Danubius International Conferences, 22nd EMAN Conference. Social Responsibility and Sustainability Accounting-Key Corporate Performance Drivers and Measures

Drivers for EMA Innovation in a Malaysian SME-Is it Truly for Environmental Reasons?

FARIZAH SULONG, Maliah Sulaiman, Mohd Alwi Norhayati
Last modified: 2018-04-12


Material Flow Cost Accounting (MFCA), an Environmental Management Accounting (EMA) tool, is a managerial innovation that has two international standards namely ISO14051 and ISO14052. The practice of MFCA has increased globally particularly since the issue ISO14051 in September 2011, evidence of the advantages companies derived from MFCA. MFCA in Malaysia is crucially needed due to the significant 97% presence of SMEs and the deteriorating environmental quality in Malaysia. MFCA was piloted in Malaysia into five small and medium-sized enterprises (SME) between 2010 and 2012. The main change agency then was Malaysia Productivity Corporation (MPC). Pursuant to 2012, these five companies were left to continue MFCA on their own. Since that pilot project in 2012, MPC had been able to entice only a further 19 Malaysian SMEs to embark on MFCA, and there has been no records of any additional adoptions since then. The aim of this study was to examine the drivers for adopting MFCA during that pilot project, and the motivation for its continuance or discontinuance beyond the pilot project. The study employed a qualitative case study investigating in-depth the implementation of MFCA in one of the pilot companies, an SME automotive vendor. The scope of the study covered the duration prior to agreeing to join the pilot project until approximately three years after the project with MPC ended, a total of five years. The study was theoretically framed using diffusion of innovations (DOI) theory and the new institutional sociology (NIS) under institutional theory. It was found that the company investigated was primarily driven to join the pilot project and adopt MFCA due to competitive isomorphism, to achieve the criteria of cost reduction and competitive pricing. In addition to that, institutional isomorphism was also present in the form of indirect coercive and normative isomorphisms. Adopting MFCA for an environmental reason was only secondary, and the environmental objective was only achieved by the company due to the unique feature of MFCA which supports the achievement of economic and environmental goals simultaneously. The study is significant for two reasons – design of future communication programmes for MFCA and the increasing effort from MFCA change agencies needed to further diffuse MFCA to other SMEs in Malaysia.