Measurement of Constructs

The extent of EMA implementation is extensively studied, and literature has provided various
perspectives to measure it. For example, Frost and Wilmshurst (2000) provided five EMA
perspectives which provides evidence of the existence of EMA implementation. The five
perspectives included:

I. The firm includes environmental information within the formal management accounting
information system.
II. The firm undertakes formal accounting procedures for a number of specific environmental
issues
III. The firm undertakes cost-benefit analysis to determine the viability of various actions
which include the consideration of environmental issues
IV. The firm undertakes audits of the environmental issues impacting on the firm as a result of
the firm’s activities
V. The firm reports environmental information to external stakeholders
Frost and Wilmshurst relied on a binary approach by scoring 1for yes if the firm has the item and
0 for if it does not.
Mokhtar et al. (2016) studied Corporate Characteristics and EMA Implementation among
Malaysian Public Listed Companies and adapted Frost and Wilmshurst (2000). However, instead
of a binary approach, Mokhtar et al. constructed and applied a likert-scale to measure the level of
EMA implementation. Similarly, in a study to ascertain the environmental management accounting
implementation in environmentally sensitive industries in Malaysia, Khalid, Lord, and Dixon
(2012) applied Frost and Wilmshurst except that they added another perspective suggested by
(Bennett & James, 2000), which was to assess whether firms had processes and procedures to
enhance environmental conservation.
Frost and Seamer (2002) also measured the extent of environmental management
accounting practices by developing an environmental management accounting index which
included:
I. Product costing and pricing
II. Capital budgeting and expenditure
III. Investment appraisal
IV. Performance measurement and appraisal
V. Cost/benefit analysis
VI. Internal reporting mechanisms
VII. Product/process design
VIII. Environmental audits contingent liabilities
IX. Toxic release inventory (TRI)
X. Purchasing policy regulations
Frost and Seamer (2002) measured the extent of EMA implementation by using a weighted score
which gave two if the item is implemented, one if there are plans to implement them and zero if it
is not implemented and there are no plans for future implementation. Similar to Frost and Seamer
(2002), Ribeiro and Aibar-Guzman (2010) developed a 16-item instrument to measure the extent
of EMA implementation. Except that, Ribeiro and Aibar-Guzman used content analysis instead of
questionnaires as in the case of Frost and Seamer. The 16-item instrument developed included:
 I. existence of an environmental department
II. elaboration of environmental indicators
III. definition of the environmental policy
IV. disclosure of environmental indicators
V. definition of plans of environmental actions to be undertaken
VI. elaboration of environmental information
VII. implementation of an environmental management system (EMS)
VIII. disclosure of environmental information
IX. environmental diagnostic
X. elaboration of an environmental report and/or a sustainability report
XI. development of documentation to support environmental management
XII. disclosure of an environmental report and/or a sustainability report
XIII. training actions on environmental organisation’s web-page, etc. protection
XIV. elaboration of environmental information to be disclosed through the media, brochures,
internet, etc.
XV. development of environmental control mechanisms
XVI. disclosure of environmental information of general scope through the media, the
organisation’s web-page, brochures, etc.

relying on Burritt et al., (2002) and Mokhtar et al. (2016), Iredele (2018) constructed three
additional parameters for measuring EMA implementation practices. The three additional
parameters were fashioned around; the level of occurrence of environmental costs within the firms
which is termed OCCURRENCE; how the environmental costs are accounted for and generated
which is classified as GENERATION and sustainable business practices within the firms which
are termed SUSTAINABLE. Iredele used a checklist in the questionnaire to gather data in a likert
scale form, on a scale of 1 (No occurrence) to 5 (Very high). The check listed included the
following items:

OCCURRENCE OF ENVIRONMENTAL COSTS IN FIRMS

Cost incurred for treating and disposing of toxic wastes
Cost of licensing for producing contaminants
Cost resulting from recycling
Cost of maintaining pollution prevention equipment
Cost of hiring environmental staff
Cost of acquiring/installing pollution control equipment
Cost of acquiring/installing Recycling equipment
Cost of evaluating and selecting pollution control equipment
Cost of implementing EMS and obtaining ISO 14001
Cost of R & D on environmental issues Waste management cost
Cost of monitoring carbon emissions level
Cost of designing environmentally friendly process
Cost of renewable sources of energy
Cost of conducting environmental audit
Cost of inspecting products and processes
Cost of developing environmental performance measures
Cost of testing contamination and measuring contamination level
GENERATION OF ENVIRONMEN TAL COST
Environmental costs are generated by your company
Environmental costs are generated separately from overheads
The accounting system provides detailed environmental cost data
Accounting department is properly linked to section that generate environmental costs

TECHNIQUES FOR APPLYING EMA IN FIRMS

Activity Based Costing for environmental cost allocation
Total Cost Assessment for inclusion of environmental costs in investment appraisal
Full Cost Accounting for long term and short-term environmental costs
Life Cycle Costing for quantification of environmental costs
Material Flow Accounting for analysing physical flows of materials
Estimation of environmental costs to determine its selling price Identification of opportunities for
reduction of environmental impacts Incorporation of environmental goals into business strategy
Estimation of potential environmental contingencies
Creation of environmental cost accounts

SUSTAINABLE BUSINESS PRACTICES IN FIRMS

Recycling of waste/effluent produced
Use of water catchment (Water saving methods)
Monitoring levels of carbon emissions
Use of renewable sources of energy Investment in cleaner technologies
[Sources: Bartolomeo et al., (2000), Burritt et al., (2002), Enahoro (2009), Mumbi (2014)]

Apart from the above instruments, Burritt et al.’s (2002) EMA framework which is based on a
checklist of techniques for applying EMA such as activity-based costing, lifecycle costing,
environmental capital budgeting was utilised by Ferreira et al. (2010), Jalaludin et al. (2011),
Christ and Burritt (2013), Mumbi (2014) and Jamil et al., (2015) in examining the EMA
implementation. All these studies employed survey questionnaire for data collection and a likert-
scale to measure the level of implementation.

This study will adapt one of the three parameters developed by Iredele (2018) which was
used to measure the level of occurrence of environmental costs within the firms. Iredele, adopted
the measurement of the variable from (Enahoro, 2009). A questionnaire to gather the data will be
developed in a likert scale form, on a scale of 1 (low) to 5 (Very high). The parameter to be used
will include the underlisted:
Measuring environmental performance of firms
Treating and disposing of toxic wastes
Licensing for producing contaminants
Recycling of waste/effluent produced
Maintaining pollution prevention equipment
Hiring environmental staff
Acquiring/installing pollution control equipment
Acquiring/installing Recycling equipment
Evaluating and selecting pollution control equipment
Implementing EMS and obtaining ISO 14001
R & D on environmental issues Waste management cost
Monitoring carbon emissions level
Designing environmentally friendly process
Renewable sources of energy
The firm undertakes audits of the environmental issues impacting on the firm as a result of the
firm’s activities
Inspecting products and processes
Developing environmental performance measures
Testing contamination and measuring contamination level
Engaging with stakeholders on environmental issues
Use of water catchment (Water saving methods)

In the case of measuring EMA implementation, the study will adapt (Frost & Wilmshurst
2000) because of its popularity in terms of use in measuring EMA implementation. However, a
likert scale will be applied to measure the variable instead of a binary yes or no. below is the list
of items to be included in measuring the variable:

Measurement EMA implementation

I. The firm includes environmental information within the formal management accounting
information system.
II. The firm undertakes formal accounting procedures for a number of specific environmental
issues
III. The firm undertakes cost-benefit analysis to determine the viability of various actions
which include the consideration of environmental issues
IV. The firm undertakes audits of the environmental issues impacting on the firm as a result of
the firm’s activities
V. The firm reports environmental information to external stakeholders

Christ, K. L., and Burritt, R. L. (2013). Environmental management accounting: The significance
of contingent variables for adoption. Journal of Cleaner Production, Vol. 41, pp. 163-173.

Enahoro, J.A. (2009). Design and bases of environmental accounting in oil & gas and
manufacturing sectors in Nigeria. Unpublished PhD Thesis in Accounting. Covenant University,
Ota.

Frost, G., and Seamer, M. (2002). Adoption of environmental reporting and management
practices: an analysis of New South Wales public sector entities. Financial accountability and
Management, Vol. 18, pp. 103-127.
Frost, G., and Wilmshurst, T. D. (2000). The Adoption of environment-related management
accounting: An analysis of corporate environmental sensitivity. Accounting Forum, Vol. 24(4),
pp. 344-361.

Khalid, F. M., Lord, B. R., & Dixon, K. (2012). Environmental management accounting
implementation in environmentally sensitive industries in Malaysia. Paper presented at the
6th NZ Management Accounting Conference, Palmerston North, 22-23 Nov 2012.

Iredele O. O. (2018). An evaluation of environmental management accounting (EMA) practices

and barriers to its implementation: a comparative study of Nigeria and South Africa. Crawford
Journal of Business & Social Sciences (Cjbass) Vol. Xiii No. 1, 96-113 ISSN 2141-9094;
Website:Cjbasscru.Org

Jalaludin, D., Sulaiman, M., and Nik Ahmad, N. N. (2011). Understanding Environmental
Management Accounting (EMA) adoption: A new institutional sociology perspective. Social
Responsibility Journal, Vol. 7(4), pp. 540-557.

Mumbi, M.W. (2014). Factors influencing environmental management accounting practices

among manufacturing firms in Nairobi, Kenya. Unpublished M.Sc Thesis. Submitted to School
of Management and Commerce, Strathmore, University, Kenya.

Ribeiro, V. P. L., Aibar-Guzman, C., Monteiro, S. M., and Guzman, B. A. (2012). Determining
factors of environmental management practices in Portuguese local entities. Management of
Environmental Quality: An International Journal, Vol. 23(5), pp. 486-502.