Effects of organizational culture on environmental management control system and performance of manufacturing firms in Pakistan
Although companies are continuously implementing the environmental discourse in their external reporting, yet, very fewer studies talk about how management control systems (MCS) support sustainability and environmental performance within organizations and embed in the organization. As a conseq...
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| Main Author: | |
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| Format: | Thesis |
| Language: | English |
| Published: |
2018
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/68902/1/GSM%202018%202%20-%20IR.pdf |
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| Summary: | Although companies are continuously implementing the environmental discourse in
their external reporting, yet, very fewer studies talk about how management control
systems (MCS) support sustainability and environmental performance within
organizations and embed in the organization. As a consequence of the worldwide
environmental issues, companies are trying to start the environmental friendly
practices. In response to the threats created by climate change and other environmental
issues, companies are trying to prioritize sustainability as a core business issue. Many
companies have already learned that sustainability can be a competitive advantage;
however, in developing countries, the majority of companies in manufacturing
industry have been failed to address these challenges.
Therefore, the role of MCS is critical for the contemporary business arena as a source
of controlling the behavior of employees and evaluating organizational resources for
implementing strategies efficiently and effectively. Despite the fact that organizations
continuously recognize environmental discourse in their external reporting, yet, a
countable have discussed the importance of MCS that support sustainability and
environmental performance within organizations. Existing literature reveals that
organizational culture plays a vital role for successful implementation, yet little
empirical research has been done to describe the relationship between organizational
culture and MCA. In this context, this research fills this gap by investigating the role
of organizational culture (OC) for development of environmental management control
systems (EMCS) for better firm performance.
Using survey data from a sample of Pakistan manufacturing firms, 314 responses were
collected and analyzed by using Smart-PLS 3.2.6. Results suggest that flexible values
of OC led to the development of the informal EMC, and stable values led to development of formal EMC. The formal and informal EMCS result in better firm
performance. The results reveal that mediation of formal EMCS with the mission and
environmental performance, and formal EMCS with the mission and social
performance were not significant. The full mediation has been observed for
consistency in its relationship with formal EMCS and economic and social
performance and partial mediation in the relationship between formal EMCS and
environmental performance. The most surprising aspect of an indirect impact of the
mission on the environment and social performance which is not significant without
any mediation and the only direct effect is significant. The relationship of involvement
with economic and social performance is significant and positive. The relationship of
involvement with environmental performance is not significant. The findings show
that there is no significant impact of adaptability on economic, environmental and
social performance. The consistency is also not significant with the relationship of
firm performance. The findings reveal that mission is significantly associated with the
environmental and social performance.
The findings of this empirical research make three contributions. First, it demonstrates
how companies align OC to develop an environmental culture that supports the
development of EMCS, and that as a result improves firm’s performance. Based on
the contingency theory, this study provides evidence that OC directly affects the
design and use of MCS. The results further reveal that EMCS fully mediate the effect
of OC on economic performance. Thus, EMCS can be used to translate environmental
strategies into high firm performance, supporting earlier research with broad empirical
evidence. Furthermore, this study contributes to the literature regarding environmental
practices and sustainability. This study extends previous research on the effect of
EMCS into a more traditional MCS. The current study’s results revealed that firm
performance including the environmental performance is much higher when
environmental aspects are integrated into a more traditional MCS. Third, the study
demonstrates that integration of an environmental culture leads to more developed
EMCS. Companies with substantial environmental issues (i.e., manufacturing industry
in Pakistan) may develop strategies that seriously address environmental concerns and
implement additional measures to improve their environmental performance. |
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