In today’s context, where companies are increasingly required to report their environmental impact with greater transparency, the quality of sustainability reporting depends strongly on the consistency and integration between financial and managerial accounting. However, how these two areas interact and how they influence internal sustainability controls remains a relatively underexplored aspect.
The study conducted by Ashish Varma, Daniela Mancini and Shreya Kaushik analyses the relationship between accounting practices and the effectiveness of environmental controls. It shows that a consistent financial language and close collaboration between the mechanisms and agents of financial and managerial accounting can enhance the quality of sustainability reporting. In essence, the interdependence between financial and managerial accounting plays a mediating role in both the quality of sustainability information and the effectiveness of internal controls for sustainability.
The research used empirical data collected through questionnaires sent to mid and senior managers in administration, finance and control, and was analysed using structural equation models. The study also found that these mechanisms are independent of the sector or size of the company.
An additional area of investigation concerns the role of digital technologies in strengthening these processes, opening up new perspectives for the management of environmental data. The results offer valuable insights for academics, professionals and companies seeking to improve their sustainable governance.
Explore the topic further and discover all the details of the research by reading the full article on our website
Article title:
“Sustainability Reporting: How Consistency and Interdependence in Financial and Managerial Accounting Enhance Eco-Controls”
Authors
Ashish Varma, Daniela Mancini, Shreya Kaushik
Journal
The International Journal of Digital Accounting Research, Vol. 23, 2023, pp. 137-179
ISSN: 2340-5058
DOI: 10.4192/1577-8517-v23_6
Abstract
Sustainability reporting requires consistency and interdependency of financial accounting and managerial accounting. Accounting is closely entangled with the eco-control (EC) in organisations. The quality of (sustainability) reporting and the disclosures is only as good as the quality and consistency of accounting data captured. Therefore, accounting choices and practices have an important role to play in sustainability reporting. This study explores the mechanism through which accounting informs EC. Through the independent and serial use of two levers, first ‘interdependency’ between financial accounting and management accounting and second, through the use of ‘digitalized information’ as a moderating variable, it is probed as to how EC are shaped. An empirical investigation is undertaken by carefully curating primary data, analysed through partial least squares structural equation modelling technique to inform broader debates in the ‘sustainability reporting’ literature concerning the mechanisms through which EC, are influenced by accounting mechanics, choices and disclosures. Sound EC contributes to sustainability accounting and governance to meet needs of the firms’ direct and indirect stakeholders without compromising the firm’s ability to meet the needs of future stakeholders. The study established that the interdependency between the financial accountants and the management accountants’ output mediates the effect of a consistent financial language on EC practices and this effect is independent of the firm size or the industry category. This article brings to the fore, the interplay of FA and MA in informing the environmental controls. The under-researched perspective addressed by this study is that EC are highly interdependent with the consistency and comprehensiveness of accounting that informs it, which in turn is affected by the cooperation and coordination (interdependency) between FA and MA information providers.
Varma, A., Mancini, D., & Kaushik, S. (2024). Sustainability reporting: How consistency and interdependence in financial and managerial accounting enhance eco‐controls. Journal of Public Affairs, 24(1), e2910.
