Financial implications of environmental management accounting practices in the South African chemical industry

Abstract

Environmental management accounting practices (EMAPs) have mainly been applied in developed countries. In contrast, the concept is slowly gaining momentum in developing countries such as South Africa. It is considered an alternative approach to addressing environmental sustainability challenges. The debate on the EMAPs' influence on financial performance (FP) remains elusive and characterised by mixed results. In the context of the chemical industry, studies are limited, focusing on awareness and adoption of EMAPs; thus, creating literature on how EMAPs affect FP is necessary. This study aimed to establish the relationship between EMAPs and FPs within ten (10) chemical companies listed on the JSE. The study used purposive sampling to gather quantitative secondary data from annual integrated reports. The analysis of the relationship between EMAPs measured through energy usage, carbon emissions, environmental expenditure, and FP proxied by return on equity (ROE) involved using ordinary least squares (OLS) and feasible general least squares (FGLS) analysis. The results concluded that only energy usage positively and significantly correlated with ROE. In contrast, water usage revealed a positive but insignificant relationship with ROE. Both carbon emissions and environmental expenditure showed a negative and insignificant relationship with ROE. The results provide insights into the relationship between EMAPs and FP in the chemical industry. The results may prove helpful to stakeholders such as policymakers and industry practitioners to assist in establishing policies, guidelines, and improvement initiatives. This study recommends further quantitative and qualitative studies applying varying research methodologies.