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A management control system to support corporate sustainability strategies

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  • Dutta, Saurav K.
  • Lawson, Raef A.
  • Marcinko, David J.

Abstract

This paper outlines a management accounting system, based upon cost variance analysis, which supports the pursuit of environmental and traditional financial goals within a decentralized organization. The framework decomposes inefficiencies into two parts. The first consists of what might be considered a natural outcome of pursuing the traditional economic goal of efficiency through cost-minimization, a “waste” variance. The second part consists of sustainability gains that produce societal benefit but may be incongruent with short-term economic goals, a “sustainability” variance. While elimination of waste variances can be encouraged using a traditional performance evaluation and reward structure, elimination of sustainability variances requires re-design of performance evaluation tools and reward structures. We demonstrate that differing production functions across operational units within organizations can impact the relative magnitude of the two variances. The failure to recognize and incorporate these differences can lead to inefficient allocation of resources and/or only partial fulfillment of the strategic environmental goals of the organization.

Suggested Citation

  • Dutta, Saurav K. & Lawson, Raef A. & Marcinko, David J., 2016. "A management control system to support corporate sustainability strategies," Advances in accounting, Elsevier, vol. 32(C), pages 10-17.
    • Handle: RePEc:eee:advacc:v:32:y:2016:i:c:p:10-17
    DOI: 10.1016/j.adiac.2015.12.001
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    References listed on IDEAS

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    Cited by:

    1. Elena Gerasimova B. & Елена Герасимова Борисовна, 2018. "Стандартизированный подход к анализу устойчивости деятельности организации // Standardized Approach to the Analysis of the Sustainability of the Organization Activity," Учет. Анализ. Аудит // Accounting. Analysis. Auditing, ФГОБУВО "Финансовый университет при Правительстве Российской Федерации" // Financial University under The Government of Russian Federation, vol. 5(2), pages 44-51.
    2. Zhihua Zhao & Zhenjiang Xing, 2024. "Corporate management, green finance, and sustainability," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-8, December.

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