Greening the black box: integrating the environment and management control systems

Purpose - The purpose of this paper is to adopt an agency theory approach to investigate the integration of environmental issues into management control systems (MCS). Prior environmental accounting research has focussed on increasing organisations' environmental accountability by "monitoring" through external reporting to stakeholders. However, this overlooks the alignment of agents' interests within the firm. Design/methodology/approach - A qualitative case study is undertaken in a large Australian listed property trust to investigate how agents' interests may be integrated with environmental objectives through the use of MCS. Findings - From the case an analytical framework is developed to illustrate how environmental issues are incorporated into organisational behaviour through MCS. The findings include, single objective environmental MCS; multiple objective MCS, which include priorities that specify environmental and economic trade-offs; and balancing MCS, which provide overarching decision-making principles without priorities. Practical implications - The findings provide examples of how an organisation may integrate environmental issues across a range of MCS and the things to consider in doing so. Originality/value - This paper draws on an agency perspective as an approach to incorporate environmental issues into MCS and to align behaviour. It explains a new way in which tensions can be managed. This study is one of the first to adopt the control package approach in investigating the incorporation of environmental issues in MCS.