Moving towards sustainability: A theoretical design of environmental performance measurement systems

Abstract

We develop and explain how environmental performance measurement systems (EPMS) can be designed to overcome some key design issues identified from extant EPMS research. We take an interdisciplinary approach integrating science and sustainability theories into accounting research to theoretically develop six key design principles for a valid decision-useful EPMS framework. Our theoretical framework, comprising established theoretical and causal links between the organization’s summary sustainability measure and its drivers, provides insight into how management decisions at the operational level influence economic and environmental sustainability value created for the organization, thus supporting sustainability-related decision making. We test the framework in an irrigated agriculture setting using simulation modeling. Measured parameter values for key sustainability measures theoretically derived from the design principles are compared with optimal values to identify production processes for improvement. The empirical results showed significant simultaneous improvement in water and economic sustainability performance, resulting from a change in one targeted production practice. While our model demonstrates how the quality of sustainability-related information and decision making can be improved within a specific organizational setting, it also provides a generalizable tool for resolving the wicked problems of sustainable natural resource use.