Institutional pressures, environmental management strategy, and organizational performance: The role of environmental management accounting

Abstract This study investigates the implementation of environmental management accounting in translating environmental management strategy into organizational performance. Further, the study identifies the influence of institutional pressures on environmental management strategy and environmental management accounting to provide a better description of the impact of the institutional environment on corporate environmental practices. The data were collected from 144 business entities in Sri Lanka using a web‐based survey and analyzed using partial least squares structural equation modeling. We found statistically significant evidence to state that the environmental management strategy is positively associated with the environmental and economic performance of organizations, whereas environmental management accounting mediates this relationship. Further, a firm's institutional environment positively affects both environmental management strategies and environmental management accounting. This study emphasizes that the organizational information systems such as environmental management accounting are useful in providing information on environmental costs and monitoring environmental and financial performance when implementing environmental management strategies in the pursuit of corporate sustainable development.