A framework for the effect of environmental management accounting costing techniques on water, energy and financial liquidity in South African manufacturing companies

Abstract

High water and energy consumption have been a challenge in manufacturing companies. In addition, increased operational costs without increased revenue led to poor financial liquidity. This study aims to determine the effect of EMA costing techniques on water, energy and financial liquidity in South African manufacturing companies. EMA costing techniques were represented by activity-based costing (ABC), material flow cost accounting (MFCA) and life cycle costing (LCC). This study followed a quantitative research method and collected numeric secondary and primary data using a sample size of twelve manufacturing companies. Secondary data was collected from selected companies reports, while primary data was collected from corporate executives of the sampled companies. Multivariate regression analysis was for data analysis. The findings revealed a positive and significant relationship between ABC, MFCA and energy consumption, suggesting that these techniques did not assist the selected companies to improve energy consumption. In addition, a negative and significant relationship exists between LCC and EC, suggesting improved energy consumption with LCC application. Moreover, the findings show a positive and significant relationship between ABC, MFCA and water consumption, suggesting that these techniques did not assist the sampled companies in reducing water consumption. Conversely, the findings indicate a negative and significant relationship between LCC and water consumption, showing reduced water consumption with LCC application. Furthermore, the findings show a positive and significant relationship between LCC and SFL, suggesting an improvement in SFL. Moreover, the findings show a positive (yet insignificant) relationship between ABC, MFCA and LFL, suggesting the possibility to improve LFL through increased application of EMA costing techniques. This study contributes to literature by developing a new framework that assist manufacturing companies in implementing EMA costing techniques that could assist in energy and water consumption reduction and improve their financial liquidity.