The role of corporate environmental ethics in shaping environmental management accounting adoption under the institutional theory

• Published in: Environmental Economics Vol. 15; no. 1; pp. 32 - 45
• Main Authors: D. B., Chetanraj, Kumar J. P., Senthil, Sri Sai, Velaga, K. V., Ramegowda
• Format: Journal Article
• Language: English
• Published: Sumy Business Perspectives Ltd 01-01-2024; LLC "CPC "Business Perspectives
• Subjects: Coercivity; corporate environmental ethics; Decision making; EMA adoption; Environmental accounting; Environmental ethics; Environmental factors; Environmental management; Environmental monitoring; Ethical standards; Ethics; financial performance; Information management; Information processing; institutional pressure; Management accounting; Pressure
• ISSN: 1998-6041; 1998-605X
• DOI: 10.21511/ee.15(1).2024.03

This study aims to investigate the complex association between institutional pressure, adoption of environmental management accounting (EMA), and financial performance, with corporate environmental ethics as a moderating component. It explains why and how firms adopt EMA in response to institutional demand to factor environmental factors into their strategic decision-making processes. Quantitative information is gathered using a structured questionnaire from 256 manufacturing companies’ environmental managers and executives who monitor environmental practices and policies and decision-makers who shape business environmental ethics and strategy in the Indian state of Karnataka. Data are analyzed using SmartPLS 4, and PLS-SEM tests the hypotheses. The results show that coercive pressure (β = 0.244, p = 0.000), mimetic pressure (β = 0.221, p = 0.000), and normative pressure (β = 0.209, p = 0.000) have a major role in determining the rate of EMA adoption. It is further identified that EMA adoption (β = 0.217, p = 0.000) positively influences the organization's financial performance. Furthermore, EMA adoption mediates the relationship between coercive pressure (β = 0.053, p = 0.000), normative pressure (β = 0.045, p = 0.000), mimetic pressure (β = 0.048, p = 0.000), and firm’s financial performance. Coercive pressure is associated with higher EMA adoption, although the impact of this link is moderated by corporate environmental ethics (β = 0.069, p = 0.000).