Environmental management control systems: Exploring the economic motivation behind their implementation

Abstract

Environmental management control systems (EMCSs) effectively integrate environmental objectives into corporate decision-making, yet implementation costs may discourage their adoption. To understand firms’ economic motivation for implementing EMCSs, we theorize that internal and external factors drive both their economic performance and the decision to implement EMCSs. We argue that the environmental costs induced by firms’ pollution intensity drive the economic benefits of EMCSs as well as their implementation. Additionally, we suggest that this relationship depends on society’s environmental awareness. By introducing an archival measure of EMCS implementation, we test these hypotheses on a longitudinal dataset of European and US firms. Our results support the argument that environmental costs drive EMCSs’ economic benefits and implementation. We also find that environmental awareness in societies influences the impact of environmental costs. Our study highlights the importance of environmental awareness in society for aligning environmental and economic goals and thus to increase corporate environmentalism.