Do the Disclosure of Environmental Management Accounting and Independent Assurance Affect Profitability?

Hempry Putuhena; Leonard D. M. Sangur; M. Rifkhi Fauzan S; Paskanova C Gainau

doi:10.61132/ijema.v2i1.430

Authors

Hempry Putuhena Pattimura University
Leonard D. M. Sangur Indonesia University
M. Rifkhi Fauzan S Pattimura University
Paskanova C Gainau Pattimura University

DOI:

https://doi.org/10.61132/ijema.v2i1.430

Keywords:

Environmental, Management, Accounting, Independent, Assurance

Abstract

This study aims to examine the effect of water usage, energy consumption, carbon emissions produced, waste generated, independent Assurance, and environmental expenditures on Return On Equity. (ROE). This study provides information about entities that are socially responsible and whether their financial performance will improve or not after the implementation of corporate social and environmental activities. The independent variables in this study are water usage, energy consumption, carbon emissions produced, waste generated, independent Assurance, and environmental expenditures. ROE in this study is the dependent variable. The secondary data required for the study comes from the sustainability reports of 35 companies in 2023, and then the relationship between the independent and dependent variables is tested using EViews. The results of data management in the study indicate that there is an effect between water usage, waste generated, and environmental expenditures on ROE, thus supporting H1, H4, and H6. This condition is reversed with energy consumption, carbon emissions produced, and independent Assurance, where these three variables do not have an effect on ROE, proving that H2, H3, and H5 are not supported. The implication of this study is that management can achieve sustainable profits by disclosing activities that support environmental sustainability and using independent parties to guarantee the sustainability reports that have been created, thereby gaining more trust from stakeholders, which affects ROE.

Downloads

Download data is not yet available.

References

Algül, Y., & Erenel, D. (2024). The impact of R&D expenditures on regional energy intensity in Turkey. International Journal of Energy Economics and Policy, 14(5), 546–557.

Amahalu, N. (2020). Effect of environmental cost disclosure on profitability of listed oil and gas firms in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences, 10(2), 157–170.

Anang, Z., Yusop, Z., Sharma, A. K., & Otoum, A. (2024). Sustainable water consumption patterns and factors: A case study of income-related water security. Environmental Research, Engineering and Management, 80(2), 56–74.

Aniebiet, J. E., & Emenyi, E. O. (2024). Environmental waste management disclosure and financial performance of listed consumer goods firms in Nigeria. Advance Journal of Management, Accounting and Finance, 9(5), 33–53.

Armstrong, D. P. (2004). Water use efficiency and profitability on an irrigated dairy farm in northern Victoria: A case study. Australian Journal of Experimental Agriculture, 44(2), 137–144.

Cornellissen, T., & Mukwarami, S. (2024). Examining the relationship between environmental management accounting practices and return on equity in the South African chemical industry. Environmental Economics, 15(1), 190.

Den, W., Chen, C.-H., & Luo, Y.-C. (2018). Revisiting the water-use efficiency performance for microelectronics manufacturing facilities: Using Taiwan’s science parks as a case study. Water-Energy Nexus, 1(2), 116–133.

Dinniyah, T., & Nuzula, N. F. (2021). The influence of environmental cost on profitability and firm value. In 3rd Annual International Conference on Public and Business Administration (AICoBPA 2020) (pp. 277–280).

Dobre, E., Stanila, G. O., & Brad, L. (2015). The influence of environmental and social performance on financial performance: Evidence from Romania’s listed entities. Sustainability, 7(3), 2513–2553.

Dzomonda, O., & Fatoki, O. (2021). Water sustainability and financial performance of firms listed on the Johannesburg stock exchange (JSE). Acta Universitatis Danubius. Œconomica, 17(3).

Fan, L. W., Pan, S. J., Liu, G. Q., & Zhou, P. (2017). Does energy efficiency affect financial performance? Evidence from Chinese energy-intensive firms. Journal of Cleaner Production, 151, 53–59.

Fu, W., & Jacobs, B. W. (2022). Does increased water efficiency improve financial performance? The important role of operational efficiency. International Journal of Operations & Production Management, 42(3), 304–330.

Ganda, F., & Milondzo, K. S. (2018). The impact of carbon emissions on corporate financial performance: Evidence from the South African firms. Sustainability, 10(7), 2398.

García-Sánchez, I., Hussain, N., Martínez-Ferrero, J., & Ruiz-Barbadillo, E. (2019). Impact of disclosure and assurance quality of corporate sustainability reports on access to finance. Corporate Social Responsibility and Environmental Management, 26(4), 832–848.

Gull, A. A., Atif, M., Ahsan, T., & Derouiche, I. (2022). Does waste management affect firm performance? International evidence. Economic Modelling, 114, 105932.

Hornsby, C., Ripa, M., Vassillo, C., & Ulgiati, S. (2017). A roadmap towards integrated assessment and participatory strategies in support of decision-making processes: The case of urban waste management. Journal of Cleaner Production, 142, 157–172.

Ifada, L. M., & Jaffar, R. (2023). Does environmental cost expenditure matter? Evidence from selected countries in the Asia-Pacific region. Sustainability, 15(5), 4322.

Iliemena, R. O. (2020). Environmental accounting practices and corporate performance: Study of listed oil and gas companies in Nigeria. European Journal of Business and Management, 12(22), 58–70.

Ji, Y., Ji, M., Yang, G., & Dong, S. (2023). Water resource management and financial performance in high water-sensitive corporates. Corporate Social Responsibility and Environmental Management, 30(5), 2419–2434.

Johnson, M. P., & Schaltegger, S. (2016). Two decades of sustainability management tools for SMEs: How far have we come? Journal of Small Business Management, 54(2), 481–505.

Jones, M. J., & Solomon, J. F. (2010). Social and environmental report assurance: Some interview evidence. Accounting Forum, 34(1), 20–31.

Maleka, T. G., Nyirenda, G., & Fakoya, M. B. (2017). The relationship between waste management expenditure and waste reduction targets on selected JSE companies. Sustainability, 9(9), 1528.

Mgbame, C. O., & Ilaboya, O. J. (2013). Environmental accounting audit decision and firm performance: An empirical investigation. Journal of Modern Accounting and Auditing, 9(4), 447.

Miah, M. D., Hasan, R., & Usman, M. (2021). Carbon emissions and firm performance: Evidence from financial and non-financial firms from selected emerging economies. Sustainability, 13(23), 13281.

Nichita, E.-M., Nechita, E., Manea, C.-L., Irimescu, A. M., & Manea, D. (2021). Are reported greenhouse gas emissions influencing corporate financial performance? Journal of Accounting and Management Information Systems, 20(4), 585–606.

Nuzula, N. (2018). Does environmental cost affect Japanese firms’ performance? In Innovation Management, Entrepreneurship and Sustainability (IMES 2018) (pp. 821–830). Vysoká škola ekonomická v Praze.

Özşahin Koç, F., & Deran, A. (2024). A research on the impact of carbon emissions on financial performance of companies in the Borsa Istanbul Sustainability Index.

Pamungkas, E. W., Nurchayati, N., Haris, N., Nugrahani, N., Putuhena, H., Usman, E., Astuti, T. D., Dewanti, M. A., Anggraini, F. D., & Indarto, S. L. (2023). Akuntansi Manajemen: Teori & Konsep-Konsep Dasar Akuntansi Manajemen Terkini. PT. Sonpedia Publishing Indonesia.

Peters, F. F., & Adeagbo, O. (2024). Analysis of corporate environmental cost disclosure on profitability of listed manufacturing firms in Nigeria. International Journal of Financial Research and Business Development.

Pons, M., Bikfalvi, A., Llach, J., & Palcic, I. (2013). Exploring the impact of energy efficiency technologies on manufacturing firm performance. Journal of Cleaner Production, 52, 134–144.

Putuhena, H., Fauzan, M. R., & Zalni, Z. (2024). Kinerja lingkungan, pengungkapan corporate social responsibility (CSR) dan dividend payout ratio terhadap nilai perusahaan. Jurnal Cita Ekonomika, 18(1), 26–33.

Sholekha, A., & Astuti, C. D. (2024). The effect of external audit quality, related party transactions, political connections, ESG performance, and independent assurance on sustainability reports on firm value. Eduvest-Journal of Universal Studies, 4(9), 7611–7627.

Simionescu, L. N., Gherghina, Ș. C., Sheikha, Z., & Tawil, H. (2020). Does water, waste, and energy consumption influence firm performance? Panel data evidence from S&P 500 information technology sector. International Journal of Environmental Research and Public Health, 17(14), 5206.

Tandiono, R., Ratnawati, A. T., Gusneli, G., Ilham, I., Martini, R., Waty, E., Putuhena, H., Mulyadi, A. R., & Devi, E. K. (2023). Teori Akuntansi: Konsep, Aplikasi, dan Implikasi. PT. Sonpedia Publishing Indonesia.

Trinks, A., Mulder, M., & Scholtens, B. (2020). An efficiency perspective on carbon emissions and financial performance. Ecological Economics, 175, 106632.

Van Emous, R., Krušinskas, R., & Westerman, W. (2021). Carbon emissions reduction and corporate financial performance: The influence of country-level characteristics. Energies, 14(19), 6029.

Waddock, S. A., & Graves, S. B. (1997). The corporate social performance–financial performance link. Strategic Management Journal, 18(4), 303–319.

Zuoza, A., & Pilinkienė, V. (2019). Energy consumption, capital expenditures, R&D cost, and company profitability: Evidence from the paper and allied industry. Energetika, 65(4).