Examining the relationship between environmental management accounting practices and return on equity in the South African chemical industry
-
Author(s)Tracy CornellissenLink to ORCID Index: https://orcid.org/0009-0004-3731-9741
,
Silas MukwaramiLink to ORCID Index: https://orcid.org/0000-0002-5812-4722
-
DOIhttp://dx.doi.org/10.21511/ee.15(1).2024.14
-
Article InfoVolume 15 2024, Issue #1, pp. 190-202
- Cited by
- 283 Views
-
99 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Environmental management accounting practices (EMAPs) have become pervasive, and continued efforts to ensure universal implementation across various sectors often represent financial implications for organizations. Despite many studies that examined the relationship between EMAPs and financial performance, the debate is still inconclusive. Therefore, the study paves the way for chemical firms to explore the effectiveness of EMAPs’ implementation for both financial and environmental gain. The study used purposive sampling to gather quantitative secondary data from annual integrated reports of chemical firms to examine the relationship between EMAPs and financial performance in the South African chemical industries during 2016–2022. Following the results from the regression estimations, two of the EMAPs – water and energy usage – have had a positive relationship with financial performance, with the latter being highly significant. Contradictorily, carbon emissions and environmental expenditure adversely and insignificantly influenced financial performance. The results suggest that chemical firms have in place ineffective carbon management strategies that fail to generate sustainable returns. Overall, the results acknowledge the efforts of chemical industries in making substantial contributions to enhance environmental performance and encourage environmentalists and policymakers to reconfigure environmental policies for improved environmental and financial performance. Further research on environmental management accounting (EMA) barriers in chemical industries is imperative to achieving environmental sustainability.
- Keywords
-
JEL Classification (Paper profile tab)M41, Q01, Q56
-
References40
-
Tables7
-
Figures0
-
- Table 1. Descriptive statistics
- Table 2. Study variables’ correlation matrix
- Table 3. Heteroscedasticity test
- Table 4. Normality test
- Table 5. Multicollinearity test
- Table 6. Relationship between EMAPs and financial performance
- Table 7. Summary of OLS and FGLS results
-
- Al-Waeli, A. J., Ismail, Z., & Khalid, A. A. (2020). The impact of environmental costs on the financial performance of industrial companies in Iraq. International Journal of Management (IJM), 11(10), 1955-1969.
- Burritt, R. L., Herzig, C., Schaltegger, S., & Viere, T. (2019). Diffusion of environmental management accounting for cleaner production: Evidence from some case studies. Journal of Cleaner Production, 224, 479-491.
- Calamar, A. (2016). Return on equity: A compelling case for investors. Jensen Investment Management.
- Chen, F., Ngniatedema, T., & Li, S. (2018). A cross-country comparison of green initiatives, green performance and financial performance. Management Decision, 56(5), 1008-1032.
- Dobre, E., Stanila, G. O., & Brad, L. (2015). The influence of environmental and social performance on financial performance: Evidence from Romania’s listed entities. Sustainability, 7(3), 2513-2553.
- Dzomonda, O., & Fatoki, O. (2021). Water sustainability and financial performance of firms listed on the Johannesburg Stock Exchange (JSE). Acta Universitatis Danubius. Œconomica, 17(3).
- Fan, L. W., Pan, S. J., Liu, G. Q., & Zhou, P. (2017). Does energy efficiency affect financial performance? Evidence from Chinese energy-intensive firms. Journal of Cleaner Production, 151, 53-59.
- Fu, W., & Jacobs, B. W. (2022). Does increased water efficiency improve financial performance? The important role of operational efficiency. International Journal of Operations & Production Management, 42(3), 304-330.
- Fujii, H., Iwata, K., Kaneko, S., & Managi, S. (2013). Corporate environmental and economic performance of Japanese manufacturing firms: Empirical study for sustainable development. Business Strategy and the Environment, 22(3), 187-201.
- Galama, J. T., & Scholtens, B. (2021). A meta-analysis of the relationship between companies’ greenhouse gas emissions and financial performance. Environmental Research Letters, 16(4), Article 043006.
- Ganda, F., & Milondzo, K. S. (2018). The impact of carbon emissions on corporate financial performance: Evidence from the South African firms. Sustainability, 10(7), Article 2398.
- García, C. B., García, J., López Martín, M. M., & Salmerón, R. (2015). Collinearity: Revisiting the variance inflation factor in ridge regression. Journal of Applied Statistics, 42(3), 648-661.
- Gunarathne, N., Lee, K. H., & Hitigala Kaluarachchilage, P. K. (2023). Tackling the integration challenge between environmental strategy and environmental management accounting. Accounting, Auditing & Accountability Journal, 36(1), 63-95.
- Gworek, B., Bemowska-Kałabun, O., Kijeńska, M., & Wrzosek-Jakubowska, J. (2016). Mercury in marine and oceanic waters – A review. Water, Air, & Soil Pollution, 227(10), Article 371.
- Iliemena, R. O. (2020). Environmental accounting practices and corporate performance: Study of listed oil and gas companies in Nigeria. European Journal of Business and Management, 12(22), 58-70.
- International Federation of Accountants (IFAC). (2005). International Guidance Document Environmental Management Accounting, New York: International Federation of Accountants.
- Ji, Y., Ji, M., Yang, G., & Dong, S. (2023). Water resource management and financial performance in high water-sensitive corporates. Corporate Social Responsibility and Environmental Management, 30(5), 2419-2434.
- Lavery, H., & Ross, H. (2023). Archives – An important requirement in environmental management. Australasian Journal of Environmental Management, 30(2), 141-147.
- Majozi, T., & Veldhuizen, P. (2015). The chemicals industry in South Africa. American Institute of Engineers (AICHE), 1, 46-51.
- Martí-Ballester, C. P. (2017). Sustainable energy systems and company performance: Does the implementation of sustainable energy systems improve companies’ financial performance? Journal of Cleaner Production, 162(suppl), S35-S50.
- Miah, M. D., Hasan, R., & Usman, M. (2021). Carbon emissions and firm performance: Evidence from financial and non-financial firms from selected emerging economies. Sustainability, 13(23), Article 13281.
- Moodley, V. (2015). Triple bottom line accounting for the chemical manufacturing sector in South Africa (Doctoral Thesis). University of KwaZulu-Natal, Durban.
- Moon, H., & Min, D. (2020). A DEA approach for evaluating the relationship between energy efficiency and financial performance for energy-intensive firms in Korea. Journal of Cleaner Production, 255, Article 120283.
- Mukwarami, S., & van der Poll, H. M. (2023). Environmental management expenditure and fiscal sustainability of South African urban municipalities: A panel data model. Indonesian Journal of Social and Environmental Issues (IJSEI), 4(2), 171-183.
- Mukwarami, S., & van der Poll, H. M. (2024). Critical environmental management accounting practices influencing service delivery of growing cities in a developing economy: a review and conceptual framework. Environment Systems and Decisions.
- Mukwarami, S., Nkwaira, C., & van der Poll, H. M. (2023). Environmental management accounting implementation challenges and supply chain management in emerging economies’ manufacturing sector. Sustainability, 15(2), Article 1061.
- Nichita, E. M., Nechita, E., Manea, C. L., Irimescu, A. M., & Manea, D. (2021). Are reported greenhouse gas emissions influencing corporate financial performance. Journal of Accounting and Management Information Systems, 20(4), 585-606.
- Nyahuna, T., & Doorasamy, M. (2022). The role and perception of accountants on environmental management accounting in an emerging market: Study on South Africa’s companies. Journal of Natural Resources and Environmental Management, 12(2), 388-394.
- Nyahuna, T., & Doorasamy, M. (2023). The nexus between environmental management accounting practices and financial sustainability of cement and mining companies in South Africa. International Journal of Environmental, Sustainability, and Social Science, 4(1), 18-26.
- Nyahuna, T., & Swanepoel, M. J. (2022). Influence of environmental management accounting practices on the environmental sustainability of South African cement and mining companies. Environmental Economics, 13(1), 101-113.
- Nyirenda, G., Ngwakwe, C. C., & Ambe, C. M. (2013). Environmental management practices and firm performance in a South African mining firm. Managing Global Transitions, 11(3), 243-260.
- Oberholzer, M., & Prinsloo, T. F. (2011). Comparing different methods to determine the relationship between environmental performance and economic performance. An empirical study of the South African Mining industry. Studia Universitatis Babes-Bolyai, 56(2), 3-15.
- Salmerón Gómez, R., García Pérez, J., López Martín, M. D. M., & García García, C. (2016). Collinearity diagnostic applied in ridge estimation through the variance inflation factor. Journal of Applied Statistics, 43(10), 1831-1849.
- Saunders, M., Lewis, P., & Thornhill, A. (2009). Research methods for business students (5th ed.). Pearson Education.
- Shrestha, N. (2020). Detecting Multicollinearity in Regression Analysis. American Journal of Applied Mathematics and Statistics, 8(2), 39-42.
- Smit, A. M., & Kotzee, E. (2016). Investigating environmental management accounting in the chemical industry in South Africa. Investment Management and Financial Innovations, 13(1-1), 151-160.
- Sudha, S. (2020). Corporate environmental performance–financial performance relationship in India using eco-efficiency metrics. Management of Environmental Quality: An International Journal, 31(6), 1497-1514.
- Sweet, S., & Grace-Martin, K. (2010). Chapter 7: Modeling relationships of multiple variables with linear regression. In K. Grace-Martin (Ed.), Data Analysis with SPSS: A First Course in Applied Statistics. Pearson.
- Van der Poll, H. M. (2022). The barriers and drivers of environmental management accounting practices’ adoption in developed and developing countries for sustainable development. Sustainable Development, 30(5), 1222-1234.
- Van Emous, R., Krušinskas, R., & Westerman, W. (2021). Carbon emissions reduction and corporate financial performance: The influence of country-level characteristics. Energies, 14(19), Article 6029.
-
Industrial development in Saudi Arabia: disparity in growth and development
Anis Ali
doi: http://dx.doi.org/10.21511/ppm.18(2).2020.03
Problems and Perspectives in Management Volume 18, 2020 Issue #2 pp. 23-35 Views: 3004 Downloads: 1021 TO CITE АНОТАЦІЯIndustrial development in any nation plays a vital role in the strengthening of the economy and employs human resources as per specifications and directly towards the mainstream of the nation. In Saudi Arabia, there was rapid industrialization for four decades. Some manufacturing industries performed well, while some internal and external business environment factors influenced the others’ performance. The study focuses on historical development, as well as recent trends of well-performing and poor-performing industries of Saudi Arabia. Small manufacturing industries in Saudi Arabia are underdeveloped and need more attention to attain sustainable and progressive growth rate in the form of the number of establishments to enjoy the potential. Manufacture of tobacco, computer, electronics and optics, pharmaceuticals and transport equipment are the deprived and underdeveloped industries of the manufacturing sector. There should be some easy credit schemes for the development of deprived or underdeveloped manufacturing industries. To attain sustainable growth and development of the manufacturing sector, a positive attitude of the government towards underdeveloped manufacturing industries, favorable labor laws, and entrepreneurial awareness, technical and financial assistance are necessary. The growth and development of the manufacturing sector of Saudi Arabia will be helpful in the attainment of goals of Vision 2030.
-
Why banks should consider ESG risk factors in bank lending?
Sarwar Uddin Ahmed ,
Samiul Parvez Ahmed ,
Ikramul Hasan
doi: http://dx.doi.org/10.21511/bbs.13(3).2018.07
Banks and Bank Systems Volume 13, 2018 Issue #3 pp. 71-80 Views: 2817 Downloads: 1132 TO CITE АНОТАЦІЯWhy banks should be concerned about incorporating environmental, social and governance (ESG) criteria in the lending process? What is the motivation? This study aims to find the motives for considering environmental, social and governance (ESG) criteria in bank lending process. A primary survey has been conducted to know the current status and motivation for incorporating ESG factors in investment decisions. Sample comprised 30 private commercial banks (PCBs) operating in Bangladesh. Data collected were analyzed with graphs, descriptive statistics, and regression analysis. Findings of the study indicate that banks are mostly considering basic environmental, social and governance factors set by regulators qualitatively. They are lagging behind in considering the advanced ESG criteria needed for sustainable and efficient credit risk management. Based on motivation for incorporating ESG factors, it was found that banks pioneering in incorporating ESG factors in lending decisions are compensated through better financial performance. Findings of the study are expected to encourage practitioners and policy-makers to take more pragmatic steps to incorporate ESG risk factors quantitatively in lending decision-making process.
-
Integrated reporting and financial performance of South African listed banks
Reon Matemane ,
Rozane Wentzel
doi: http://dx.doi.org/10.21511/bbs.14(2).2019.11
Banks and Bank Systems Volume 14, 2019 Issue #2 pp. 128-139 Views: 2769 Downloads: 540 TO CITE АНОТАЦІЯThe recent development of integrated reporting intends to address the limitations associated with corporate reporting practices. This paper aims to examine whether a statistically significant relationship exists between integrated reporting quality and financial performance. Secondary data was used, namely the integrated reports and annual financial statements of South African banks listed on the Johannesburg Stock Exchange (JSE) for 2010–2014. For the period 2005–2009, only the financial statements were used, since integrated reporting was not yet mandatory. The research design was longitudinal and it combined qualitative and quantitative methods. Descriptive statistics and Feasible Generalized Least Square (FGLS) were used to explore the relationships between financial performance and integrated reporting quality. The results indicate that there is a positive relationship between integrated reporting quality (IRQ) and earnings per share (EPS). However, there is no significant relationship between IRQ and Tobin’s q (Q-Ratio), IRQ and return on equity (ROE), IRQ and return on assets (ROA) as well as IRQ and economic value added (EVA). Moreover, there are no significant differences on the financial performance of the listed banks before and after the introduction of integrated reporting.
