change processes and classification of levels of sustainability. This can be used by practitioners who strive for more sustainability in their organization. It also provides an rich overview of relevant publications in this field and can be the next step towards implementing sustainability in organizations.
The conclusions provide some directions for future research. Besides these directions another direction for future research is the explore the gap between external reporting and internal practices.
As discussed in the results section of this review, the search criteria also led to thirteen articles which describe the gap between external sustainability reporting and internal practices. This gap is out of the scope of this literature review. Therefore it is an recommendation for future research to not only address this gap but also get a better understanding of what causes the gap and how it can be solved.
4.3 Limitations
A limitation of this paper is the used methodology. As is described in the methodology section the most prominent and well cited literature reviews provide not much support in shaping the methodology. Therefore a less prominent article was used in order to shape the methodology, enriched with input from the methodology of other literature reviews such as Denyer and Tranfield (2007) and Tranfield et al. (2003). The methodology is shaped based on the methodology of Stechemesser & Guenther (2012) who perform a literature review in the search for a definition of
25 carbon accounting. The steps from Stechemesser & Guenther (2012) are enriched with input from other literature reviews in order to strengthen the methodology. This is not the most desirable way in performing a research. Although it would be better suitable to use a prominent and often cited work as base for the review, by describing each step of the method as extensive as possible, the reproducibility of the review is enhanced.
Another important limitation in this review is the number of journals which are used as sources.
The search for publications for the review was limited to five journals due to boundaries in time and considerations about the depth and qualitative nature of the review. By limiting the search to the five journals, there are several ‘TOP’ and ‘Very good’ SOM-rated journals ignored such as ‘Accounting Review’ and ‘Journal of accounting Research’. The review therefore only gives an view on sustainability and management control within the five used journals. A clear direction for future research is therefore to perform the same literature review for all the ‘top’ and ‘very good’ rated journals. This will contribute to a better understanding of the current state of literature on sustainability in management control.
Another limitation of the research is that with this type of research, the form and direction are dependent on the interpretation of the investigator (Denyer and Tranfield, 2006). This can cause that if this review is performed by another researcher it may cause total different outcomes. In order to prevent this as much as possible and to contribute to the reproducibility of this research, the different steps of the review are described as much as possible. The extensive description of the steps of the review contributes according to Crossan and Apaydin (2010) to the reproducibility of the review. That does however not ensure that other researchers with exactly the same methodology will find the exact same results.
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5. References
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