An in-depth look at the status of environmental financial accounting in Mexico from the point of view of stakeholder theory: myth or reality?
| Autor | Martinez, Saulo Sinforoso |
1 Introduction
Over the past 20 years, several authors (Bebbington, 2001; Gray, 1992; Larrinaga, 1995; Llull, 2001; Moneva & Llena, 1996, among others) have stressed the need for companies to disclose environmental and social information. Decades have passed since Tua (1995) defined accounting as a science. He argued that accounting professionals have attempted to fulfill the needs of society not only by processing and presenting information. According to him, they have also contributed with new concepts and procedures related to issues that concern society.
Accounting involves non-static knowledge under constant construction (Mejia, Montilla, Montes, & Mora, 2015). The term environmental accounting results from a series of discussions regarding how accounting can contribute to caring for natural resources so as to ensure that the needs of future generations are met. Environmental accounting identifies measures and assigns environmental costs that should be considered in commercial decisions as well as in communications between the parties of a given company (Mussa, Feku, & Mussa, 2018). It also deals with activities, methods, recording, analysis, and the reporting of the environmental and ecological impacts of defined economic systems (Azizul, 2017). According to Larrinaga (1997, p. 960): "the criteria traditionally considered by accounting to determine the success of a company are merely based on results that ignore the social and environmental impact that companies cause. Now, with aims to move in a different direction, the idea is to create a social accounting that evaluates to what degree a company meets the social contract."
In terms of sustainability, financial information is fundamental for companies, as it assists with decision-making related to environmental concerns (Stefan, 2017). Financial reports are thus essential since they provide data to develop and implement actions to care for and preserve natural resources. According to Salas (2015, p. 102): "Accounting--as a means to represent economic activity--has to acknowledge, present and evaluate relevant information concerning the environmental performance of a company in the protection of the setting where it is located." This has given rise to the emergence of "specialized segments of the accounting discipline constituted of different areas: environmental financial accounting, environmental costs or environmental management, and environmental auditing" (Palma & Canizares, 2018, p. 137). These are quite useful in managing the environmental and operating costs of natural resources (Muralikrishna & Manickam, 2017).
Environmental accounting has been a topic of discussion at both the national and international level. So far, numerous articles have been published that address theoretical propositions, concepts, and the importance of their application among companies. These have attracted great interest in academic discussions (Macias & Velazquez, 2017). However, it is now time to question the professional application of environmental accounting (Bernal & Santos, 2018) in emerging economies. In this sense, Larrinaga, Moneva, and Ortas (2019) state that it is not enough to study the impact of environmental financial accounting (EFA) in developed economies; it is also necessary to explore other perspectives, as the market economy is characterized by high uncertainty of the business environment, and the speed of development leads to the need to adapt enterprises to a dynamic market environment (Sheshukova & Mukhina, 2018). Thus, the aim of this study is to analyze the use of EFA in sustainable companies listed on the Mexican Stock Exchange in order to question how useful the theoretical contributions are regarding the relationship between the environment and accounting reports in Mexico. Therefore, the main research question is: how has the theory generated by academics on environmental financial accounting been applied in sustainable companies listed on the Mexican Stock Exchange? This leads to the following specific questions: has there been a transition in Mexico from conventional accounting to a type of accounting that is concerned with the environment?; do theoretical proposals on environmental accounting enhance business competitiveness?; what accounts do companies use to keep records of environmental transactions?; and finally, is the impact on the Mexican economy real or a myth? These questions are addressed and discussed in this quantitative, descriptive, and correlational study on 29 sustainable companies listed on the Mexican Stock Exchange (BMV, according to its Spanish acronym), through document analysis of their 2018 and 2019 third quarter financial reports and the sustainability reports for the 2018 financial year. The study assesses the impact of EFA on the revenue of these companies. Finally, the analytic-synthetic method is applied to review the sustainability and financial reports in order to analyze the use of EFA in Mexican companies.
2 Literature review
2.1 Progress in and limitations of the use of environmental financial accounting (the last 5 years)
Llena (2008) indicates that one of the areas of environmental accounting is environmental financial accounting. Several studies have been conducted in this field over the past five years, some of which address the representation of environmental impact in accounting (Colmenares, Valderrama, & Adriani, 2015). Others propose decision-making tools such as the environmental profit and loss account (Deniz & Verona, 2015). This assists with the sustainable development of companies (Martinez, Jimenez, & Mesa, 2019), as information of this nature is important for those who manage the resources within firms (Gray, Owen, & Adams, 1996).
Table 1 lists a few examples of recent studies on the use of environmental financial accounting around the world. These are sorted by continent and country and highlight the interest of various academics with regards to this topic.
With regards to the progress in and limitations of EFA in the business and economic environment, the findings of recent studies are reassuring. In the United Arab Emirates, the use of EFA allows companies to develop strategies for the financial market (Al-Mawali et al., 2018). For cement companies in Hungary, the reports generated by EFA are important for decision making (Fogarassy et al., 2018). In Vietnam, EFA has been useful in preventing financial risks and generating competitive advantages (La Soa, 2019). Studies conducted in the chemicals industry in South Africa show that environmental management practices assist in generating financial information for the companies listed in the stock market (Smith & Kotzee, 2017).
The drawbacks for the implementation of EFA vary depending on the country; this could be a direction for further studies on the subject. For instance, manufacturing companies in Bangladesh need to have specific environmental accounting principles before they can implement EFA (Hossain, 2019). In Ecuador, the lack of terminology has been an obstacle for its development in agricultural companies (Vilela, 2017). For other countries, such as Cuba, there are a large number of theoretical proposals that could be the basis for the implementation of EFA in companies where it is unknown, such as in rum businesses (Albuerne & Venereo, 2017). In the case of the cement industry in Algeria, the obstacles for companies to implement EFA are external, such as the lack of legal texts to force companies to provide and issue financial reports related to their environmental performance (Nadjoua & Bouselma, 2016).
Other findings regarding the application of EFA are evidence of how useful it is for the business sector. For instance, companies listed on the Buenos Aires Stock Exchange in Argentina tend to disclose environmental information, thus proving their social responsibility (Larramendy, Tellechea, & Tobes, 2018). In India, some companies keep accounting records of carbon emissions, which allows them to increase their value (Kumar & Firoz, 2019b). In the case of chemicals and oil companies in Brazil and Spain, transparency and legitimacy of their activities are the main reasons why they elaborate sustainability reports to keep stakeholders informed (Cunha & Moneva, 2018).
2.2 Stakeholder theory from the perspective of Mexican companies
Stakeholder theory, according to Freeman (1984), considers the interested parties within a company as members connected by a common cause. This theory is included in the ethical framework of the company (Carroll, 1989), so that all parties participate in the decision-making process (Martinez, Carbonell, & Aguero, 2006). For Freeman (1984), an organization is a group of parties known as stakeholders. These are shareholders, employees, investors, suppliers, customers, and society in general (Uribe & Requena, 2013), who all work together to create a successful business (Freeman, 2010). In this sense, communication and interaction among stakeholders make an important contribution in the process of achieving company goals (Schvarstein, 2010). Thus, the information disclosed by a company is fundamental to devising the best corporate strategy (Hyo-Sook, 2011) to address concerns such as caring for and preserving natural resources (Barrios & Enrique, 2018; Castaneda, 2017; Contreras, Talero, & Escobar, 2020).
However, the main objective of this theory is not to focus on the information, but to ensure that all stakeholders become involved in issues concerning the environment; the aim is to strengthen business decisions regarding environmental impact (Carrasco, Correa, & Larrinaga, 1999). With this in mind, "accounting and the accounting profession have to participate in fulfilling the needs of all stakeholders, as they offer information to collaborate in environmental management through different functions" (Llena, 2008, p. 126). In Mexico, environmental financial information has been disclosed...
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