Integrating ESG issue into performance management system: An analysis of Italian Context

Journal title MANAGEMENT CONTROL
Author/s Salvatore Principale, Daniela Cicchini, Luigi Andrea Carello, Rubina Michela Galeotti
Publishing Year 2024 Issue 2024/2
Language English Pages 24 P. 15-38 File size 320 KB
DOI 10.3280/MACO2024-002002
DOI is like a bar code for intellectual property: to have more infomation click here

Below, you can see the article first page

If you want to buy this article in PDF format, you can do it, following the instructions to buy download credits

Article preview

FrancoAngeli is member of Publishers International Linking Association, Inc (PILA), a not-for-profit association which run the CrossRef service enabling links to and from online scholarly content.

Keywords: Performance Management Systems, Management Control, Sustaina-bility management control, Sustainability, ESG performance

  1. Anthony, R.N. (1965), Planning and control systems: a framework for analysis, Harvard University Graduate School of Business Administration, Cambridge.
  2. Adams, C.A., Abhayawansa, S. (2021), Connecting the COVID-19 pandemic, environmental, social and governance (ESG) investing and calls for ‘harmonisation’ of sustainability reporting, Critical Perspectives on Accounting, 148, pp.148-162.
  3. Adams, C.A., Alhamood, A., He X., Tian, J., Wang, L., Wang, Y. (2022), The development and implementation of GRI Standards: practice and policy issues, Handbook of Accounting and Sustainability, pp. 26-43.
  4. Aguinis, H. (2012), Performance Management, third ed., Pearson, Harlow.
  5. Al Amosh, H., Khatib, S. F., Ananzeh, H. (2023), Environmental, social and governance impact on financial performance: evidence from the Levant countries, Corporate Governance: The International Journal of Business in Society, 23(3), pp. 493-513.
  6. Aldamen, H., Duncan, K., Kelly, S., McNamara, R., Nagel, S. (2012), Audit committee characteristics and firm performance during the global financial crisis, Accounting & Finance, 52, pp. 971-1000.
  7. Ali, W., Frynas, J.G. (2018), The role of normative CSR‐promoting institutions in stimulating CSR disclosures in developing countries, Corporate Social Responsibility and Environmental Management, 25(4), pp. 373-390
  8. Appuhami, R., Tashakor, S. (2017), The impact of audit committee characteristics on CSR disclosure: An analysis of Australian firms, Australian Accounting Review, 27(4), pp.400-420.
  9. Argento, D., Grossi, G., Persson, K., Vingren, T. (2019), Sustainability disclosures of hybrid organizations: Swedish state-owned enterprises, Meditari Accountancy Research, 27(4), pp. 505-533.
  10. Armstrong, M.E., Baron A. (2005), Managing Performance: Performance Management in Action, CIPD, London.
  11. Aydoğmuş, M., Gϋlay, G., Ergun, K. (2022), Impact of ESG performance on firm value and profitability, Borsa Istanbul Review, 22-S2, pp. S119-S127.
  12. Barney, J. (1991), Firm resources and sustained competitive advantage, Journal of Management, 17(1), pp. 99-120.
  13. Baumert, K.A., Pershing, J., Herzog, T. (2005), Climate data: A sectoral perspective, Pew center on global climate change
  14. Beusch, P., Frisk, J. E., Rosén, M., Dilla, W. (2022), Management control for sustainability: Towards integrated systems, Management accounting research, 54, 100777.
  15. Bhandari K.R., Ranta M., Salo J. (2022), The resource‐based view, stakeholder capitalism, ESG, and sustainable competitive advantage: The firm’s embeddedness into ecology, society, and governance, Business Strategy and the Environment, 31(4), pp. 1525-1537.
  16. Bhattacharyya, A. (2019), Corporate environmental performance evaluation: A cross-country appraisal, Journal of Cleaner production, 237, 117607.
  17. Blackwell, D.W., Noland, T.R., Winters, D.B. (1998), The Value of Auditor Assurance: Evidence from Loan Pricing, Journal of Accounting Research, 36, pp. 57-70.
  18. Bonacchi, M., Rinaldi, L. (2007), DartBoards and Clovers as new tools in sustainability planning and control, Business Strategy and the Environment, 16(7), pp. 461-473.
  19. Brammer, S., Pavelin S. (2006), Voluntary environmental disclosures by large UK companies, Journal of Business Finance & Accounting, 33(7-8), pp. 1168-1188.
  20. Busco, C., Giovannoni, E., Scapens, R.W. (2008), Managing the tensions in integrating global organisations: The role of performance management systems, Management Accounting Research, 19(2), pp. 103-125.
  21. Busco, C., Malafronte, I., Pereira, J., Starita, M.G. (2019), The determinants of companies’ levels of integration: does one size fit all?, The British Accounting Review, 51(3), pp. 277-298.
  22. Chenhall, R.H. (2003), Management control systems design within its organizational context: findings from contingency-based research and directions for the future, Accounting, organizations and society, 28(2-3), pp. 127-168.
  23. Clarkson, P., Li, Y., Richardson, G., Tsang, A. (2019), Causes and consequences of voluntary assurance of CSR reports: International evidence involving Dow Jones Sustainability Index Inclusion and Firm Valuation, Accounting, Auditing & Accountability Journal, 32(8), pp. 2451-2474.
  24. Cohen, J., Holder-Webb, L., Nath, L., Wood, D. (2011), Retail investors’ perceptions of the decision-usefulness of economic performance, governance, and corporate social responsibility disclosures, Behavioral Research in Accounting, 23(1), pp. 109-129.
  25. Colbert, B.A. (2004), The complex resource-based view: implications for theory and practice in strategic human resource resource management, Academy of Management Review, 29(3), pp. 341-358.
  26. D’Onza G. (2022), L’orientamento delle aziende ad uno sviluppo sostenibile: quale contributo da parte dei sistemi di management e controllo?, Management Control, 1, pp. 5-15. DOI: 10.3280/MACO2022-001001
  27. Dagiliene, L., Frendzel, M., Sutiene, K., Wnuk-Pel, T. (2020), Wise managers think about circular economy, wiser report and analyze it, Research of environmental reporting practices in EU manufacturing companies, Journal of Cleaner Production, 274, 121968.
  28. Dalal, K.K., Thaker, N. (2019), ESG and corporate financial performance: A panel study of Indian companies, Journal of Corporate Governance, 18, pp. 44-59.
  29. De, Villiers C., Sharma, U. (2020), A critical reflection on the future of financial, intellectual capital, sustainability and integrated reporting, Critical Perspectives on Accounting, 70, 101999.
  30. Derchi, G.B., Davila, A., Oyon, D. (2023), Green incentives for environmental goals, Management Accounting Research, 59, 100830.
  31. DiMaggio, P., Powell, W.W. (1983), The iron cage revisited: collective rationality and institutional isomorphism in organizational fields, American Sociological Review, 48(2), pp. 147-160.
  32. Doni, F., Corvino A., Martini S.B. (2019a), Servitization and sustainability actions. Evidence from European manufacturing companies, Journal of environmental management, 234, pp. 367-378.
  33. Doni F., Larsen M., Bianchi Martini S., Corvino A. (2019b). Exploring integrated reporting in the banking industry: the multiple capitals approach, Journal of Intellectual Capital, 20(1), pp. 165-188.
  34. Dubey, R., Gunasekaran, A., Childe, S.J., Papadopoulos, T., Hazen B., Giannakis M., Roubaud D. (2017), Examining the effect of external pressures and organizational culture on shaping performance measurement systems (PMS) for sustainability benchmarking: Some empirical findings, International Journal of Production Economics, 193, pp. 63-76.
  35. Duréndez, A., Dieguez-Soto, J., Madrid-Guijarro, A. (2023), The influence of CEO’s financial literacy on SMEs technological innovation: the mediating effects of MCS and risk-taking, Financial Innovation, 9(1), 15.
  36. Eng, L.L., Mak, Y.T. (2003), Corporate governance and voluntary disclosure, Journal of Accounting and Public Policy, 22(4), pp. 325-345.
  37. Engert, S., Rauter, R., Baumgartner, R.J. (2016), Exploring the integration of corporate sustainability into strategic management: A literature review, Journal of cleaner production, 112, pp. 2833-2850.
  38. Ferreira, A., Otley, D. (2009), The design and use of performance management systems: An extended framework for analysis, Management accounting research, 20(4), pp. 263-282.
  39. Ferretti, P., Gonnella, C., Martino, P. (2024), Integrating sustainability in management control systems: an exploratory study on Italian banks, Meditari Accountancy Research, 32(7), pp. 1-34.
  40. Folger-Laronde, Z., Pashang, S., Feor, L., Elalfy, A. (2020), ESG ratings and financial performance of exchange-traded funds during the COVID-19 pandemic, Journal of Sustainable Finance & Investment, 12, pp. 490-496.
  41. Frumkin, P., Galaskiewicz, J. (2004), Institutional isomorphism and public sector organizations, Journal of public administration research and theory, 14(3), pp. 283-307.
  42. Galeotti, M., Garzella, S. (Eds.). (2013), Governo strategico dell’azienda: Prefazione del Prof. Umberto Bertini, Torino, Giappichelli.
  43. Garcia, A.S., Mendes-Da-Silva, W., Orsato, R. (2017), Sensitive industries produce better ESG performance: evidence from emerging markets, Journal of Cleaner Production, 150, pp. 135-147.
  44. García Meca, E., Martínez Ferrero, J. (2021), Is SDG reporting substantial or symbolic? An examination of controversial and environmentally sensitive industries, Journal of Cleaner Production, 298, 126781.
  45. Gates, S., Germain, C. (2010), Integrating sustainability measures into strategic performance measurement systems: an empirical study, Management Accounting Quarterly, 11(3), pp. 1-7.
  46. Genovese, A., Morris, J., Piccolo, C., Koh, S.L. (2017), Assessing redundancies in environmental performance measures for supply chains, Journal of Cleaner Production, 167, pp. 1290-1302.
  47. Gerged, A.M., Albitar, K., Al‐Haddad, L. (2023), Corporate environmental disclosure and earnings management—The moderating role of corporate governance structures, International Journal of Finance & Economics, 28(3), pp. 2789-2810.
  48. Gebhardt, M., Thun, T. W., Seefloth, M., Zülch, H. (2023), Managing sustainability – Does the integration of environmental, social and governance key performance indicators in the internal management systems contribute to companies' environmental, social and governance performance?. Business Strategy and the Environment, 32(4), pp. 2175-2192.
  49. Gond, J.P., Grubnic, S., Herzig, C., Moon, J. (2012), Configuring management control systems: Theorizing the integration of strategy and sustainability, Management Accounting Research, 23(3), pp. 205-223.
  50. Gray, R., Owen, D., Adams, C. (2009), Some theories for social accounting?: a review essay and a tentative pedagogic categorisation of theorisations around social accounting, Sustainability, Environmental Performance and Disclosures, 4, pp. 1-54.
  51. Grossi, G., Papenfuß, U., Tremblay, M.S. (2015), Corporate governance and accountability of state-owned enterprises: Relevance for science and society and interdisciplinary research perspectives, International Journal of Public Sector Management, 28(4-5), pp. 274-285. DOI: 10.1108/IJPSM-09-2015-0166/FULL/XML.
  52. Grosvold, J., Hoejmose, S.U., Roehrich, J.K. (2014), Squaring the circle: management, measurement and performance of sustainability in supply chains, Supply Chain Management, 19 (3), pp. 292-305
  53. Gu, Y., Dai, J., Vasarhelyi M.A. (2023), Audit 4.0-based ESG assurance: An example of using satellite images on GHG emissions, International Journal of Accounting Information Systems, 50, 100625.
  54. Hart, S.L. (1995), A natural-resource-based view of the firm, Academy of Management Review, 20, pp. 986-1014.
  55. Herremans, I.M., Nazari, J.A. (2016), Sustainability reporting driving forces and management control systems, Journal of Management Accounting Research, 28(2), pp. 103-124.
  56. Hoang, H.V., Nguyen C., Hoang K., Gan C. (2023), Are co‐opted boards socially responsible?, Journal of International Financial Management & Accounting.
  57. Hoque, Z. (2018), Methodological issues in accounting research, Spiramus Press Ltd.
  58. Hristov, I., Appolloni, A., Chirico, A., Cheng, W. (2021), The role of the environmental dimension in the performance management system: A systematic review and conceptual framework, Journal of Cleaner Production, 293, 126075.
  59. Jollands, S., Akroyd, C., Sawabe, N. (2018), Management controls and pressure groups: the mediation of overflows, Accounting, Auditing & Accountability Journal, 31(6), pp. 1644-1667.
  60. Kılıç, M., Kuzey, C. (2019), Determinants of climate change disclosures in the Turkish banking industry, International Journal of Bank Marketing, 37(3), pp. 901-926.
  61. Kim, J, Cho, K, Park, CK. (2019), Does CSR Assurance Affect the Relationship between CSR Performance and Financial Performance?, Sustainability, 11(20), 5682.
  62. Krasodomska, J., Michalak, J., Świetla, K. (2020), Directive 2014/95/EU: Accountants’ understanding and attitude towards mandatory non-financial disclosures in corporate reporting, Meditari Accountancy Research, 28(5), pp.751-779.
  63. Lai, A., Melloni, G., Stacchezzini, R. (2016), Corporate sustainable development: is ‘integrated reporting’ a legitimation strategy?, Business Strategy and the Environment, 25(3), pp. 165-177.
  64. Lammers, J.C., Garcia, M.A., Putnam, L.L., Mumby, D.K. (2014), Institutional theory. The SAGE handbook of organizational communication: advances in theory, research, and methods, pp. 195-216.
  65. Langfield-Smith, K. (2006), A review of quantitative research in management control systems and strategy, Handbooks of management accounting research, 2, pp. 753-783.
  66. Lisi, I.E., Cifalinò, A. (2017), Exploring the use of social and environmental performance indicators by European companies, Management Control, 3, pp. 53-86.
  67. Lozano M.B., Martinez-Ferrero J. (2022), Do emerging and developed countries differ in terms of sustainable performance? Analysis of board, ownership and country-level factors, Research in International Business and Finance, 62, 101688.
  68. Madhani P.M. (2010), Resource-based view (RBV) of competitive advantage: an overview. Resource-based view: concepts and practices, Pankaj Madhani, ed, pp. 3-22.
  69. Malmi T., Brown D.A. (2008), Management control systems as a package – Opportunities, challenges and research directions, Management accounting research, 19(4), pp. 287-300.
  70. Marchi L. (2011), L’evoluzione del controllo di gestione nella prospettiva informativa e gestionale esterna, Management Control, 1, pp. 5-16.
  71. Martínez-Ferrero, J., García-Sánchez, I.M. (2017), Coercive, normative and mimetic isomorphism as determinants of the voluntary assurance of sustainability reports, International Business Review, 26(1), pp. 102-118.
  72. Mcnally M.A., Cerbone D., Maroun W. (2017), Exploring the challenges of preparing an integrated report, Meditari Accountancy Research, 25(4), pp. 481-504.
  73. Meyer J.W., Rowan B. (1977), Institutionalized organizations: Formal structure as myth and ceremony, American Journal of Sociology, 83(2), pp. 340-363.
  74. Michelon, G., Parbonetti, A. (2012), The effect of corporate governance on sustainability disclosure. Journal of Management & Governance, 16, pp. 477-509.
  75. Molinari, M., Maraghini, M.P., Riccaboni, A. (2021), Reporting di Sostenibilità e Controllo Manageriale: L’esperienza di Edison S.p.A., Management Control, 2, pp. 61-86.
  76. Munir, R., Baird, K. (2016), Influence of institutional pressures on performance measurement systems. Journal of Accounting & Organizational Change, 12(2), pp. 106-128.
  77. Naeem, N., Cankaya, S., Bildik, R. (2022), Does ESG performance affect the financial performance of environmentally sensitive industries? A comparison between emerging and developed markets, Borsa Istanbul Review, 22, pp. S128-S140.
  78. Nicolò, G., Tiron-Tudor, A., Manes-Rossi, F., Zanellato, G. (2019), Beyond Financial Reporting: Integrated Reporting and its determinants: Evidence from the context of European state-owned enterprises, Financial reporting: bilancio, controlli e comunicazione d’azienda, 2, pp. 43-72.
  79. Nicolò, G., Zanellato, G., Manes-Rossi, F., Tiron-Tudor, A. (2020). Corporate reporting metamorphosis: empirical findings from state-owned enterprises, Public Money & Management, 41(2), pp. 138-147.
  80. Olsen, B.C., Offei, K.A., Bumblauskas, D. (2021), Setting materiality thresholds for ESG disclosures: A case study of U. S. mine safety disclosures, Resources Policy, 70, 101914.
  81. Otley, D. (1999), Performance management: a framework for management control systems research, Management accounting research, 10(4), pp. 363-382.
  82. Parker L.D. (2020), The COVID-19 office in transition: cost, efficiency and the social responsibility business case, Accounting Auditing & Accountability Journal, 33(8), pp. 1943-1967.
  83. Peters, J., Mooij, J.M., Janzing, D., Schölkopf, B. (2014), Causal discovery with continuous additive noise models, Journal of Machine Learning Research, 15.
  84. Philippe, D., Durand, R. (2011), The impact of norm‐conforming behaviors on firm reputation. Strategic Management Journal, 32(9), pp. 969-993.
  85. Pizzi, S., Rosati, F., Venturelli, A. (2021), The determinants of business contribution to the 2030 Agenda: Introducing the SDG Reporting Score, Business Strategy and the Environment, 30(1), pp. 404-421.
  86. Pizzi, S., Principale, S., De Nuccio, E. (2022), Material sustainability information and reporting standards. Exploring the differences between GRI and SASB, Meditari Accountancy Research, (ahead-of-print).
  87. Pozzoli, M., Pagani, A., Paolone, F. (2022), The impact of audit committee characteristics on ESG performance in the European Union member states: Empirical evidence before and during the COVID-19 pandemic, Journal of Cleaner Production, 371, 133411.
  88. Pozzoli, M., Raffaele, M. (2022), Non-financial information and company market value, Management Control, 2 Suppl., pp. 167-187.
  89. Rahman, H.U., Zahid, M., Al-Faryan, M.A.S. (2023), ESG and firm performance: The rarely explored moderation of sustainability strategy and top management commitment, Journal of Cleaner Production, 404, 136859.
  90. Rezaee, Z., Alipour, M., Faraji, O., Ghanbari, M., Jamshidinavid, B. (2021), Environmental disclosure quality and risk: the moderating effect of corporate governance, Sustainability Accounting, Management and Policy Journal, 12(4), pp. 733-766.
  91. Setiarini A., Gani L., Diyanty V., Adhariani D. (2023), Strategic orientation, risk‐taking, corporate life cycle and environmental, social and governance (ESG) practices: Evidence from ASEAN countries, Business Strategy & Development, 6(3), pp. 491-502.
  92. Teece, D.J., Pisano, G., Shuen, A. (1997), Dynamic capabilities and strategic management, Strategic Management Journal, 18, pp. 509-533.
  93. Traxler, A.A., Schrack, D., Greiling, D. (2020), Sustainability reporting and management control – A systematic exploratory literature review, Journal of Cleaner Production, 276, 122725.
  94. Trianni, A., Cagno, E., Neri, A., Howard, M. (2019), Measuring industrial sustainability performance: Empirical evidence from Italian and German manufacturing small and medium enterprises, Journal of Cleaner Production, 229, pp. 1355-1376.
  95. Usman, B., Bernardes, O.T.F., Kananlua, P. S. (2020), On the nexus between CSR practices, ESG performance, and asymmetric information, Gadjah Mada International Journal of Business, 22(2), pp. 151-177.
  96. Velte, P. (2017), Does ESG Performance have an impact on financial performance? Evidence from Germany, Journal of Global Responsibility, 8, pp. 169-178.
  97. Velte, P., Stawinoga, M. (2020), Do chief sustainability officers and CSR committees influence CSR-related outcomes? A structured literature review based on empirical-quantitative research findings, Journal of Management Control, 31(4), pp. 333-377.
  98. Wang, L., Shang, Y., Li, C. (2023), How to improve the initiative and effectiveness of enterprises to implement environmental management system certification?, Journal of Cleaner Production, 404, 137013.
  99. Wang, Q., Liu, M., Zhang, B. (2022), Do state-owned enterprises really have better environmental performance in China? Environmental regulation and corporate environmental strategies, Resources, Conservation and Recycling, 185, 106500.
  100. Wu, W., Zhang, P., Zhu, D., Jiang, X., Jakovljevic, M. (2022), Environmental pollution liability insurance of health risk and corporate environmental performance: evidence from China, Frontiers in Public Health, 10, 897386.
  101. Wijethilake, C., Ekanayake, A. (2018), Proactive strategic responses to corporate sustainability pressures: a sustainability control system framework, Advances in Management Accounting, 30, pp. 129-173.
  102. Xie, J., Wataru, N., Michiyuki, Y., Hidemichi, F., Shunsuke, M. (2019), Do Environmental, Social and Governance activities improve corporate financial performance?, Business Strategy and the Environment, 28, pp. 286-300.
  103. Ye, Y., Li, K. (2021), Impact of family involvement on internal and external corporate social responsibilities: evidence from Chinese publicly listed firms, Corporate Social Responsibility and Environmental Management, 28(1), pp. 352-365.
  104. Yoon, B., Lee, J., Byun, R. (2018), Does ESG performance enhance firm value? Evidence from Korea, Sustainability, 10(10), 3635.
  105. Zharfpeykan, R, Akroyd, C. (2022), Factors influencing the integration of sustainability indicators into a company’s performance management system, Journal of Cleaner Production, 331, 129988.

Salvatore Principale, Daniela Cicchini, Luigi Andrea Carello, Rubina Michela Galeotti, Integrating ESG issue into performance management system: An analysis of Italian Context in "MANAGEMENT CONTROL" 2/2024, pp 15-38, DOI: 10.3280/MACO2024-002002