Analysis of the effect of Environmental Management Accounting Costing Techniques on Energy Consumption in South African Manufacturing Companies

Abstract

Manufacturing companies are widely recognised for their intensive energy consumption, which significantly contributes to global environmental degradation. These challenges are further exacerbated by the limitations of traditional costing techniques, which often fail to measure environmental and energy-related costs accurately. In response to these shortcomings, environmental management accounting (EMA) has emerged as an important managerial tool aimed at addressing environmental challenges and improving the quality of decision-making. This paper aims to examine the effect of EMA costing techniques on energy consumption in South African manufacturing companies listed on the Johannesburg Stock Exchange. In the empirical model, EMA costing techniques represent the independent variables and are proxied by activity-based costing (ABC), material flow cost accounting (MFCA), and life cycle costing (LCC). Energy consumption serves as the dependent variable. The study adopts a quantitative research design based on secondary data collected from the annual, integrated, and sustainability reports of selected companies over a ten-year period (2013–2022). Multivariate regression analysis was employed to assess the relationship between the study variables. Additionally, diagnostic tests, including normality, heteroscedasticity, and multicollinearity tests, were conducted to ensure compliance with the assumptions underlying regression analysis and to validate the robustness of the empirical results. The findings reveal a positive and statistically significant relationship between ABC and energy consumption. A positive, though statistically insignificant, relationship was identified between MFCA and energy consumption. Furthermore, the results indicate a negative and statistically significant relationship between LCC and energy consumption, suggesting that the application of life cycle costing may contribute to improved energy efficiency. This study contributes to the EMA literature by integrating ABC, MFCA, and LCC within a single analytical framework and by identifying the costing techniques that are more effective in reducing energy consumption. The results provide practical implications for manufacturing companies, encouraging them to enhance the adoption and strategic application of EMA costing techniques in order to unlock potential environmental and economic benefits associated with their implementation.