10 1016@j Mar 2015 06 001

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YMARE-552; No. of Pages 18
Management Accounting Research xxx (2015) xxxxxx
Contents lists available at ScienceDirect
Management Accounting Research

journal homepage: www.elsevier.com/locate/mar
Translating environmental motivations into performance:

The role of environmental performance measurement
systems
Irene Eleonora Lisi
Universit Cattolica del Sacro Cuore, largo A. Gemelli 1, 20123 Milan, Italy
a r t i c l e
i n f o
Keywords:
Environmental performance measurement
systems
Environmental performance
Eco-efciency
Business case
Stakeholders
Survey
a b s t r a c t
Although corporate environmentalism has achieved great momentum and the literature
has examined both its motivations and performance outcomes, relatively little is known
about the specic managerial processes whereby companies may translate their motivational factors into improved performance. In this respect, the environmental accounting
literature suggests the introduction of specic control mechanisms such as environmental
performance measurement systems. Yet, in the environmental domain, driving performance through measurement may be less straightforward than often realized because
of various technical and motivational challenges. To examine further the theoretically
questionable role of performance measurement in the environmental context, this study
proposes a model in which the use of environmental performance measures for a variety
of decision-making and control purposes mediates the links between rms environmental
motivations and corporate performance. The results from a survey of 91 Italian companies
provide support for the hypothesized relationships, while offering several insights into the
differential strength of business-oriented, stakeholders-oriented and ethical motivations
and their implications for environmental performance measurement systems. The paper
concludes with some avenues for future research revealed by this work.
2015 Elsevier Ltd. All rights reserved.
1. Introduction
Over recent decades, companies in every sector have
been confronted with increasing pressures to control
and improve their operations impacts on the natural
environment (Burnett and Hansen, 2008). Corporate environmental proactivity, in turn, is claimed to be associated
with favorable internal outcomes such as reduced waste
and discharges, increased efciency, reduced energy and
resource costs, lower risk and better reputation, and
Correspondence to: via Bigiogera 13, 20128 Milan, Italy.

Tel.: +39 3497613213.
E-mail address: ireneeleonora.lisi@unicatt.it
reduced compliance costs (Sharma and Vredenburg, 1998).

As managers recognize these advantages, they in many
cases commit substantial resources toward environmental
protection initiatives (Roewer, 2008).
To date, environmental management research has
extensively examined environmental motivations as a
basic trigger of organizations environmental proactivity.
Those motivations can basically reect a mix of businessoriented, stakeholders-oriented and ethical motivations
(Bansal and Roth, 2000). However, this literature is relatively silent on which specic managerial processes may
translate such motivational factors into improved performance (Wisner et al., 2006).
The management control literature has started to analyze this issue by discussing the potential role of specic
http://dx.doi.org/10.1016/j.mar.2015.06.001
1044-5005/ 2015 Elsevier Ltd. All rights reserved.
Please cite this article in press as: Lisi, I.E., Translating environmental motivations into performance: The role of environmental performance measurement systems. Manage. Account. Res. (2015), http://dx.doi.org/10.1016/j.mar.2015.06.001
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I.E. Lisi / Management Accounting Research xxx (2015) xxxxxx
environmental performance measurement and control systems in supporting companies environmental initiatives
(Gond et al., 2012). As a particular application of management control systems, they are expected to foster the
translation of companies environmental motivations into
improved performance by better aligning organizational
and behavioral structures with rms objectives and underlying value drivers (Henri and Journeault, 2010). More
specically, it is suggested that environmental performance measurement and control systems are important
to: identify emerging threats and opportunities, facilitate
environmental decision-making and coordination by managers, promote goal and value congruence between the
individual and the organization, and facilitate learning (see,
e.g., Arjalis and Mundy, 2013; Henri and Journeault, 2010;
Virtanen et al., 2013).
Yet, these alleged positive effects might be less straightforward than often realized, for at least two reasons.
First, similar to performance measurement systems in general, environmental performance measurement systems
are also fraught with commensuration problems, which
may hamper their effectiveness. Indeed, the technical challenges implied in the measurement of many environmental
impacts such as those associated with carbon emissions
or water use are well recognized (Unerman and Chapman,
2014). If environmental performance measures are perceived to have low controllability or technical validity, their
use particularly when linked with rewarding can have
dysfunctional effects (Virtanen et al., 2013). Second, the
environmental domain represents a particularly challenging decision-making setting, in which ethical motivations
play a crucial role (Bansal and Roth, 2000), but they may
sometimes conict with economic considerations (Figge
and Hahn, 2013). In such a context, the introduction of
ad hoc systems aimed at quantifying the environmental
actions of an organization and at formally integrating the
environmental concerns into the organizational routines
may even be counterproductive, as the risk exists of undermining employees intrinsic motivation to work toward
environmental goals (Virtanen et al., 2013). Based on such
arguments, it therefore seems possible to question the supposedly unproblematic role of environmental performance
measurement systems as a mechanism for translating companies environmental motivations into performance.
To address this puzzle, this paper develops a comprehensive model in which the use of Environmental
Performance Measures (EPM) for a wide variety of
decision-making and control purposes acts as an intervening variable among business motivations, perceived
stakeholders pressures and top managements environmental commitment on the one hand, and environmental
and economic performance on the other hand. The theoretical perspective underlying this model leverages the
concept of environmental performance measurement
systems as tools to deal with various forms of uncertainty
(Davila, 2000). Building on Galbraith (1973), the different
types of uncertainty under consideration in this study refer
to the differences between the amount of information
required to meet the various environmental concerns and
expectations held by managers and external stakeholders
and the amount of information already possessed by the
organization. By supplying the information required to

deal with uncertainty related to the environmental implications of a range of decision-making and control contexts
(e.g., capital expenditures approval, suppliers selection
or product decisions), EPM address Galbraiths (1973)
information gaps and foster the translation of companies
environmental motivations into improved performance.
The model is tested using survey data from a sample
of 91 Italian rms. The empirical results, based on Partial Least Squares (PLS) structural equation modeling (Chin,
1998), conrm the hypothesized mediation role for the use
of EPM. In particular, the use of EPM for decision-making
and control appears to partially mediate the relationship
among rms business motivations and environmental performance and to fully mediate the links between the other
two motivations (i.e., perceived stakeholders pressures
and top managements environmental commitment) and
environmental performance. The results also show that
EPM use positively inuences economic performance indirectly through environmental performance.
This study contributes to the literature by developing
insights into the link between environmental motivations
and performance. More specically, it investigates the
processes through which companies may translate their
motivational factors into enhanced performance. The use
of EPM for decision-making and control is shown to represent an effective mechanism in that respect. In so doing, this
paper also contributes to the performance measurement
literature, in which the empirical evidence supporting the
link between performance measurement systems and economic performance is limited and conicting (see, e.g.,
Franco-Santos et al., 2012; Melnyk et al., 2014). This studys
results contribute to this stream of research by suggesting
that the inuence of a performance measurement system
on economic performance is mediated by one intervening variable (environmental performance) that depicts the
operational consequences of the actions induced by the
system. Finally, this work reinforces the initial insights on
the economic effects of environmental performance measurement and control systems (Henri et al., 2014; Henri and
Journeault, 2010; Wisner et al., 2006) by using objective
rather than subjective economic performance data.
The remainder of the paper is organized as follows. The
next section develops the theoretical model. Section 3 claries the research method, including sample selection and
variable measurement. This is followed by a presentation
of the results. The nal section discusses the results and
concludes the paper by raising implications for theory and
practice, acknowledging limitations of the study, and offering directions for further research.
2. Theoretical framework and hypotheses
2.1. Environmental motivations, corporate performance
and environmental performance measurement systems
The literature provides various explanations for corporate environmental proactivity, reecting a combination of
business-oriented, stakeholders-oriented and ethical motivations (see, e.g., Banerjee et al., 2003; Bansal and Roth,
2000). Some authors adopt an economics-based paradigm
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and claim that companies engage in proactive green management because of its potential nancial benets. Other
academics agree on a sociopolitical approach and maintain
that rms respond to external green-oriented stakeholders to demonstrate that their operations are legitimate and
congruent with societal expectations. Finally, other studies emphasize the role of ethical motivations, based on
the idea that environmental actions are grounded in moral
values and are a reection of top managements sensibility toward environmental ills. Recent contributions have
also argued that these perspectives are complementary and
their combination can create a more comprehensive view
of corporate environmental proactivity (Ervin et al., 2013).
Proactive environmental management, in turn, has been
linked with improved corporate performance through various operational, reputational and competitive benets
(Sharma and Vredenburg, 1998). Within the environmental
management literature, however, the concept of environmental proactivity remains somewhat abstract (Wisner
et al., 2010). Environmentally proactive rms have been
described, for example, as those in which environmental management is a priority for top management (Hunt
and Auster, 1990), which commit a substantial amount
of resources to environmental management and integrate it into strategic planning (Judge and Douglas, 1998),
or which actively manage their processes to minimize
environmental impacts beyond regulatory requirements
(Aragn-Correa and Sharma, 2003). As a result, relatively
little is still known on which specic managerial processes
may translate companies environmental motivations into
improved performance (Wisner et al., 2006).
Useful insights in this respect may be offered by
the emerging stream of research on environmental performance measurement systems, which have attracted
growing attention in recent years as tools supporting the
integration of environmental concerns into rms business processes (see, e.g., Bonacchi and Rinaldi, 2007,
and references therein). Environmental performance measurement systems represent an important component of
environmental management control systems (Henri and
Journeault, 2010) and a specic application of performance
measurement systems. They can be used to supply information for decision-making (Burritt et al., 2002; Burritt
and Schaltegger, 2010) as well as to support the attainment of environmental objectives through performance
evaluation and rewarding (Gabel and Sinclair-Desgagn,
1993; Perego and Hartmann, 2009). By fostering the alignment of management processes with rms objectives and
underlying value drivers (Ittner et al., 2003), environmental
performance measurement systems may help companies
translate their environmental motivations into improved
performance. More specically, they are expected to play
such a mediation role through their inuence on peoples
behavior and on organizational capabilities (Franco-Santos
et al., 2012). Concerning the behavioral impacts, the use of
performance measures may help to concentrate the efforts
of executives on what is important for the organization,
to foster the cooperation and coordination among people,
and to improve employees motivation toward the achievement of the rms objectives. Regarding the inuence
on organizational capabilities, performance measurement
systems may facilitate both single- and double-loop learning through the routines they stimulate.
Yet, performance measurement is not without its critics (Melnyk et al., 2014), and there are reasons to expect
that, in the environmental context, the introduction of
formal performance measurement systems may be particularly problematic or even counterproductive. First,
commensuration problems are likely to create challenges,
as sufciently established measurement practices are still
lacking for many environmental impacts such as those
associated with carbon emissions or water use (Hartmann
et al., 2013; Unerman and Chapman, 2014). If environmental performance measures are perceived to have low
controllability or technical validity, their use particularly when linked with rewarding can negatively affect
motivation and other job-related attitudes, ultimately
endangering performance (Franco-Santos et al., 2012).
Alternatively, companies could focus their efforts primarily on easily quantiable environmental measures such as
energy consumption and overlook other aspects potentially of more critical importance but harder to quantify
for example, carbon emissions or biodiversity (Arjalis
and Mundy, 2013). A second challenge with formal performance measurement systems, which may be particularly
severe in the environmental context, is their potentially
negative effect on intrinsic motivation (Adler and Chen,
2011). Indeed, improving environmental performance can
provide signicant personal rewards for many employees (Virtanen et al., 2013). In this setting, a focus on the
use of informal systems and the role of behavioral aspects
could be critical in providing employees with the intrinsic
motivation to achieve environmental goals (Epstein, 2010).
On the contrary, an excessive economic rationalization
of environmental concerns through formal performance
measurement systems could have negative motivational
consequences (Virtanen et al., 2013).
With the aim of further exploring the (theoretically
unclear) role of performance measurement in the environmental context, this paper denes environmental
performance measurement systems as the extent to which
Environmental Performance Measures (EPM) are used by
managers for a variety of different purposes pertaining to
both the decision-making and decision-control (decisioninuencing) roles of management accounting information
(Luft and Shields, 2003).1 A comprehensive model is thus
developed in which the use of EPM mediates the relationships among rms environmental motivations and
corporate performance (see Fig. 1).
More specically, it is proposed that EPM use is positively inuenced by expected competitive advantage
(H1a), perceived stakeholders concern (H1b), and top
managements environmental commitment (H1c). EPM
1
In so doing, this study adopts a more specic and comprehensive
operationalization than those employed in previous research. For example, Perego and Hartmann (2009) focus on decision-control exclusively,
Passetti et al. (2014) consider only decision-making, whereas Henri and
Journeault (2010) refer to a broad, single item for internal decision-making
together with other generic uses of EPM (namely, monitoring compliance
with policies and regulations, motivating continuous improvement, and
providing data for external reporting).
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Expected
competitive
advantage
H1a
Perceived
stakeholders
concern
H2a
H1b
EPM use
Environmental
performance
H2b
Economic
performance
H1c
Top managements
environmental
commitment
Fig. 1. General theoretical model.
use, in turn, enhances a companys environmental performance (H2a) and, through this, its economic performance
(H2b) as well. Control paths in Fig. 1 are shown as
dotted lines to represent a test for the possibility of a
direct association between environmental motivations and
environmental performance. Such direct links would be
observed if environmentally motivated rms adequately
aligned their organizational and behavioral structures to
the goals of environmental protection even in the absence
of specic environmental performance measurement systems, for example by relying on their traditional control
systems or through more soft and informal mechanisms
such as cultural controls (Epstein, 2010).
2.2. Environmental motivations and EPM use (H1a, H1b,
H1c)
Expected competitive advantage is dened here as the
belief that proactive environmental initiatives represent a
source of competitive advantage and improve long-term
protability. The search for competitive advantage has
been repeatedly recognized as a fundamental, businessoriented motivation for environmental proactivity (see,
e.g., Banerjee et al., 2003; Bansal and Roth, 2000; Paulraj,
2009). Empirical ndings from the environmental management literature have generally conrmed that companies
adhering to this business case rationale (Laine, 2005) tend
to adopt voluntary and innovative environmental management activities aimed at improving their environmental
performance (Sharma, 2000). However, this traditionally
positive relationship between a rms economic motivations and its environmental proactivity has been recently
called into question by Boiral and colleagues (2012), who
nd that in their sample of Canadian rms the possible economic benets that could result from environmental
initiatives are negatively related with their commitment to
reduce greenhouse gas emissions.
In the management accounting literature, however,
various arguments suggest that a competitive advantage rationale provides a strong incentive for managers
to invest in environmental management accounting and
control systems that quantify the costs, benets, and operational outcomes of proactive environmental management
(Burnett and Hansen, 2008). Because management control
systems are adopted to assist managers in achieving some
desired organizational outcomes, organizations adhering
to the business case rationale for corporate environmentalism should develop environmental management control
systems to support the implementation of their environmental initiatives (Pondeville et al., 2013). This expectation
can be expected to hold, in particular, with respect to
rms performance measurement systems, which play a
major role in aligning management processes with the
achievement of the rms objectives (Otley, 1999). More
specically, rms that perceive corporate environmentalism as key value driver leading to enhanced rm value
should make more extensive use of EPM for decisionmaking to align their goals and resource allocation with this
value driver and to ensure that the expected economic benets actually materialize (Ittner et al., 2003). In addition,
the business case rationale for corporate environmentalism should also positively affect EPM use for control (i.e.,
performance evaluation and rewarding) purposes. Indeed,
incentive systems should encompass environmental criteria if top management wants to align employees efforts
toward environmental protection as this is perceived to
have positive consequences on prot (Gabel and SinclairDesgagn, 1993).
Based on the aforementioned arguments, the following
hypothesis is proposed:
H1a. EPM use for decision-making and control is positively inuenced by expected competitive advantage.
As shown in Fig. 1, the second determinant of EPM use
is represented by perceived stakeholders concern, which
has been variously recognized as an inuential, external
motivation for corporate environmentalism (Buysse and
Verbeke, 2003; Henriques and Sadorsky, 1999). Perceived
stakeholders concern is dened here as the perceived
degree of concern a companys stakeholders demonstrate toward the natural environment. Indeed, managers
subjective evaluations of stakeholders pressures not
stakeholders pressures as such determine the role of
stakeholders in the adoption of environmental initiatives
(Ervin et al., 2013).
Stakeholders-oriented arguments have been extensively applied within the environmental management
literature to explain why rms may voluntarily adopt environmental protection initiatives that are not required by
law (Plaza-beda et al., 2009). On the contrary, they have
not been subject to thorough investigation in management control research (Pondeville et al., 2013). Yet, from
a management control perspective, management must
consider and weigh stakeholders concerns when designing and implementing performance measurement systems
(Ferreira and Otley, 2009). Therefore, organizations should
be expected to reinforce their environmental performance
measurement mechanisms when perceived stakeholders
pressures intensify (Songini and Pistoni, 2012). In this
respect, Rodrigue et al. (2013) provide some preliminary
evidence regarding stakeholders nuanced inuences on
the choice of EPM in their case-study organization. In particular, organizations should make more extensive use of
EPM for decision-making purposes as a means to improve
their alignment with stakeholders growing environmental concerns (Henriques and Sadorsky, 1999) as well as to
achieve legitimacy in the stakeholders eyes (Bansal and
Roth, 2000). Organizations should also make more extensive use of EPM for performance evaluation and rewarding
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to further direct managerial effort toward stakeholders environmental priorities (Berrone and Gomez-Mejia,
2009a).
However, in the absence of specic mandatory regulations, it could also be argued that perceived pressures
from stakeholders are quite weak and lead to supercial responses that are detached from companies internal
functioning (Boiral et al., 2012; Ervin et al., 2013).2 According to this skeptical view, companies could, for example,
measure and report EPM to promote a legitimate image
outside the organization, but at the same time ignore such
information in relation to their internal decision-making
and control processes. Such a ceremonial response, while
theoretically plausible, is nevertheless considered to be
rather myopic and possibly counterproductive when stakeholders environmental pressures are particularly strong,
as key stakeholders are unlikely to be fooled by imageenhancing activities (Berrone and Gomez-Mejia, 2009b).
On the contrary, achieving legitimacy in such a context is
likely to require relatively substantial practices (Berrone
and Gomez-Mejia, 2009a).
Based on the preceding discussion, the following
hypothesis is formulated:
H1b. EPM use for decision-making and control is positively inuenced by perceived stakeholders concern.
The third determinant of EPM use (see Fig. 1) is top
managements environmental commitment, a motivation
which stems from the concern that top executives have for
their social obligations as well as the social good (Bansal
and Roth, 2000). The literature has long recognized that
one of the main drivers to the adoption of environmental initiatives by rms is represented by top managements
ethical values and attitudes toward environmental ills (see,
e.g., Banerjee et al., 2003; Bansal and Roth, 2000; Keogh
and Polonsky, 1998; Paulraj, 2009). In this respect Keogh
and Polonsky (1998), by leveraging on the organizational
commitment literature (Meyer and Allen, 1991), advance
the notion of affective environmental commitment, which
encompasses the individuals emotional attachment to,
identication with and involvement in supporting environmental concerns. The authors argue that, by nature of
its deep emotional attachment, such an affective commitment provides the impetus to embrace as global a view as
possible and expend great effort in the pursuit of the environmental goals that view engenders. Managers affectively
committed to the natural environment will constantly seek
to explore any and all opportunities that present themselves and to craft alternative solutions to capitalize on
such opportunities. Environmentally committed managers
can therefore be expected to follow through on their commitment to the natural environment by amongst other
things promoting EPM use to ensure the business is operating in accordance with their environmental concerns and
priorities.
2
The possibility of a disconnect between the measures adopted by
companies in response to external pressures and rms internal practices
has been highlighted by various schools of thought, and particularly by
institutional research (Baxter and Chua, 2003).
These arguments lead to the following hypothesis:

H1c. EPM use for decision-making and control is positively inuenced by top managements environmental
commitment.
2.3. EPM use and corporate performance (H2a, H2b)
As shown in Fig. 1, the two performance dimensions
considered in the theoretical model are environmental performance and economic performance. Indeed, this study
investigates the direct effect of EPM use on environmental
performance (H2a), as well as the indirect effect of EPM use
on economic performance through environmental performance (H2b).
With respect to environmental performance, there is
no clear agreement concerning the denition and operationalization of this construct (Ilinitch et al., 1998) and its
most appropriate boundaries (Gray and Milne, 2004). Definitions have ranged from quite narrow ones focused on
environmental impacts, such as waste or toxic releases (AlTuwaijri et al., 2004; Burnett and Hansen, 2008), to broader
conceptualizations based either on rating agencies scores
(Cho et al., 2012) or on multidimensional, subjective assessments directly made by sample respondents (Henri and
Journeault, 2010). At the extreme, it has even been argued
that environmental performance at the organizational level
should be abandoned altogether in favor of regional and
eco-system levels (Gray and Milne, 2004). In this study,
environmental performance is dened as a rms effectiveness in meeting and exceeding societys expectations
with respect to concerns for the natural environment
(Judge and Douglas, 1998, page 245). This denition was
chosen as it does not restrict the scope of this multidimensional construct to environmental impacts only, but
it adopts a societal perspective that also considers the
capacity of the organization to establish harmonious relationships with external green-oriented stakeholders (Henri
and Journeault, 2010).
Concerning the link between EPM use and environmental performance, a few empirical studies show a positive
relationship between some aspects of management control systems and environmental performance (e.g., Henri
et al., 2014; Henri and Journeault, 2010; Judge and Douglas,
1998; Wisner et al., 2006). Among management control
mechanisms, environmental performance measurement
systems could also be expected to be positively associated
with environmental performance.
On the one hand, the use of EPM for decision-making
purposes allows for the integration of environmental
concerns within organizational routines and processes.
This enhances environmental performance by clarifying
expectations, reducing the ambiguity associated with
tasks related to achieving environmental strategies,
and providing a coherent reection of environmental
priorities (Chenhall, 2005). Indeed, managers need a
considerable amount of information from their environmental accounting systems to support decision-making
in relation to cost reduction, process and production efciency, regulatory compliance, and product improvement
(Burritt et al., 2002). By revealing the cause-and-effect
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relationships among environmental operations, strategies

and goals, or between environmental and organizational
issues (Chenhall, 2005), environmental performance
measurement systems improve the decision-making
process (Burritt and Schaltegger, 2010) and contribute to
environmental performance.
On the other hand, the use of EPM for control purposes
(such as performance evaluation and rewarding) promotes
environmental goal congruence between individuals and
the organization (Flamholtz et al., 1985). It motivates people to align their behavior with the environmental goals
of the organization and to exert additional effort (Bonner
et al., 2000), which in turn should improve environmental performance. Indeed, if performance is rewarded based
only on economic parameters, managers quickly recognize that eventual trade-offs on the environment are
acceptable and, thus, environmental performance will be
negatively affected (Epstein, 1996). On the contrary, the
use of EPM for performance evaluation and rewarding
sends a clear message from top-management that environmental performance is important to the rm, forcing
managers to focus on both prot-related activities and
activities related to environmental performance (Gabel and
Sinclair-Desgagn, 1993).
The aforementioned arguments lead to the following
hypothesis:
H2a. Environmental performance is positively inuenced
by EPM use for decision-making and control.
Concerning the other performance dimension considered in the model (Fig. 1), the literature reports contrasting
arguments for a direct effect of environmental performance measurement and control systems on economic
performance, that is performance expressed in nancial
metrics. On the one hand, such mechanisms are used to
encourage desirable actions (Merchant, 1998), which can
have major economic consequences in relation to environmental issues through, e.g., cost reductions, improved
product pricing, attraction of human resources and reputational improvements (Ferreira et al., 2010). On the other
hand, environmental performance measurement and control systems may also have some costs that offset their
benets, such as promoting information overload, spreading managerial efforts over too many objectives, reducing
motivation by including multiple goals that are inconsistent in the short term, and increasing administrative
costs relative to simpler systems (Henri and Journeault,
2010). Empirical evidence suggesting there is no direct
relationship between environmental control systems and
economic performance is provided by Henri and Journeault
(2010) and by Henri et al. (2014).
Yet, if EPM use has no direct effect on economic
performance, it may indirectly inuence it through environmental performance. Such a mediation effect may be
expected based on the eco-efciency thesis (Burnett and
Hansen, 2008). Eco-efciency challenges the traditional
economic view according to which improving environmental performance inevitably contributes to penalties,
such as increased lead times, reduced quality or increased
costs, ultimately decreasing returns to stockholders
(Melnyk et al., 2003). On the contrary, proponents of the
eco-efciency thesis argue that pollution is a form of

economic inefciency and, thus, reductions in pollution
actually increase productive efciency and thereby reduce
costs (Porter and van der Linde, 1995). Therefore, in
contrast with the traditional win-lose model of pollution control and cost management, eco-efciency reects
an underlying winwin paradigm (Burnett and Hansen,
2008). Robust empirical support for this thesis is provided
by Al-Tuwaijri et al. (2004). The authors, by controlling for
endogeneity concerns through a simultaneous equations
approach, are able to conclude that higher environmental
performance is signicantly associated with higher economic performance. Similarly, Burnett and Hansen (2008)
provide both cross-sectional and longitudinal evidence
suggesting that lower polluting plants are also more efcient.
The use of EPM for both decision-making and control has been linked to environmental performance (H2a).
As argued above, environmental performance positively
affects economic performance. Therefore, EPM use is
expected to have indirect implications for economic performance by inuencing an intermediary level of performance
environmental performance which in turn inuences
economic performance.
The following hypothesis is thus proposed:
H2b. Economic performance is positively inuenced by
EPM use for decision-making and control through environmental performance.
2.4. Control variables
To control for the potentially spurious effects of other
factors on the relationships under investigation, the model
includes as control variables: (i) size, (ii) industry, (iii)
performance measurement quality, and (iv) the presence of a certied environmental management system.
These factors have been chosen as their inuence has
been documented in past environmental management and
accounting research (Banerjee et al., 2003; Ferreira et al.,
2010; Henri and Journeault, 2010).
As larger rms are more likely to adopt sophisticated management accounting techniques (Bouwens and
Abernethy, 2000), size is likely to affect companies
environmental performance measurement systems. In
addition, size may inuence the link among EPM use and
economic and environmental performance, as the potential
cost savings or revenue improvements related to environmental matters may be more important for larger rms
(Henri and Journeault, 2010). Industry is an important variable driving the type and degree of external pressures
organizations are facing with respect to environmental
issues (Banerjee et al., 2003); thus, industry can alter
organizations responses to such issues and, consequently,
their environmental performance measurement systems
as well. In addition, organizations that operate in industries
that have a greater impact on the environment are more
likely to use environmental management control systems
because they will enjoy more material benets (Ferreira
et al., 2010). The perceived quality of EPM is also included
as a control. Indeed, if the quality of EPM is perceived to
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be particularly low, it is likely that their use is hindered

(Abernethy et al., 2004). Finally, the model controls for the
presence of a ISO 14001 or EMAS certied environmental
management system (Melnyk et al., 2003).
3. Research method
3.1. Sample selection and data collection
Data were collected using a web-based questionnaire
administered to a target sample of Italian organizations
from a variety of industries. Survey data were also complemented with archival data whenever possible.
The survey was administered with the contribution of
the Italian branches of two of the worlds leading bodies
in the eld of management systems certication services
Bureau Veritas and DNV GL Business Assurance who acted
as the legitimate authority (Dillman, 2000) to increase the
response-rate. A non-random purposive sampling strategy was applied as it was considered better suited than
a fully random sampling approach given the novelty of
the eld under investigation. In particular, only companies with more than a hundred employees as listed in
the sponsors client databases were selected because
they were expected to have more developed environmental performance measurement systems (Perego and
Hartmann, 2009). A total of 443 potential respondents were
comprised in the nal target sample. It was requested
that the companys Sustainability/Corporate Responsibility manager (or, in absence, the person most responsible for
environmental aspects within the rm) be involved in the
survey. Such a prole, indeed, emerged as the most knowledgeable respondent about the topics under investigation
during the pre-tests of the questionnaire with several professionals in the eld.3
The web-survey was administered using a slightly modied version of the implementation strategy suggested
by Dillman (2000): a pre-notice mailing to alert about
the study; a rst mailing containing the link to access
the web-based questionnaire; and three follow-ups. To
encourage completion of the questionnaire, participants
were promised a summary of the results and assured condentiality (Dillman, 2000).
Of the 443 distributed questionnaires, 124 were
received (28%). Of these returned questionnaires, nineteen
were dismissed because the respondent declared the issues
investigated were not applicable to the company. Moreover, fourteen questionnaires with multiple missing values
on dependent variables were excluded from hypothesis
testing to avoid any articial increase in relationships with
independent variables (Hair et al., 2010). For the remaining
3
In some instances, respondents were senior ofcers from the Sustainability/Corporate Responsibility or environmental functional areas,
and in others they were general managers, quality, HR, manufacturing or
nancial managers. Respondents were generally members of the top management team, as only 1.56 hierarchical levels separated on average
respondents from their companies CEOs, and their mean company tenure
was 12.45 years. Such a high-level prole seems appropriate to obtain
valid and reliable subjective evaluations of companies characteristics and
policies.
sample of 91 cases, the level of randomness in missing values was tested with Littles missing completely at random
(MCAR) test and the result was found to be acceptable
(2 = 231.837, DF 227, and Sig. 0.399). Therefore, in a small
number of other cases individual missing values were
replaced with mean values (Hair et al., 2010). This resulted
in a complete data set of 91 responses, for a nal response
rate of 20.5%, which compares favorably with prior environmental management accounting survey-based studies
(see, e.g., Ferreira et al., 2010; Pondeville et al., 2013).
Nevertheless, the possibility of non-response bias was
also investigated. In particular, early and late responses
were compared in paired samples of 45, 30 and 15 using
both an independent samples t-test and its non-parametric
equivalent, the MannWhitney U-test. The results (not
reported) show that there are no signicant differences on
any of the study variables including demographic and
control variables with the sole exception of economic
performance, which is higher for late respondents compared to early respondents when paired samples of 30
are considered.4 In addition, during some follow-up phone
calls, I discussed with approximately 40 non-respondents
their reason(s) for not completing the questionnaire. These
reasons were mainly time pressures and receiving too
many surveys, which are similar to those reported in other
studies (Chenhall, 2005; Hall, 2008). Overall, these tests
indicate that there is no signicant non-response bias in
the sample.
I also estimated the extent to which the common
method variance affects the results by performing two
statistical tests: Harmans (1976) one factor test and partialling out a marker variable (Lindell and Whitney, 2001).
According to the rst test, if a substantial amount of
common method variance exists in the data, then either
a single factor will emerge out of an exploratory factor analysis or one factor will account for the majority
of the variance in the measurement items used in the
model. The un-rotated exploratory factor analysis, using
the eigenvalue-greater-than-one criterion, revealed ve
distinct factors that accounted for 70.18% of the variance,
with the rst factor capturing 39.03% of the variance in
the data. According to the second test, if a variable can
be identied that is theoretically unrelated to at least one
other variable in a study (preferably the dependent variable), then it can be used as a marker variable in controlling
for the common method variance (Lindell and Whitney,
2001). Following the approach by Elbashir et al. (2011), I
used respondents age as the unrelated marker variable as
a surrogate for the common variance and examined the PLS
structural model both with and without the marker variable. The ndings (not reported) show the marker variable
is not statistically signicant and the original results are
4
Indeed, when applied to paired samples of 30, the independent
samples t-test shows that economic performance is higher for late
respondents (X = 3.03) as compared to early respondents (X = 9.36)
(t = 2.214, p = 0.031). However, a statistically signicant difference is not
conrmed by the MannWhitney U-test. In addition, no statistically signicant differences emerge when comparing paired samples of 15 and 45
according to both tests. Therefore, it seems possible to conclude that the
overall sample is not systematically biased in this respect.
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Table 1
Demographic variables and sample composition (n = 91).
Variable
Minimum
Panel A: Descriptive statistics for demographic variables

1
Job tenure (years)
2
Company tenure (years)
30
Age (years)
a
0
Hierarchical level
Maximum
Mean
SD
25
34
62
5
8.49
12.45
43.83
1.56
5.43
8.13
7.81
0.86
Frequency
Panel B: Respondents by functional area

Sustainability/Environmental
General management
Quality
HR
Other
33
9
25
7
11
38.8
10.6
29.4
8.2
12.9
Panel C: Respondents by education

High school
University degree
Master degree
Doctorate degree
26
36
21
5
29.5
40.9
23.9
5.5
Panel D: Respondents by gender

Male
Female
55
33
62.5
37.5
Panel E: Respondents by industry category (SIC codes)

Agriculture, mining and construction (0119)
Manufacturing (2039)
Transportation and utilities (4049)
Wholesale and retail (5059)
Services (6089)
10
47
7
7
20
11.0
51.6
7.7
7.7
22.0
Measured by asking respondents how many hierarchical levels separate them from their companies CEOs.
not affected by its inclusion in the model. Together these

procedures suggest that the common method bias does not
seriously affect the results of this study.
Demographic information was collected from respondents regarding role, job tenure, company tenure, hierarchical level, education level, age, gender and main industry.
Table 1 reports the descriptive statistics and frequencies for
these variables.
factorability of the items,5 the design of all measurement

instruments was based on the results of principal components analysis and Cronbach alpha statistics of internal
reliability (Nunnally, 1978). Table 2 contains an overview
of the wording of items in the nal analysis together with
the results of the factor and reliability analysis. Descriptive
statistics, based on the average scores of multi-item
variables, are presented in Table 3.
3.2. Variable measurement

The questionnaire solicited respondents subjective
appreciation regarding: the use of EPM for decision-making
and control, expected competitive advantage, perceived
stakeholders concern, top managements environmental
commitment and environmental performance. Established
scales were used whenever available. Economic performance was measured through archival data.
An initial survey draft was circulated among four academic scholars with substantive or psychometric expertise
and was pre-tested by four professionals from the two survey sponsors and three managers (not part of the sample)
for clarity, understandability, ambiguity, and face validity (Dillman, 2000). This resulted in minor changes to the
wording of some items and to the questionnaires layout.
The questionnaire was then translated into Italian by applying the back-translation procedure proposed by Behling
and Law (2000).
The psychometric properties of the measurement
scales were also assessed prior to including them in the
PLS measurement model. In particular, after checking the
3.2.1. EPM use

EPM can be dened as specic expressions that provide information about . . . [the] results of an organizations
management of its environmental aspects (ISO, 1999).
To enhance the understandability and uniformity of interpretation on the part of survey respondents, a denition
of EPM based on the Global Reporting Initiative (GRI) G3
guidelines was provided in the introductory section of
the studys questionnaire. Indeed, because the GRI guidelines represent the de facto global standard for corporate
responsibility reporting (KPMG, 2011), they are supposed
to be familiar to most organizations. In particular, GRI G3
EPM cover the performance related to inputs (e.g., materials, energy, water), outputs (e.g., emissions, efuents,
waste), biodiversity, environmental compliance, and other
5
The Bartlett test of sphericity showed that nonzero correlations
existed at a signicance level of 0.000 for all the variables. The
KaiserMeyerOlkin measures of sampling adequacy were above 0.7 in
all cases (Hair et al., 2010).
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Table 2
Principal component analysis and Cronbach alphas for the main variables (n = 91).
Factors and Cronbach alphas
Factor loadings
Panel A: EPM use ( = 0.895, Eigenvalue = 4.31, 61.51% of variance)

Evaluate managers performance (Item 1)
Incentivize and reward managers (Item 2)
Establish formal strategic objectives (Item 3)
Evaluate and approve capital expenditures (Item 4)
Make product decisions, e.g.: product price, product mix (Item 5)
Select/assess external suppliers (Item 6)
The daily management and operational decisions, e.g.: assess make-or-buy alternatives, assess the manufacturing
process to use (Item 7)
0.764
0.723
0.854
0.751
0.825
0.760
0.806
Panel B: Expected competitive advantage ( = 0.864, Eigenvalue = 2.85, 71.21% of variance)

Being environmentally conscious can lead to substantial cost advantages for our rm (Item 1)
Our rm can enter lucrative new markets by adopting environmental strategies (Item 4)
Our rm can increase market share by making our current products more environmentally friendly (Item 5)
Reducing the environmental impact of our rms activities will lead to a quality improvement in our products and
processes (Item 6)
0.725
0.859
0.936
0.842
Panel C: Perceived stakeholders concern ( = 0.834, Eigenvalue = 2.69, 67.38% of variance)

Our stakeholders feel that environmental protection is a critically important issue facing the world today (Item 1)
The public is very concerned about environmental destruction (Item 2)
Our customers are increasingly demanding environmentally friendly products and services (Item 3)
Our stakeholders expect our rm to be environmentally friendly (Item 4)
0.763
0.796
0.853
0.867
Panel D: Top managements environmental commitment ( = 0.963, Eigenvalue = 2.81, 93.74% of variance)
The top management team in our rm is committed to environmental preservation (Item 1)
Our rms environmental efforts receive full support from our top management (Item 2)
Our rms environmental strategies are driven by the top management team (Item 3)
0.973
0.976
0.956
Panel E: Environmental performance ( = 0.896, Eigenvalue = 3.07, 76.75% of variance)

Complying with environmental regulations (i.e., emissions, waste disposal) (Item 1)
Limiting environmental impact beyond compliance (Item 2)
Preventing and mitigating environmental crises (i.e., signicant spills) (Item 3)
Educating employees and the public about the environment (Item 4)
0.902
0.895
0.866
0.840
Table 3
Descriptive statistics (n = 91).
Variable
Mean
SD
Theoretical range
Actual range
Panel A: Descriptive statistics (for scale variables)

EPM use
Expected competitive advantage
Perceived stakeholders concern
Top managements environmental commitment
Economic performance
Size (ln n. employees)
EPM perceived quality
3.66
5.18
5.69
5.72
5.37
3.92%
5.92
5.22
1.12
1.05
0.83
1.10
0.91
18.15
1.44
1.17
1.007.00
1.007.00
1.007.00
1.007.00
1.007.00
NA
NA
1.007.00
1.006.00
2.007.00
1.757.00
1.007.00
2.007.00
79% to 77%
4.2811.29
1.007.00
Variable
Frequency
Panel B: Frequencies (for dummy variables)

Industry = 1 (manufacturing)
Industry = 0 (non-manufacturing)
Certication = 1 (certied environmental management system)
Certication = 0 (no certied environmental management system)
47
44
46
45
51.60
48.40
50.50
49.50
relevant information such as environmental expenditures

and the impacts of products and services (GRI, 2006).
As previously mentioned, this paper investigates the
extent to which EPM are used within organizations6 for
a variety of different purposes pertaining to both the
decision-making and decision-control roles of management accounting information (Luft and Shields, 2003).
6
The corporate level of analysis employed in the study is consistent
with prior environmental management accounting literature (e.g., Henri
and Journeault, 2010; Perego and Hartmann, 2009).
Given the absence of an established scale simultaneously

capturing the extent to which EPM are used by managers for both decision-making and control, an instrument
was developed by adapting to the environmental context
items from Ittner and Larcker (2001), Perego and Hartmann
(2009) and Gerdin (2005). The instrument consists of seven
items measured over a seven-point fully anchored Likert
scale, asking the respondent to rate to what extent (ranging from 1 = not at all to 7 = totally) his/her rm uses EPM
for a variety of purposes. In particular, for decision-making,
two items (namely, establishing formal strategic objectives and evaluating capital expenditures) were derived
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from Ittner and Larcker (2001) and three items (regarding product decisions, suppliers selection and operational
decisions) were adapted from Gerdins (2005) list. For
decision-control, one item (i.e., evaluating managerial performance) was adapted from Ittner and Larcker (2001)
and one item (incentivizing and rewarding managers) was
taken from Perego and Hartmann (2009).
As reported in Table 2, the results of an exploratory
factor analysis show that the seven-item scale is onedimensional; indeed, each item loads on the same factor
above 0.723.7 This factor explains 61.51% of the variation.
The Cronbach alpha for the scale is 0.895, well above the
conventional lower limit of 0.7. However, because the scale
has not been used in prior research, I performed additional
tests to examine the extent to which it converged with
alternative measures of EPM use. First, respondents were
asked whether there were any environmental targets
amongst the objectives formally assigned to managers
within their rms (yes/no). A dichotomous variable was
then obtained by coding 1 for afrmative answers and
0 for negative ones. I deliberately chose an alternative
measure that was different in format (forced choice) from
the seven-point Likert type scale to be consistent with the
principle of maximally dissimilar forms of ratings, urged
in the literature on convergent validation (Hall, 2008). The
point-biserial correlation between the multi-item measure
and the dichotomous measure is 0.497 (p < 0.001), providing reasonably strong support for the convergent validity
of the seven-item measure used in the study.8 In addition,
respondents answering afrmatively to this same question
were also asked to indicate: the percentage of managers to
whom such environmental targets were formally assigned,
and what percentage (if any) of managers variable compensation depended, on average, upon the achievement
of such environmental targets. The Pearson correlation
coefcients among the seven-item scale for EPM use and
these two percentages are, respectively, 0.486 (p < 0.001)
and 0.521 (p < 0.005), providing additional support for the
convergent validity of the seven-item measure. Finally, as
a test of discriminant validity, I examined the relationship
among the multi-item measure of EPM use for internal
decision-making and control and a measure of EPM use
for external accountability purposes, i.e., a dichotomous
variable equal to 1 if the company publishes an Environmental/Sustainability report and 0 otherwise. As expected,
the point-biserial correlation between the multi-item
7
Therefore, at rst glance respondents do not seem to clearly distinguish among the decision-making and the decision-control use of EPM. To
examine more in depth whether the theoretical distinction between these
two different uses of EPM could be supported by the empirical data, a further factor analysis (with oblique Oblimin rotation) was run imposing two
factors. Results provide evidence for the existence of two dimensions as
expected. Indeed, the ve items for decision-making load on the rst factor, whereas the two items for decision-control load on the second factor.
However, due to the problem of justifying the number of factors imposed,
the analyses that follow are based on the one-dimensional solution. Yet,
the PLS model was also tested by distinguishing between the two dimensions of EPM use. Results from these additional analyses are presented in
Section 4.3.
8
I calculated the score for each respondent on the seven-item scale as
an average of the seven items.
measure and the dichotomous measure is not signicant

(0.141; p > 0.1), providing support for the divergent validity
of the seven-item measure used in the study.
3.2.2. Expected competitive advantage, perceived
stakeholders concern and top managements
environmental commitment
The items to measure expected competitive advantage,
perceived stakeholders concern and top managements
environmental commitment were drawn from the corresponding scales developed by Banerjee et al. (2003).9
Specically, expected competitive advantage was measured by asking respondents their agreement (ranging
from 1 = completely disagree to 7 = completely agree) on six
statements concerning the competitive advantage benets
(in terms of cost savings, quality improvements and growth
opportunities) perceived to be derived from environmental initiatives. Exploratory factor analysis supported the use
of only four items. These items load, as expected, on a single factor, explaining 71.21% of the variation. The Cronbach
alpha is 0.864.
Perceived stakeholders concern was measured by
asking respondents their agreement (ranging from
1 = completely disagree to 7 = completely agree) on four
statements concerning their perceptions of importance
assigned by the companys stakeholders to protecting
the environment and the potential customer demand
for environmentally friendly products and services. The
results of an exploratory factor analysis show that the
four-item scale is one-dimensional, with each item loading
on the same factor above 0.76. This factor explains 67.38%
of the variation. The Cronbach alpha is 0.834.
Finally, top managements environmental commitment
was measured by asking respondents their agreement
(ranging from 1 = completely disagree to 7 = completely
agree) on three items concerning their evaluation of top
managements commitment to and support for environmental initiatives. The results of an exploratory factor
analysis show that the three-item scale is one-dimensional,
with each item loading on the same factor above 0.95. This
factor explains 93.74% of the variation. The Cronbach alpha
is 0.963.
The measures described above are congruent with the
nature of the studys independent variables, which refer
to managements subjective appreciation of environmental
motivations rather than to their objective strength, consistent with prior studies (Ervin et al., 2013; Pondeville et al.,
2013). Nevertheless, to verify the accuracy of the respondents subjective evaluations, whenever possible I checked
the extent to which they converged with more objective,
proxy measures used in the literature. The results provide support for the validity of the subjective assessments
employed in the study.10
9
These scales have also been applied by another study in a different
country (Fraj-Andrs et al., 2009), providing evidence of their robustness.
10
In particular, industry membership was used as a proxy measure for
expected competitive advantage because companies operating in highly
polluting industries, being exposed to higher future environmental costs,
are more likely to foresee potential cost savings in relation to environmental matters (Ervin et al., 2013; Henri and Journeault, 2010). Consistent
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3.2.3. Environmental and economic performance

Consistent with prior literature (e.g., Boiral et al., 2012;
Henri and Journeault, 2010; Judge and Douglas, 1998),
environmental performance is measured using a perceptual instrument. As several authors argue, in terms of
consistently providing a valid and reliable performance
assessment, neither objective nor subjective measures are
superior (Chenhall, 2003). In this study, the items to measure environmental performance were drawn from the
scale developed by Judge and Douglas (1998). In particular, four questions asked the respondents to rate their
rms performance in 2010, compared to other competitors
across the industry, on several environmental dimensions
(such as compliance with environmental regulations and
limitation of environmental impact beyond compliance).
Answer categories ranged from 1 = much worse to 7 = much
better, such that a higher score indicates better environmental performance. The results of an exploratory factor
analysis show that the four-item scale is one-dimensional,
with each item loading on the same factor above 0.84. This
factor explains 76.75% of the variation. The Cronbach alpha
for the scale is 0.896. To establish the validity of the subjective appreciations made by the respondents, the mean
score of the items was compared with more objective data
collected through some questions positioned elsewhere in
the questionnaire.11 Such tests provide some support for
the validity of the subjective measure used in the study.
Economic performance is measured by relying on
archival data. Prior environmental studies have used both
accounting-based and market-based measures to represent economic performance. For example, Spicer (1978)
used both accounting-based and market-based metrics
(protability and the price-earnings ratio). King and Lenox
(2002) used accounting-based measures, whereas AlTuwaijri et al. (2004) preferred market-based measures. In
this study, because the majority of rms in the sample are
with such arguments, a positive and signicant correlation has been established between the mean score of the four items as provided by survey
respondents and a dummy variable equal to one for companies operating
in the chemical industry (0.19; p < 0.05), a sector characterized by high
environmental impact (Banerjee et al., 2003; Perego and Hartmann, 2009).
On the contrary, the mean score of the four items was negatively and
signicantly correlated with membership in the service industry (0.18;
p < 0.05), a relatively low polluting industry in which cost advantages are
generally not foreseen (Ervin et al., 2013). Concerning perceived stakeholders pressures, company size and ownership (i.e., listed status) were
used as proxy measures of companies public visibility and, therefore,
of the strength of stakeholders pressures with respect to environmental issues (Ervin et al., 2013; Henri and Journeault, 2010). As expected,
a positive and signicant correlation has been established between the
mean score of the four items as provided by survey respondents and (i)
the natural log of the rms employees (0.24; p < 0.05), and (ii) a dummy
variable equal to one for listed companies (0.17; p < 0.1).
11
More specically, respondents were asked to indicate the total quantity of waste both produced and recycled by their rms throughout
2010. Respondents answered such questions in 27 cases. Positive and
slightly signicant correlations have been established between the mean
score of environmental performance as provided by survey respondents
and (i) the percentage of recycled waste over produced waste (0.25;
p < 0.1), and (ii) the quantity of recycled waste divided by the rms operating revenues (0.27; p < 0.1). Therefore, the rms that reported having
good environmental performance are those that recycle more. A similar
proxy of environmental performance has been employed by Al-Tuwaijri
et al. (2004).
11
not publicly quoted, I used the return on capital employed

(ROCE), a standard accounting measure of operating profitability. ROCE data were collected from Amadeus, a
database developed by Bureau Van Dijk Electronic Publishing that contains nancial data about European companies.
To control for industry inuences, I subtracted from each
rms ROCE the average industry ROCE, based on a rms
dominant four-digit SIC code. This method of controlling
for industry effects has been used frequently (Agle et al.,
1999).
3.2.4. Control variables
Size is measured using the natural log of the number of employees (Henri and Journeault, 2010), as derived
from the Amadeus database. Industry is measured as
a dummy variable, distinguishing among manufacturing
(SIC codes 2039 inclusive) and non-manufacturing rms,
because manufacturing rms are considered to be more
environmentally sensitive (Melnyk et al., 2003). Companies industrial codes were also derived from the Amadeus
database. The perceived quality of EPM is measured
through a single-item instrument drawn from Abernethy
et al. (2004). Finally, the presence of a certied environmental management system is measured through a
dummy variable based on the respondents answers to a
question asking them whether the majority of their rms
facilities are certied according to the ISO 14001 or EMAS
standards.
3.3. Partial Least Squares (PLS) structural equation
modeling
PLS was used to test the research model.12 PLS is a
component-based structural equation modeling technique
that simultaneously tests the psychometric properties of
the scales used to measure the constructs (i.e., measurement model) and examines the strength of the relations
between the constructs (i.e., structural model) (Chin, 1998).
Over the last few years, a growing number of accounting
studies using PLS have been published (e.g., Chapman and
Kihn, 2009; Elbashir et al., 2011; Pondeville et al., 2013).
PLS was chosen for this study because it is suitable for the causal-predictive analysis of complex models
with multiple independent and dependent variables (Chin
and Newsted, 1999). In addition, unlike covariance-based
approaches to structural equation modeling, PLS does
not require multivariate normal data, places minimum
requirements on measurement levels, and is suitable for
small samples (Chin, 1998).13 In this study, PLS was
12
I used Smart PLS 2.0 (Ringle et al., 2005).

Chins (1998) rule of thumb suggests that the sample size for a PLS
study should be 5 to 10 times for either: (1) the largest number of formative indicators for a particular construct in the measurement model;
or (2) the largest number of structural paths directed at a particular construct in the structural model. In this study, the dependent latent variable
with the largest number of structural paths directed at it is EPM use, with
seven independent variables (namely, expected competitive advantage,
perceived stakeholders concern, top managements environmental commitment, and the four control variables). Thus, the sample size of 91 cases
satises this requirement. I also employed power analysis to investigate
the issue more in depth. In particular, under the assumption that the
13
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used to test reective links between constructs and measures (indicators), signifying that indicators are believed
to reect the unobserved, underlying construct (Chapman
and Kihn, 2009).
As previously mentioned, PLS comprises a measurement model and a structural model, which are estimated
simultaneously. However, to maximize the interpretability
of both models, the PLS model is interpreted in two stages:
rst, the reliability and validity of the measurement model
is assessed, and then the structural model is assessed.
4. Results
4.1. Measurement model
The preliminary analyses of dimensionality and reliability of multi-item constructs (i.e., the factor analyses and
Cronbach alphas) were presented above (see Table 2). The
output from PLS in relation to the measurement model (see
Appendices A and B) conrms these preliminary tests by
showing high (greater than 0.70) loadings of all items on
their respective latent variables. In addition, the high composite reliability measures for all latent variables (from 0.89
to 0.98) conrm the alpha scores by demonstrating satisfactory reliability (Nunnally, 1978).
The convergent validity of constructs is assessed by
examining the average variance extracted (AVE) statistics. As Appendix A shows, the AVE for each variable is
well above 0.50, which demonstrates adequate convergent
validity (Hair et al., 2014).
Finally, concerning discriminant validity, Appendix B
shows that the square roots of the AVEs (diagonal) are
all greater than the respective correlations between constructs, in support of the measures discriminant validity
(Chin, 1998). An additional test of discriminant validity
assesses each measurement item to ensure that it has a
higher loading on its assigned factor than on the other
factors (Chin, 1998). As Appendix A indicates, each measurement item loads higher on the appropriate construct
than on any other construct.
Overall, the results from the PLS measurement model
indicate that each construct exhibits satisfactory reliability
and validity.
4.2. Structural model
To test the hypotheses, a PLS structural model was
estimated. PLS uses an iterative estimation algorithm,
with a series of simple or multiple OLS regression analyses (Chin, 1998); therefore, the path coefcients in the
structural model can be interpreted as standardized regression coefcients.14 Because PLS makes no distributional
regression of EPM use is a regular OLS regression (Abernethy et al., 2010)

and setting to 5% (two-tailed) and power to 80%, my sample is able to
detect a true effect size of 0.17, which can be considered a medium effect
size according to the operational denition suggested by Cohen (1988).
14
Because the estimation of path coefcients in the PLS structural model
is based on OLS regressions of each endogenous latent variable on its
corresponding predecessor constructs, these path coefcients might be
biased in the presence of high levels of collinearity among the predictor
assumptions, bootstrapping (5000 samples with replacement) is used to evaluate the statistical signicance of each
path coefcient (Hair et al., 2014).15
Because the objective of PLS is to maximize the variance
explained rather than t, the overall incidence of signicant
relationships between constructs and the explained variance of the dependent variables (i.e., the R2 measures) are
used to evaluate the PLS model instead of goodness-of-t
measures (Chin, 1998). Another assessment of the structural model involves the models capability to predict, as
expressed by the Stone-Geissers Q2 measure of predictive
relevance (Hair et al., 2014). The R2 and Q2 for the studys
endogenous variables, together with the path coefcients
and the corresponding t-statistics, are shown in Table 4 and,
graphically, in Fig. 2.
Overall, the results suggest the model has good predictability. As Table 4 indicates, the coefcients for the ve
hypothesized paths in the model are all statistically signicant at the 0.1 level or better. The results also show
that 50 percent of EPM use, 37 percent of environmental performance and 3 percent of economic performance
are explained by the model. In addition, Stone-Geissers
Q2 is greater than zero for all endogenous latent variables,
providing support for the predictive relevance of the corresponding explanatory variables (Hair et al., 2014).
In particular, the results suggest that the use of EPM
for decision-making and control is positively inuenced
by expected competitive advantage ( = 0.279, p < 0.01),
perceived stakeholders concern ( = 0.189, p < 0.05) and
top managements environmental commitment ( = 0.349,
p < 0.01), in support of H1a, H1b and H1c. The proposed
positive association between EPM use and environmental performance (H2a) is also supported with a strong
and signicant path coefcient ( = 0.335, p < 0.01). Taken
together, these results indicate that the use of EPM for
decision-making and control purposes acts as a mediating variable in the relationships between a companys
environmental motivations and its environmental performance. More specically, the results provide evidence of
partial mediation with reference to expected competitive advantage, which signicantly affects environmental
performance both directly ( = 0.287, p < 0.01) as well as
indirectly through EPM use. A pattern of full mediation
emerges instead with respect to the other two motivations.
Indeed, the direct path among perceived stakeholders concern and environmental performance is negative but not
signicant ( = 0.014, p > 0.1), whereas the direct link
between top managements environmental commitment
and environmental performance is positive but still not
signicant ( = 0.108, p > 0.1). To provide a more thorough
analysis of these mediating effects, the signicance of the
indirect paths was also tested by bootstrapping their sampling distribution, following the procedure suggested by
constructs. Therefore, a preliminary test of the structural model involves

an assessment of collinearity diagnostics (Hair et al., 2014). The VIF values for all the predictor constructs are well below the threshold value of
5, suggesting collinearity does not threaten the robustness of the studys
ndings.
15
Statistical signicance is determined using the reported original PLS
estimates and bootstrapped standard errors (Hair et al., 2014).
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Table 4
PLS structural model: path coefcients, t-statistics, R2 and Q2 (n = 91).
Paths from
Paths to
EPM use

EPM use
Environmental Performance
Size
Industry
EPM perceived quality
Certication
0.279 (3.073)***
0.189 (2.142)**
0.349 (3.642)***
0.071 (1.043)
0.113 (1.443)
0.099 (1.332)
0.125 (1.643)
0.287 (2.395)***
0.014 (0.202)
0.108 (1.253)
0.335 (3.135)***
0.146 (1.528)
0.007 (0.118)
0.108 (1.441)
0.035 (0.474)
0.178 (1.602)*
0.079 (1.085)
0.005 (0.072)
R2
Stone-Geissers Q2
0.502
0.313
0.377
0.264
0.031
0.041
Each cell reports the path coefcient (t-value).

Bold style denotes hypothesized paths, while italic style denotes control paths.
*, ** and *** denote signicance at the 0.1, 0.05 and 0.01 levels using a one-tailed test for hypotheses with predicted sign and a two-tailed test for control
paths.
Expected
competitive
advantage
0.287***
0.279***
Perceived
stakeholders
concern
EPM use
0.335***
0.178*
Environmental
performance
Economic
performance
R2= 0.502
Q2 = 0.313
R2= 0.377
Q2 = 0.264
R2= 0.031
Q2 = 0.041
0.189**
0.349***
Top managements
environmental
commitment
Fig. 2. PLS structural model with signicant path coefcients (n = 91). *, ** and *** denote signicance at the 0.1, 0.05 and 0.01 levels.
Preacher and Hayes (2008).16 The results (not reported)

provide support for the signicance of the three indirect
effects acting through EPM use. Finally, the results also
suggest that EPM use positively inuences economic performance indirectly through environmental performance
(H2b). Indeed, the direct path between environmental
performance and economic performance is positive and
slightly signicant ( = 0.178, p < 0.1). Combined with the
positive and signicant path coefcient between EPM use
and environmental performance on the one hand, and with
the insignicant direct link between EPM use and economic
performance ( = 0.035, p > 0.1) on the other hand, this
result provides conrmatory evidence for a full mediating
effect of environmental performance on the relationship
between EPM use and economic performance. In other
words, even if EPM use does not directly enhance a rms
bottom line, it does so indirectly through its positive inuence on environmental performance. The signicance of
this indirect effect was also tested by applying the bootstrapping procedure suggested by Preacher and Hayes
(2008), obtaining conrmatory results (not reported).
16
As noticed by Hair et al. (2014), this approach is particularly suited
for PLS settings as it makes no distributional assumption, unlike the Sobel
(1982) test. It also exhibits higher levels of statistical power.
4.3. Sensitivity and additional analyses

To validate the robustness of the overall model, several sensitivity analyses were run. Firstly, the PLS structural
model was tested with alternative measures of economic
performance, namely cash ow divided by operating revenues and ROE. These data were also collected from the
Amadeus database, like ROCE, and were similarly adjusted
for industry by subtracting the dominant four-digit industry average from their respective rm counterparts. The
ndings are qualitatively similar, as all of the results that
were previously signicant are still signicant and the
paths that were not signicant remain unchanged.
Secondly, to control for potential respondents bias
and particularly for the endogeneity concern that the
respondents function systematically inuences his/her
subjective evaluations with regard to both the independent and dependent variables in the theoretical framework
a robustness check was performed by adding to the
PLS structural model a control variable equal to one if
the respondent came from the Sustainability/Corporate
Responsibility or Environmental functional areas, and zero
otherwise. The results are the same as those obtained by
estimating the model without such a control variable.
Finally, some additional analyses were run by distinguishing between the two underlying dimensions of EPM
use. More specically, three different PLS models were
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tested in which the EPM use variable was (i) exclusively

composed of the items referring to decision-making purposes, (ii) exclusively composed of the items referring to
decision-control purposes, and (iii) split into two separate variables, one for decision-making and one for control.
The results are generally in line with those of the principal model, conrming the robustness of the identied
relationships. As a unique exception, the path coefcient
between perceived stakeholders concern and EPM use for
control purposes is approximately zero and statistically
insignicant for both the model exclusively focused on this
dimension ( = 0.080, p > 0.1) as well as for the one in which
both dimensions are modeled separately ( = 0.072, p > 0.1).
These unexpected ndings are discussed in the next section.
5. Discussion and conclusions
This study aimed to improve our understanding on the
role that environmental performance measurement systems may play in translating companies environmental
motivations into performance. To this end, a theoretical
model was developed in which the use of EPM for a variety
of decision-making and control purposes acts as an intervening variable among expected competitive advantage,
perceived stakeholders pressures and top managements
environmental commitment on the one hand, and environmental and economic performance on the other hand. This
model was tested using PLS on data collected from a survey
of 91 Italian rms.
The results generally conrm the hypothesized relationships. Indeed, all of the three motivational factors
signicantly inuence the use of EPM for decision-making
and control, which in turn positively affects environmental performance. However, while EPM use appears to
fully mediate the relationship between perceived stakeholders concern and environmental performance, as well
as the link between top managements environmental
commitment and environmental performance, a pattern
of partial mediation emerges instead with reference to
expected competitive advantage. This may suggest that
the introduction of specic environmental performance
measurement systems is crucial to align organizational
conduct with the goals of environmental protection in
relation to stakeholders-oriented and ethical motivations,
but this is not necessarily the case with respect to
business-oriented motivations. Indeed, it may be that
rms economic arguments for corporate environmentalism are already although partially channeled through
the conventional management control systems, which are
traditionally focused on the economic goals of organizations (Gond et al., 2012). Alternatively, it could be argued
that the business case rationale represents if compared
with the other two factors a relatively stronger motivation, whose full deployment requires the mobilization of a
more extensive set of managerial mechanisms than those
investigated here. Soft or informal control mechanisms,
such as cultural controls (Epstein, 2010), could represent
examples of other translating devices.
Additional insights on the differential strength of the
three environmental motivations and their implications
for environmental performance measurement systems are

offered by the sensitivity analyses, in which the two theoretical dimensions of EPM use (namely, decision-making
and control) are considered separately. Such tests conrm
the robustness of the identied relationships with respect
to business-oriented and ethical motivations, as these two
factors signicantly inuence both the decision-making
and the decision-control use of EPM. Perceived stakeholders concern, instead, is found to positively inuence only
the decision-making use, but not the control use. One possible explanation may be related to the peculiarities of
the control use in comparison with the decision-making
one, and specically to the lower extent to which companies performance evaluation and rewarding mechanisms
can be observed and judged by external stakeholders. As
these practices tend to be maintained in highly condential
terms (Kolk and Perego, 2014), it may be that stakeholders pressures represent a relatively weak incentive toward
the integration of environmental criteria into performance
evaluation and rewarding processes because stakeholders
are less likely to easily distinguish supercial responses
from more substantive ones with respect to these practices. These ndings seem to provide partial support for
the skeptical view according to which perceived pressures
from stakeholders may be relatively weak and lead to
supercial, legitimacy-enhancing responses detached from
companies internal processes (Boiral et al., 2012; Ervin
et al., 2013). Future work could investigate these initial
thoughts in greater depth.
Finally, the results also suggest that EPM use positively
inuences economic performance indirectly through environmental performance. This nding partly contrasts with
Henri and Journeaults (2010) results, according to whom
an indirect effect of eco-control on economic performance
is supported only under certain circumstances (namely,
higher environmental exposure, higher public visibility,
higher environmental concern, and larger size). In the
present study, this indirect effect is found to hold for the
overall sample. This contrasting result may be due to the
different operationalization of the economic performance
variable. Indeed, Henri and Journeault (2010) measure this
construct subjectively. The present study, instead, employs
an objective and industry-adjusted measure of economic
performance, thus avoiding eventual respondents bias in
this respect.
This study is not free of limitations, which have to be
taken into consideration when interpreting the ndings.
First, a new instrument was developed to measure the
use of EPM for decision-making and control purposes. The
instrument exhibited satisfactory psychometric properties,
apart from some minor concerns regarding its ability in
distinguishing between the two types of use, as noticed in
footnote 7. Yet, future research is warranted to rene and
further validate the instrument. Second, no clear evidence
of causality can be established with survey-data obtained
from cross-sectional analyses. Rather, the evidence must
be considered consistent with theoretical arguments and
predicted hypotheses. Third, although tests indicate an
absence of non-response bias, the relatively low response
rate is a shortcoming of the study. A nal weakness is the
lack of explicit convergence between the outcomes of the
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ARTICLE IN PRESS
exploratory factor analyses and the nal PLS measurement

model.
Notwithstanding these limitations, this study is
believed to contribute to the literature in several ways.
In general terms, it builds insights into the link between
environmental motivations and performance by investigating the role played by environmental performance
measurement systems in this respect. In so doing, this
paper also contributes to the performance measurement
literature, which has to date provided conicting results
on the performance consequences of performance measurement systems (Franco-Santos et al., 2012; Melnyk
et al., 2014). Finally, this study strengthens the preliminary
insights on the economic consequences of environmental
management control systems available in the literature
(see, e.g., Henri et al., 2014; Henri and Journeault, 2010;
Wisner et al., 2006) by using objective rather than
subjective economic performance data.
This study also has implications for practice. Its results
concerning the differential strength of companies environmental motivations could be of particular interest to
policy makers and business advice organizations. These
ndings suggest that public policy and business advice
in this area should particularly emphasize the business
case and economic arguments to foster the integration of
environmental concerns into companies decision-making
and control processes. This study is also of practical
signicance for management accountants, environmental
managers and top management in general. Indeed, its ndings concerning the performance effects of EPM use provide
additional conrmatory evidence on the eco-efciency
thesis (Burnett and Hansen, 2008) and, thus, encourage
managers to adopt initiatives aimed at improving their
companies environmental performance as a way to contribute to corporate economic well-being. The use of EPM
for internal decision-making and control is shown to represent an effective mechanism in this respect.
15
This study also opens up avenues for future research.

In particular, it could be interesting to further examine
the relationship among perceived stakeholders concern
and EPM use by adopting a more ne-grained operationalization of the rst variable (see, for example, Buysse and
Verbeke, 2003), to test whether the strength of such link
vary according to the specic stakeholders categories considered. An additional extension of the model could be
related to the inclusion of other, more informal control
systems such as cultural ones, which can play an important role in relation to environmental issues (Epstein,
2010). Finally, it could be interesting to replicate such an
investigation by shifting the focus of analysis from the
environmental to the social dimension of the sustainability
concept (Bebbington and Thomson, 2013). Indeed, starting from the end of the 1980s, environmental accounting
emerged as the prime focus of attention of the sustainability accounting literature, to the detriment of the social
dimension (Owen, 2008). Therefore, it could be interesting to adapt this studys model to investigate the role of
social performance measurement systems, to test whether
the identied relationships also hold in that context or if
differences arise.
Acknowledgements
This paper is based on my PhD thesis completed at Bocconi University, Milan. I am grateful for the support and
advice of my PhD supervisor Professor Angelo Ditillo. I
would like to thank the Editor and the two anonymous
reviewers for their insightful comments and suggestions.
Thanks also to Tony Davila, Andrea Dossi, Mario Molteni,
Carlos Larrinaga, and participants at the EAA Doctoral Colloquium (2010) and at the EABIS PhD Conference (2012).
Finally, I thank Bureau Veritas Italia, DNV GL Business
Assurance Italia and SDA Bocconi School of Management
for their operational support in survey administration.
Appendix A.
Item loadingsa and Cross Loadings; Composite Reliability and AVE statistics for the main variables (n = 91).
EPM use
Expected
competitive
advantage
Perceived
stakeholders
concern
Top
managements
environmental
commitment
Environmental
performance
Economic
performance
0.771
0.731
0.850
0.748
0.820
0.754
0.807
0.429
0.326
0.436
0.319
0.406
0.311
0.375
0.403
0.329
0.513
0.487
0.398
0.374
0.442
0.316
0.455
0.411
0.344
0.392
0.471
0.505
0.491
0.430
0.387
0.399
0.456
0.369
0.426
0.102
0.171
0.053
0.117
0.076
0.025
0.008
0.766
0.821
0.917
0.855
0.398
0.384
0.297
0.406
0.213
0.109
0.062
0.241
0.496
0.325
0.396
0.299
0.024
0.144
0.119
0.052

0.492
0.353
Item 1
0.416
0.276
Item 2
0.370
0.483
Item 3
0.795
0.788
0.828
0.646
0.220
0.291
0.306
0.237
0.287
0.106
0.056
0.132
EPM use
Item 1
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7

0.432
Item 1
0.305
Item 4
0.370
Item 5
Item 6
0.455
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ARTICLE IN PRESS
16
Appendix A (Continued)
Item 4
EPM use
Expected
competitive
advantage
Perceived
stakeholders
concern
Top
managements
environmental
commitment
Environmental
performance
Economic
performance
0.463
0.363
0.865
0.397
0.263
0.106

0.519
0.203
Item 1
0.516
0.197
Item 2
Item 3
0.494
0.171
0.501
0.521
0.402
0.973
0.976
0.955
0.291
0.324
0.315
0.178
0.198
0.242
Item 1
Item 2
Item 3
Item 4
0.465
0.503
0.508
0.410
0.068
0.405
0.415
0.396
0.379
0.093
0.235
0.300
0.394
0.236
0.122
0.220
0.358
0.270
0.270
0.212
0.900
0.896
0.871
0.836
0.157
0.121
0.134
0.126
0.172
1.000
COMPOSITE RELIABILITY
AVE
0.918
0.615
0.906
0.708
0.891
0.672
0.978
0.937
0.930
0.767
NAb
NAb
All loadings in this table are statistically signicant at p < 0.001.

Composite reliability and AVE will only be suitable to use for multiitem constructs.
b
Appendix B.
Inter-Construct Correlations and Square Root of AVE statisticsa for the main variables (n = 91).
EPM use
EPM use
Top managements env. commitment
0.784
0.476
0.537
0.527
0.540
0.068
Expected
competitive
advantage
Perceived
stakeholders
concern
0.841
0.446
0.197
0.455
0.093
0.820
0.492
0.335
0.122
Top managements
env. commitment
Environmental
performance
Economic
performance
0.968
0.320
0.212
0.876
0.157
1.000
Diagonal elements are the square roots of the AVE statistics. Offdiagonal elements are the correlations between the latent variables
calculated in PLS. AVE will only be suitable to use for multi-item constructs.
Appendix C. Supplementary data

Supplementary data associated with this article can
be found, in the online version, at http://dx.doi.org/10.
1016/j.mar.2015.06.001.
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YMARE-552; No. of Pages 18

Management Accounting Research xxx (2015) xxxxxx

Contents lists available at ScienceDirect

Management Accounting Research

Translating environmental motivations into performance:

Correspondence to: via Bigiogera 13, 20128 Milan, Italy.

reduced compliance costs (Sharma and Vredenburg, 1998).

organization. By supplying the information required to

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Fig. 1. General theoretical model.

These arguments lead to the following hypothesis:

relationships among environmental operations, strategies

eco-efciency thesis argue that pollution is a form of

be particularly low, it is likely that their use is hindered

Panel A: Descriptive statistics for demographic variables

Panel B: Respondents by functional area

Panel C: Respondents by education

Panel D: Respondents by gender

Panel E: Respondents by industry category (SIC codes)

not affected by its inclusion in the model. Together these

factorability of the items,5 the design of all measurement

3.2. Variable measurement

3.2.1. EPM use

Panel A: EPM use ( = 0.895, Eigenvalue = 4.31, 61.51% of variance)

Panel B: Expected competitive advantage ( = 0.864, Eigenvalue = 2.85, 71.21% of variance)

Panel C: Perceived stakeholders concern ( = 0.834, Eigenvalue = 2.69, 67.38% of variance)

Panel E: Environmental performance ( = 0.896, Eigenvalue = 3.07, 76.75% of variance)

Panel A: Descriptive statistics (for scale variables)

Panel B: Frequencies (for dummy variables)

relevant information such as environmental expenditures

Given the absence of an established scale simultaneously

measure and the dichotomous measure is not signicant

3.2.3. Environmental and economic performance

not publicly quoted, I used the return on capital employed

I used Smart PLS 2.0 (Ringle et al., 2005).

regression of EPM use is a regular OLS regression (Abernethy et al., 2010)

constructs. Therefore, a preliminary test of the structural model involves

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Expected competitive advantage

Each cell reports the path coefcient (t-value).

Preacher and Hayes (2008).16 The results (not reported)

4.3. Sensitivity and additional analyses

tested in which the EPM use variable was (i) exclusively

for environmental performance measurement systems are

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exploratory factor analyses and the nal PLS measurement

This study also opens up avenues for future research.

Perceived stakeholders concern

Expected competitive advantage

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Top managements environmental commitment

All loadings in this table are statistically signicant at p < 0.001.

Appendix C. Supplementary data

Aragn-Correa, J.A., Sharma, S., 2003. A contingent resource-based view

Gerdin, J., 2005. The impact of departmental interdependencies and

Owen, D., 2008. Chronicles of wasted times? A personal reection on the

Roewer, U., 2008. Environmental Protection Expenditure by Industry in

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