A Conceptual Foundation for Management Accounting Information to Support Sustainability Strategies

Advances in Accounting, Vol. 31, No. 1, 2016

30 Pages Posted: 17 Mar 2016

See all articles by Saurav K. Dutta

Saurav K. Dutta

State University of New York (SUNY) at Albany

Raef A. Lawson

Institute of Management Accountants

David Marcinko

Skidmore College

Date Written: October 16, 2015

Abstract

This paper derives an actionable model that serves as a basis for cost variance analysis to support the pursuit of environmental and traditional financial goals within a decentralized organization. The model identifies two distinguishable departures from optimality. 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.

Keywords: Performance measurement, Production function, Shadow prices, Sustainability, Waste, Variance

JEL Classification: E12, C61, D61

Suggested Citation

Dutta, Saurav K. and Lawson, Raef A. and Marcinko, David, A Conceptual Foundation for Management Accounting Information to Support Sustainability Strategies (October 16, 2015). Advances in Accounting, Vol. 31, No. 1, 2016. Available at SSRN: https://ssrn.com/abstract=2748546

Saurav K. Dutta (Contact Author)

State University of New York (SUNY) at Albany ( email )

135 Western Ave
Building, Room 109
Albany, NY 12222
United States

Raef A. Lawson

Institute of Management Accountants ( email )

10 Paragon Drive
Montvale, NJ 07645-1760
United States
2014741532 (Phone)
2014741603 (Fax)

David Marcinko

Skidmore College ( email )

815 North Broadway
Saratoga Springs, NY 12866-1632
United States

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