Environmental Management Accounting (EMA) for Organizational Change: An Eco Control Approach

This text discusses the importance of Environmental Management Accounting (EMA) in organizations and its role in promoting sustainability and organizational change. It highlights the increasing significance of sustainability in various industries, including the service industry, and emphasizes the need for businesses to have a proper sustainability plan. The paper focuses on the hotel industry as an example, exploring the implementation of EMA techniques and their benefits, as well as the challenges faced. It also provides an evaluation of EMA implementation and offers recommendations for the hotel industry. The chosen article, "Environmental Management Accounting (EMA) for Environmental Management and Organizational Change: An Eco Control Approach" by Nuwan Gunarathne and Ki-Hoon Lee, serves as the key reference for the group term paper.

ACC 4113
DECISION MAKING & CONTROL
SEM 1, 2022/2023
GROUP TERM PAPER
KEY ARTICLE:
“ENVIRONMENTAL MANAGEMENT ACCOUNTING (EMA) FOR
ENVIRONMENTAL MANAGEMENT AND ORGANIZATIONAL CHANGE
AN ECO CONTROL APPROACH”
SECTION 2 (GROUP 1)
LECTURER’S NAME : PROF. DR. NIK NAZLI BT NIK AHMAD
NO NAME MATRIC NUMBER
1 NURUL AIN HUSNA BINTI ALIAS 1910962
2 NUR SYUAIBA BINTI MOHAMAD SHUKOR 1913864
3 NOR AMIERAH BINTI MOHAMMAD RAFIQ MUBAN 1824456
4 SITI UMAIRAH BINTI AHMAD SUKI 1914004
5 SITI ZULAIKHA BINTI MOHD NOR 1914670

Table of Contents
No. Contents Page
1.0 Introduction 2-3
2.0 Overview Of EMA Techniques and the Case Company 4-5
3.0 Implementation of the EMA Technique at the Case Company 6-9
4.0 Benefits of Implementing EMA in the Case Company 10-11
5.0 Challenges of Implementing EMA in the Case Company 12
6.0 Evaluation of Implementation EMA in the Case Company 13-15
7.0 Recommendation for the Case Company 16-18
8.0 Conclusion 19
9.0 References 20
1

1.0 Introduction
The issues of sustainability have become big issues in the industry which includes the
service industry. For organizations to maintain a competitive edge, meet rising stakeholder
expectations, and ensure operations into the future, sustainability is becoming significantly
crucial. Environmental problems and worries are a global reality. The overuse of non-renewable
resources and worldwide air pollution are two of the major environmental risks to the future of
humanity (Jones, 2010 as cited in Nyide and Lekhanya, 2016). Without a proper sustainability
plan, companies might put their business at risk.
Discussion regarding sustainable and environmental issues mostly related to the
manufacturing company but in fact, companies that provided services like hotels, hospitals,
restaurants and others were also exposed to the risk of sustainability. The hotel industry
consumes more natural resources and creates more pressure on the environment in order to
attract more customers. As a result, there will be more potential risk created. Fortunately, many
companies started to incorporate sustainability due to various factors such as increase in business
cost, enforcement of government regulation, competitors' action and expectation from customers
on firm’s responsibility towards sustainability.
Organizations have become more conscious of the environmental influence of their
operation, products and services. Environmental risk must be taken into consideration as they are
important factors that need to be considered to operate a successful business, alongside factors
like product development, marketing, and prudent financial management (ACCA Global, n.d.).
Therefore, EMA not only helps businesses manage costs more effectively but also provides a
green public profile. In order to assess the application of Environmental Management
Accounting in the hotel industry. We are interested in learning more about a paper that details the
creation and application of environmental management accounting (EMA) and environmental
management at the level of a firm in the hotel sector in Sri Lanka. The identified paper, titled
"Environmental Management Accounting (EMA) for environmental management and
organizational change An eco-control approach" was written by Nuwan Gunarathne and
Ki-Hoon Lee and published in 2015. According to the author of the selected article analysis, they
chose a hotel in Sigiriya, Sri Lanka next to the Lion Rock since it is the top-ranked green hotel in
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the nation and is listed as a UNESCO World Heritage site. The hotel employs roughly 280
people on a temporary and permanent basis. It is one of the top 100 brands in Sri Lanka and is
listed on the local stock exchange (Gunarathne & Lee, 2015).
3

2.0 Overview Of EMA Techniques And The Case Company
The United Nations Division for Sustainable Development (UNDSD) proposed a
difference between two categories of information that has gained widespread acceptance. EMA
is the process of collection and analysis of the information related to environmental costs in
order to make internal decisions. The Environmental Management Agency (EMA) offers
physical and monetary data on the usage and flow of energy, water, and materials as well as
financial data on environmental costs, revenues, and savings. This results in the development of
the monetary EMA (MEMA) and physical EMA systems (PEMA). While PEMA focuses on a
company's physical influence on the environment, MEMA focuses on the environmental
elements of business operations reflected in monetary units (ACCA Global, n.d.). EMA
encourages managers to make a wise decision by educating managers about the environmental
effects of an organization outside of its limits and the environmental challenges that affect the
organization. This involves the causes and effects of environmental issues from an economic
perspective.
Besides, organizations might integrate financial and environmental performance
indicators for the benchmarking process by taking environmental concerns into account while
making business decisions. As a result, environmental management accounting provides
managers with information about the environmental cost to help decision-making processes that
improve environmental and financial performance of the organization. There are three primary
types of decision-making techniques which are Cost Analysis, Investment Appraisal, and
Performance Management. An organization can use these approaches to increase the efficiency
of the performance (Wahyuni, 2009). The three components of cost analysis are life cycle
assessment (LCA), activity-based costing (ABC), and material flow cost accounting. Whereas,
EMA tool for investment assessment is the Total Cost Assessment (TCA), which is essentially a
study based on capital budgeting and in terms of performance management or evaluation,
Balanced Scorecard is an approach where it allows the organizations to assist each aspect
thoroughly, including environmental considerations (Wahyuni, 2009).
4

This hotel developed the goals and policies for its environmental management strategies
as the initial step in adopting an eco-control framework. In recent years, eco-control has emerged
as a specific application of management control systems (MCS) that is used to implement an
environmental policy across the organization. Organizations may assess, manage, and reveal
their environmental performance with the use of eco-control. They provide information to
decision-makers that will assist them in achieving environmental objectives and to present
compelling evidence in favor of the advantages of such activities. The hotel began its operations
around four decades ago. It had implemented certain conservation measures from the beginning
to protect the surrounding ecosystem.
However, these procedures had not been strictly adhered to until the company
encountered a serious crisis in 2007. This condition was mostly brought about by Sri Lanka's war
against terrorism, which significantly decreased the number of visitors by more than 11% in the
years 2007 and 2008 compared to the years before. In 2007 and 2008, the hotel's occupancy rate
hit record lows of 37% and 45%, respectively. Hence, the low occupancy combined with intense
price competition and rising operating costs resulted in a drop in revenues and profit. The top
and bottom lines were severely impacted in 2008, resulting in a fall of more than 20% in sales
and more than 200% in profit. Since 2007, the corporation has not been able to pay dividends to
its shareholders, which has had a negative impact on the share price (Gunarathne & Lee, 2015).
Therefore, the hotel's management was searching for a functional solution to minimize the
operational costs and to increase the revenue by offering favorable incentives for the hotel
industry. In addition to reducing costs and carbon footprint, sustainable development may also be
used to improve visitor experiences. Hence, the effectiveness and sustainability of a hotel have
an impact on customers' attitudes, feelings of security, relaxation, and contentment.
5

3.0 Implementation of the EMA Technique at the Case Company
According to the integrated eco-control framework, the author highlights three stages in
the case firm's adoption of EMA in corporate environmental strategy (Gunarathne & Lee, 2015):
1. How the hotel adopted EMA;
2. How conservation efforts resulted in cost savings; and
3. How the EMA approaches were implemented into the organization's daily
operations.
Goal and policy formulation
The management created a plan to enhance the hotel's green hotel concept while saving
money. This initiative aimed to promote ecotourism by incorporating it into hotel operations. The
hotel's environmental policy has the following goals (Gunarathne & Lee, 2015):
● save water and energy;
● decrease air pollution, solid waste and chemical pollution;
● increase practices for reducing, recycling and reusing;
● increase the use of materials that environment-friendly;
● increase the use of indigenous flora landscaping and remove invasive alien
species; and
● promote local livelihoods and save biodiversity.
Implementation
During the survival phase, the area of energy and water practices were created because
they offered great cost-saving possibilities. Management recognised after studying operating
expenses that energy expenditures are the most critical. So, they focused on electricity and other
energy sources to save the cost.
To create a thorough energy conservation plan, the hotel came up with several initiatives.
These included putting up solar panels to heat water, installing card key switches for room air
conditioning, setting up a schedule for turning lights on and off, giving each light switch a
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different color, putting up freezer curtains in cold rooms, and putting up a biomass plant to make
steam (Gunarathne & Lee, 2015).
The hotel took several steps to save water and deal with wastewater because they knew
how important it was. This included putting in an independent biological sewage treatment plant,
using the treated water to water the garden, putting in water-saving cisterns, and giving people
the option to reuse their room linens (Gunarathne & Lee, 2015). To make these changes work
during this phase, the hotel asked its employees for help, since they were the most important
people involved. It taught the employees about the new ways of managing the environment.
Since the hotel was in financial trouble and everyone's job was at risk, it wasn't hard to get
employee support for these plans. To figure out how much money it saved, the hotel started
keeping track of how much energy and water it saved through these different activities. During
this period, EMA focused on the past-oriented, where savings were only measured in physical
units like kilowatts and liters (Gunarathne & Lee, 2015).
In addition to water and energy, the hotel started to pay attention to other parts of the
environmental policy, such as biodiversity and waste (Gunarathne & Lee, 2015). During this
period, the hotel gave a lot of thought to how it handled solid waste. In this way, they started
sorting garbage, recycling, reusing, and reducing (3Rs), composting garden waste, using less
chemical and plastic, and reusing office supplies.
In addition to these steps, the hotel's landscaping makes the most of indigenous flora and
gets rid of invasive alien species (Gunarathne & Lee, 2015). It has taken care of the animals
around the hotel and tried to come up with creative ways to solve problems. The hotel thought
carefully about how each project would affect the environment and tried to include
environmental concerns in the design phase of each project. It was clear in the newly remodeled
restaurant, which does not need air conditioning or fans because it is built in a way that lets in as
much natural light and air as possible (Gunarathne & Lee, 2015).
Internal and external communication
As part of its efforts to be eco-friendly, the hotel talked to both internal and external
stakeholders. The hotel made several public relations efforts aimed at the public and potential
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guests. Numerous steps have been done in this direction, such as redesigning the hotel's website,
including the hotel's eco-friendly practices in its marketing campaign, teaching guests about the
eco-friendly practices of the hotel, and other similar measures.
The hotel made sure that the environmental practices were carried out well by focusing
on the people who booked rooms there. It is especially crucial in a business like a hotel because
most expenses are determined by guest activity. So, the hotel put up signs in all the bathrooms
asking guests to reuse towels to save water and cut down on the number of plastic straws they
use (Gunarathne & Lee, 2015). On the last day of every month, the hotel hosts an event called
"Earth Hour," during which all the lights are turned off and meals are served by candlelight.
Practices of the EMA have become part of the organization's culture. For these practices
to operate well in day-to-day business, the hotel focused its communication on getting the
support of all stakeholders, not just guests. These stakeholders include all levels of employees,
suppliers, and the community. The success of EMA depends greatly on how much support it gets
from employees. In many hotels, the data needed to properly deploy EMA is spread out among
several service hubs including the kitchen, laundry, lobby, and garden (Gunarathne & Lee, 2015).
The hotel delivers a comprehensive training session once every three months to all its
employees to promote continual employee support. It has also created various techniques to
routinely acquire employee support for EMA implementation. Some of these activities include
preventative maintenance according to a timetable, generating energy conservation awareness
among all personnel, checking and monitoring water and energy meters daily, and teaching
employees on rubbish separation at their source in all departments (Gunarathne & Lee, 2015).
Also, the hotel is now using a performance evaluation system that takes environmental
concerns into account. In service areas like the kitchen, garden, and laundry, business goals are
set for energy, water, and consumables. All these issues are reviewed in depth at the daily and
weekly meetings with the accountants, engineers, laundry manager, and chef.
The hotel has made measures to earn the cooperation of suppliers by training them to use
reusable plastic crates or cardboard boxes, sending wet rubbish to a piggery, supplying glass
bottles instead of plastic bottles, and requesting that the pest control service not use pollutant
8

chemicals (Gunarathne & Lee, 2015). Over 90% of suppliers now utilize eco-friendly or reusable
bulk packaging due to these actions. The hotel sought community support for its environmental
efforts. It buys gliricidia from the locals for its biomass unit, which offers green energy. Besides,
the hotel offers environmental awareness initiatives in schools and villages.
In general, an integrated eco-control for environmental management as an EMA practice
provides a structured framework for conducting environmental management. It also emphasizes
identifying physical and monetary information (PEMA and MEMA) that can lead to cost savings
and reduced environmental impact (Gunarathne & Lee, 2015). Besides, it highlights the
effectiveness of EMA practice during development by giving an organizational shift toward
environmental management.
9

4.0 Benefits of Implementing EMA in the Case Company
When operating in the hotel industry, business should put into consideration all the
financial and non-financial aspects that will determine the success of its operation and
sustainability in the future. Economic uncertainty affects hotel business tremendously just like
how the recent global pandemic, Covid-19 has caused a downturn to the tourism industry leading
to bankruptcy of a lot of hotel operators. Hence, there is a need for businesses to take on the
strategy that could help them sustain which one of them would include implementation of EMA.
There are many compelling reasons for companies to consider the environment in operating their
business. Its main benefit is how it will help businesses save cost and generate additional revenue
which is what seems to be the main concern to business in ensuring its profitability. Other
potential benefits include responding to the stakeholders pressure which includes the
government, shareholders and the customers itself. The implementation of EMA would also help
companies achieve competitive advantage and at the same time mitigate the impact of its
business activities to the environment. After all, for a business to sustain in the long run, the
overall well-being of the environment should be put into importance.
Business activities of hotel companies might result in huge cost incur if no measure was
taken to monitor and help reduce these costs. By implementing environmental management
practices, it might result in a cost - saving and other potential benefits to the hotel. In the case of
a hotel in Sri Lanka, it was proven that by implementing EMA into its business activities has
helped the hotel tremendously in minimizing cost of operations that eventually leads the
company to opportunities for additional revenue potential. In 2007, the hotel’s occupancy rate
fell to an all time low of 37% due to the war against terrorism in Sri Lanka which drastically
reduced foreign tourist entry into the country. The global financial crisis further threatens the
hotel industry. The hotel came into a position where they could not declare dividend to its
shareholders which adversely affected share price. After exploring various cost-saving and
revenue generating venues including staff layoffs, introducing packages and discounts to attract
tourists, these measures taken were not successful until the management of the hotel discovered
that much savings could be done in the areas of energy, material, waste and water. All these areas
were related to the environment which opened up opportunities for the hotel to be
environmentally friendly while at the same time saving costs. Energy cost and water usage is
10

among the main important cost elements. By paying attention to electricity usage and developing
other energy and water saving measures, the hotel has successfully reduced a lot of its energy use
and approximately 30,000 liters of daily water savings was identified. The hotel assigned
monetary value to the savings to realize the potential benefits of the practices.
Having achieved substantial cost savings, the hotel took further steps to develop practices
in conserving the environment to earn a reputable image as an environmentally conscious hotel
among the tourists. Citing the hotel’s ex CEO statements: “Most of these initiatives were begun
primarily to reduce energy costs, but we found that there were greater benefits accruing not only
directly but indirectly. This has become a useful marketing tool now, where discerning travelers
are beginning to choose hotels, which are more environment-conscious”. The environmental
strategies have become the driver for attracting more guests to the hotel and the green initiatives
adopted by the hotel have generated pleasing customer images to attract green-conscious tourists.
Some guests wrote their reviews on the hotel’s website by recommending the hotel because it is
green. The green practices by the hotel are not only praised by the customer but also admired by
other organizations. The company received many awards in recognition of its green initiatives
such as the International Green Apple Award for environmental best practices from the Green
Organization, UK. Such international recognition will provide revenue-generating opportunities
for the hotel from customers all over the world.
Other than cost-saving and revenue-generating benefit, implementation of EMA into
business activities will help companies respond better to stakeholders pressure. The growing
concern on the impact of business activities to the environment by organizations and individuals
has pressured businesses to adopt EMA in order to be environmentally conscious. In the case of
the hotel in Sri Lanka, EMA practices have become part of the organizational culture that it has
been embedded into the management daily process. Due to the environmental consciousness
prevailing in the hotel’s organization culture, the management always considers environmental
aspects as the main importance in the decision making process. The hotel's consistent approach
to promote nature-friendly and environmentally sustainable tourism in order to win the hearts of
many important stakeholders such as the employees, suppliers, guests and the community is
crucial in achieving competitive advantage for the sustainability of the hotel in the long run.
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5.0 Challenges of Implementing EMA in the Case Company
Among the challenges of implementing EMA in the hotel industry is resistance to change
among employees. In the case of the hotel in Sri Lanka, the general manager stated that no
matter how much communication is done and training provided, some employees still choose the
easier way and ignore the company requirement in terms of the green practices if not monitored
closely. This may be due to the lack of understanding on the importance and benefits of a sound
environmental management by the employee himself. This issue is especially coherent in the
developing countries where concern for environmental issues are less intense compared to
developed countries. Other than resistance from its own employees, companies might have
difficulties in communicating its green initiatives to the external stakeholders including the
customer and the suppliers. In the case of the hotel in Sri Lanka, despite the various steps taken
by the management, the hotel still had a hard time convincing some stakeholders, especially
guests with diverse needs. For instance, a guest had written some comments on the hotel’s
website saying it was ridiculous when the customer asked for straws twice but then the manager
came to them saying the hotel did not use straw due to environmental policy. Also noted in the
comment is how the employee serving the customer did not say anything when the customer
asked for the straw until the manager had to come which shows that employee may not be
trained enough to communicate the environmental policy of the company effectively to the guest.
The challenge in implementing EMA could also be due to the inadequate research done
on the implementation of EMA in the hotel industry. Literature reveals that there is limited
research pertaining to the application of EMA tools, particularly in the hotel sector which results
in the application process of EMA remains unclear. In the case of the hotel in Sri Lanka, the
management works together with its engineer and accountant in order to develop the company's
own environmental policy by making observations on the important cost element and aspect of
business activities that is related to the environment. It can be said as if the hotel has to try
something and see if the steps taken would work in favor of the company and the environment
before including it as one of its environmental policies. This takes a lot of energy, time, cost and
effort to be done by the hotel. Only if there is enough empirical investigation on the development
of EMA in the tourism sector, hotel operators would have the framework and guidelines on how
to strategically adopt EMA in its business operation without having to go through much hassle.
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6.0 Evaluation of Implementation EMA in The Case Company
Based on the implementation above, it can be seen that the implementation of EMA in
this company is really important for them to sustain in the longer term. This is because the
business activity of this hotel involved a lot of energy and water consumption. The preparation of
the implementation of EMA was properly done by the hotel as they did much research and
created a clear strategy to strengthen the hotel's adherence to the eco-hotel idea while at the same
time needing to reduce expenses (Gunarathne & Lee, 2015). Even though there are no
compulsory regulations regarding environmental costs, the main objective of the implementation
was cost reduction which is the same as the other four hotels in the study of Nyide and Lekhanya
(2016) where costs become factors that trigger the implementation of EMA. As they pass the
survival phase, they are still researching the environmental concern which is not limited to the
energy and water expense which is a good approach as they are not only doing it merely for cost
savings but also the environment. In addition to energy and water, the hotel increased its focus on
other areas covered by the environmental policy, such as waste, biodiversity and others as,
during this conservation phase, the hotel's main area of focus was solid waste management
(Gunarathne & Lee, 2015). They need to consider other factors that can contribute to
environmental issues so that the hotel can prevent them earlier and reduce the cost of
environmental problems like pollution.
Not only that, the hotel showed a good implementation as they get excellent buy-in from
employees. Employee buy-in occurs when workers acknowledge the value of their work, support
the company's vision, and are prepared to go beyond to accomplish the organization’s goals and
objectives. employee s buy-in occurred in this continuous communication with their employees
with regard to the EMA practices. According to Gunarathne and Lee (2015), the cooperation of
staff members at all levels is crucial to the adoption of EMA's success. The implementation of
EMA practice involved from the bottom to upper level of management and employees. As stated
by the General Managers of the hotel, all levels of employees strongly support these initiatives.
They discussed the significance of reducing these expenses and how important these steps are for
the organization's sustainability (Gunarathne & Lee 2015). Every three months, the hotel offers
all of its staff thorough training to promote ongoing employee support so that the employees can
better understand the EMA. When employees understand and are aware of the implementation of
13

EMA practice, they can execute their daily tasks better and each of them knows their roles as
they receive constant information and the importance of considering environmental costs for the
hotels.
Moreover, the implementation of EMA in this company was good as the hotel also
evaluates the performance of the manager by taking into consideration environmental issues as
an approach to the performance evaluation system. These service center managers will be
evaluated based on the level of water and energy consumption that they can save which they can
have the opportunity to be promoted. The managers will be more enthusiastic and responsible
towards water consumption in daily activities so that they can have good performance
evaluations and be promoted. Even though savings of water and energy can be considered in
performance evaluation, it can also discourage managers as it is hard to trace the cost. It would
not be fair to each service center's managers as the savings of water and energy cannot be traced
directly to each division hence it will be hard to determine which division contributes to the
savings of energy, water and others. If there were no proper ways to trace it, some managers
would not care and would not be held responsible for the consumption of water and energy
which involved costs to the hotel. The top management needs to find better measurements or
allocation of consumption so that it can be fairly allocated for each division. The hotels also did
not have a proper incentives system that can motivate employees to control environmental costs
whether in monetary or other forms of incentives. Compared to the findings of Nyide and
Lekhanya (2016) who found that most hotels in South Africa provide the employees with
compensation like monetary incentives, directives, and others while some of the hotel managers
stated that to use EMA as a tool for incentives, fair KPIs are needed.
Furthermore, to successfully implement EMA practices, support from external
stakeholders which includes customers and shareholders is very important. The hotel has a good
communication approach with other external stakeholders so that they can understand the hotel’s
initiative of green-hotel. According to Gunarathne and Lee (2015), numerous steps have been
done in this direction, including redesigning the website, incorporating the hotel's green
initiatives into its marketing strategy, informing the guests of the hotel's green initiatives, etc. By
having those initiatives, it will be easier for them to deliver the information and gain support
14

from the external stakeholders as they use many platforms to spread the information. When the
external stakeholders are aware of these initiatives, they can provide support in many means
possible. The involvement of hotel guests in environmental practices is also good as it can
become the culture of the hotels at the same time they can further enhance awareness of the
importance of conserving energy and the environment. However, it can also become an issue if
the guest doesn't want to follow environmental practices, such as when the guest doesn't want to
reuse the towels and keep requesting new ones since not all guests want to reuse them. This can
create issues among guests and can ruin a hotel's reputation. To avoid this, the hotel can provide
new towels to the guests but they need to pay a certain amount so that they need to decide
whether to reuse or pay for new ones.
Next, EMA practices assist the hotel in measuring the physical data on how much energy,
water, material, and waste is used since they also implemented MEMA. This could help the hotel
to provide financial data on environmental costs, earnings, and savings for internal
decision-making. The MEMA practice in this hotel is important since it can help the hotel to
account for various environmental factors such as pollution, waste and biodiversity. However,
the hotel did not take into consideration Total Quality Management (TQM) and Total Quality
Eco Management during the implementation of EMA practices. According to Jankovic et al.
(2011), to incorporate environmental information into the TQM and TQEM, hotel environmental
management must be organized on an integrated basis Total Quality Eco Management (TQEM)
which consists of prevention costs, appraisal cost, internal failure costs and external failure costs.
The hotel did not classify its cost accordingly because the classification of cost helps analyze a
budget and evaluate an investment project and can assess or audit goods or services to ensure
they meet performance and quality standards or framework (Jankovic et al., 2011). Not only that,
since the hotel mostly focuses on cost reduction and cost savings, it is also important to look at
the revenue derived from EMA practices as it can lead to higher profitability through the
recycling activities. To conclude, the implementation of EMA practice for the hotel in Sri Lanka
was properly done and successfully implemented with their clear vision and goals but some areas
need to be improved which will be further explained in the recommendation part of this paper.
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7.0 Recommendation for The Case Company
First and foremost, the EMA application is actually much wider and they can also
implement the EMA in the application to setting performance goals that are quantifiable and
budgeting (ACCA Global, n.d.). According to what we've seen, the corporation only employs the
EMA method after the damage to the environment has already been done by employing the
method of calculating costs. Therefore, by comparing the cost of the environment in budgeting
and the actual cost, the notion of EMA in budgeting may aid in avoiding and making the
performance measurable. The application in budgeting can help in planning and controlling the
behavior of the employees so it helps each of the divisions to set their own standard on what is
the maximum they can use certain activities to reduce the harm to the environment. One of the
tools they can use in applying the EMA in budgeting is the concept of Total Cost Assessment
(TCA) which weights all environmental and health impacts to the community. This TCA
technique asks the user to take into account all of the expenses that harm the environment, but as
the hotel is only focusing on water, energy, waste, pollution and biodiversity, they can try to
implement TCA by assessing these costs first and making a proper environmental budgeting.
Other than that, they can also perform the eco-benchmarking as an essential element in
the environmental management accounting (EMA), benchmarking evaluates environmental
performance and aids in identifying and prioritizing areas for improvement (Vejzagic et al.,
2018). The volume of water used, the use of absorber chillers, the presence of pools and spas, the
number of covers serviced, and other variables all affect benchmark values for hotels. Hilton
Europe and North Africa were able to lower their energy use by more than 16 percent by
adopting an energy benchmarking approach to monitor energy consumption (Dodds, 2015).
Water meters are a useful tool for managers to identify equipment and activities that consume a
lot of water. Regularly reading and checking a water meter enables comparisons to industry
benchmarks and the deployment of water-saving strategies. Dodds (2015) also stated that hotels
can use the following method to determine water use and compare it to an industry standard:
Number of guest night over one year / total volume of water consumed = water
consumed per guest
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For the waste disposal, the hotel can calculate the amount of non-hazardous garbage that was
deposited or sent to a landfill in the past full calendar year in terms of weight (kg) or volume
(liters). This data should not include any information regarding recycled waste flows and can be
located on waste disposal invoices, collected from waste contractors, or discovered via
performing a poll. Multiply the total weight or volume by the total number of guest nights
accumulated at the hotel during the most recent calendar year (Dodds, 2015).
The hotel can utilize the benchmarking tool www.benchmarkhotel.com as a guide, which
was created by the IBLF's tourism programme and WWF-UK with assistance from Biffaward as
has been mentioned by Dodds (2015). Because it makes it possible for the hotel to estimate their
fresh water usage and find places where savings may be achieved. The tool aids in evaluating a
hotel's current environmental performance and making a confident comparison between that
performance and that of other hotels in the same or similar climate zones.
Next, the hotel can also develop the environmental cost-center. However, one of the
problems facing the hotel is the allocation of the environmental cost to which division. As for the
solution, they can use the activity-based costing (ABC) as one of the tools the hotel can use by
implementing the EMA (ACCA Global, n.d.). This activity-based costing helps in uncovering
the majority of environmental expenditures such as electricity, water and waste disposal which
are typically considered overhead as other crucial functions of activity-based costing. These
expenses are more likely to be concealed from the manager's assessment. As a result, the ABC
will produce more precise cost information for the hotel itself and could assist in a more effective
way to avoid pollution. They can enlist the combined experience of environmental engineers,
specialists in the natural sciences, IT, and accounting professionals who specialize in the EMA
approach to increase its effectiveness.
Furthermore, they can appoint a leader that is specifically in charge of sustainability
(Nyide & Lekhanya, 2016). As we already know, There are CFO, CEO, CPO and CAE that are
in charge specifically for finance, human resources, internal control and others to realize a
company’s aims and plans thus making sure the various departments cooperate to achieve the
same goals. Then why not also assign the suitable person to be ‘Chief Sustainability Officer’
(CSO) to collaborate with managers, staff, customers and shareholders to address the company’s
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approach to environmental responsibility in order to lessen the environmental effect that the hotel
has. In addition, the CSO may assist the hotel in identifying the activities that incur
environmental cost and tracking and tracing those expenses. The CSO should be elevated to the
same level as the other "c-suites" in order to have a substantial effect on getting other workers or
managers to adopt the CSO's recommendations.
Last but not least, as has been mentioned in the challenges part, one of the problems is
the demanding customers. The hotel should still focus on the quality of service given to the
customers as that is one of the key parts in the hotel management industry. So, they should think
of something that can balance the quality service as well as the impact it has on the environment.
They need to ease customer’s activities to make them also accept the changes the hotel has to
protect the environment. In order to make it easier for clients to refill the bottle once they finish
drinking it, the hotel may, for instance, supply plain water in reusable bottles while
simultaneously adding water-bottle filling stations at each level. In order to make it simple for
visitors to reuse towels, they might also install additional towel racks in the restrooms and make
a sign urging recycling (Fredericks, 2020). By charging a high charge for items that have a
negative impact on the environment, like straws, the hotel can also attempt to "compel" its
clients to adhere to its rules.
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8.0 Conclusion
Overall, the hotel case firm truly did execute the EMA practice as well as they could. It
illustrates how an organization could transition over time from survival to environmental
integration. This will serve as useful examples for other hotel businesses or service industries in
developing nations to establish EMA practices since they constantly deal with people. As more
hotels begin to use EMA, this will increase the effectiveness of the practice since it will continue
to be improved to be a better form of EMA application both in physical and monetary practices
thus having a significant impact on the entire world. It is important to the hotel industry to
continue using EMA rather than only using it to achieve a short-term goal.
Additionally, it is stressed in Surah al-Qasas verse 77 of the Quran, which reads“...and do
good as Allah has done good to you. And desire not corruption in the land. Indeed, Allah does
not like corrupters”. This verse reminds us that Allah bans environmental destruction and
commands mankind to make the best use of it. As someone who has an accounting background
as their profession, we should contribute to the perseverance of the environment by using the
function of EMA in every industry we work in. We should also always make sure that the
intention to use EMA is also for the sake of Allah and the community as a whole and not merely
to gain profit or gain competitive advantage specifically in the service industry such as the hotel
management.
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9.0 References
Dodds, R. (2005). Why Environmental Benchmarking will help your Hotel. London, United
Kingdom: The International Business Leaders Forum’s Tourism Partnership. Retrieved
from
https://www.academia.edu/8517888/Why_Environmental_Benchmarking_Will_Help_Yo
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Environmental management accounting | F5 Performance Management | ACCA Qualification |
Students | ACCA | ACCA Global. (n.d.). Www.accaglobal.com.
https://www.accaglobal.com/ie/en/student/exam-support-resources/fundamentals-exams-s
tudy-resources/f5/technical-articles/Env-MA.html
Fredericks, L. (2020). Sustainable hotel ideas: 25 ways to go green. 25 Eco-Friendly Hotel Ideas
for Sustainable Properties | Cvent Blog. Retrieved from
https://www.cvent.com/en/blog/hospitality/eco-friendly-hotel-ideas
Gunarathne, N., & Lee, K. H., (2015). Environmental management accounting (EMA) for
environmental management and organizational change. Journal of Accounting &
Organizational Change, 11(3) 362 – 383. Retrieved from
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Jankovic, S., Persic, M., & Zanini, T. (2011). Environmental Management Accounting in the
Framework of EMAS II in the Czech Republic. Sustainable Tourism: Socio-Cultural,
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Nyide, C. J., & Lekhanya, L. M. (2016). Environmental Management Accounting (EMA) in the
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Vejzagić, V., Brown, J. B., & Schmidt, P. (2018). Accounting for Sustainability: Environmental
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Wahyuni, D. (2009). Environmental management accounting: Techniques and benefits. Jurnal
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