Environmental management accounting practices in electricity enterprises in vietnam

BANKING ACADEMY OF VIETNAM ADVANCED PROGRAM ACCOUNTING AND AUDITING - - GRADUATION THESIS TOPIC: ENVIRONMENTAL MANAGEMENT ACCOUNTING PRACTICES IN ELECTRICITY ENTERPRISES IN VIETNAM Student name : Nguyen Kim Trang Class : K20CLCI Major : Accounting Student’s ID : 20A4020820 Instructor : PhD Bui Thi Thuy HANOI – MAY 2021 Tai ngay!!! Ban co the xoa dong chu nay!!! 17014126235511000000 BANKING ACADEMY OF VIETNAM ACCOUNTING AND AUDITING - - GRADUATION THESIS TOPIC: ENVIRONMENTAL MANAGEMENT ACCOUNTING PRACTICES IN ELECTRICITY ENTERPRISES IN VIETNAM Student name : Nguyen Kim Trang Class : K20CLCI Major : Accounting Student’s ID : 20A4020820 Instructor : PhD Bui Thi Thuy HANOI – MAY 2021 STATUTORY OF DECLARATION I herewith officially declare that I have written the submitted Graduation Thesis autonomously I didn't utilize any outside help with the exception of the cited writing and different sources referenced toward Reference I unmistakably pointed out and independently recorded all the writing and every single other source which I utilized delivering this academic work, either truly or in content Hanoi, May 26th 2021 Signature Nguyen Kim Trang i ACKNOWLEDGEMENT I would like to express my most profound gratitude to PhD Bui Thi Thuy for giving valuable direction and advices Her direction supports me to realize how to gather the data about the association She also gives me advices and provides me right guidance to finish my Graduation Thesis Also, I would like to express my sincere gratitude to Advanced Program for giving a brilliant opportunity to have an internship period with lots of success It is actually an open door for me to learn, to find out about accounting in the reality and to create myself I view myself as fortunate and to have a great deal of superb individuals control me through in finishing of this Graduation thesis ii TABLE OF CONTENTS STATUTORY OF DECLARATION i ACKNOWLEDGEMENT ii LIST OF ABBREVIATIONS v LIST OF TABLES vi LIST OF CHARTS vi LIST OF FIGURES vi INTRODUCTION .1 CHAPTER 1: THEORETICAL BASIS OF ENVIRONMENTAL MANAGEMENT ACCOUNTING 1.1 Definitions of key terms .7 1.1.1 Management Accounting 1.1.2 Environmental Management .7 1.1.3 Environmental Management Accounting 1.1.4 Environmental Accounting System (EAS) .9 1.2 EMA classification 12 1.2.1 Monetary EMA (MEMA) .15 1.2.2 Physical EMA (PEMA) 17 1.3 The role of EMA .17 1.3.1 Decision-making support 17 1.3.2 Improve operational efficiency .18 1.3.3 Increase profits through cost reduction 19 1.4 Accounting methods for environmental costs 19 1.4.1 Activity Based Accounting (ABC) 20 1.4.2 Material Flow Cost Accounting (MFCA) .22 1.4.3 Full Cost Accounting (FCA) 22 1.4.4 Life Cycle Costing (LCC) .23 1.5 Overall trend of EMA practices in the world 24 CHAPTER SUMMARY 27 CHAPTER 2: EMA PRACTICES IN ELECTRICITY ENTERPRISES IN VIETNAM .28 iii 2.1 Overview of EMA adoption in Vietnam 28 2.2 Overview of Vietnam’s electricity industry 29 2.2.1 Milestones in Vietnam’s electricity industry development .29 2.2.2 Current situation of electricity industry in Vietnam .30 2.2.3 Roadmap and conditions to a competitive electricity market 31 2.3 EMA practices in electricity enterprises in Vietnam 32 2.3.1 Overview about the data collection process 32 2.3.2 Respondent’s profile and overall result 35 2.3.3 Descriptive EMA statistics for operating durations 40 2.3.3 Descriptive EMA statistics for environmental cost allocation 42 2.3.4 Descriptive EMA statistics for ISO adoption 42 CHAPTER 3: RECOMMENDATIONS FOR EMA ADOPTION IN ELECTRICITY ENTERPRISES IN VIETNAM 46 3.1 Influence factors of EMA adoption .46 3.1.1 Theoretical basis of the factors influencing EMA adoption 46 3.1.2 Factors influencing EMA adoption 47 3.2 Recommendations for EMA adoption 49 3.2.1 Recommendations for the government 49 3.2.2 Recommendations for the enterprises .51 CONCLUSION 53 REFERENCES 55 iv LIST OF ABBREVIATIONS No Words Meanings AAA American Accounting Association ABC Activity Based Cost Accounting EA Environmental Accounting EAS Environmental Accounting System EMA Environmental Management Accounting FCA Full Cost Accounting IFAC International Federation of Accountants JSC Joint Stock Company LCA Lifecycle Cost Accounting 10 LLC Limited Liability Company 11 MA Management Accounting 12 MEMA Monetary Environmental Management Accounting 13 MFCA Material Flow Cost Accounting 14 PEMA Physical Environmental Management Accounting 15 UNDSD The United Nations Commission on SustainableDevelopment 16 USEPA United States Environmental Protection Agency v LIST OF TABLES Table 1.1 Comprehensive framework of environmental managementaccounting 14 Table 2.2 Profile of Respondents 36 Table 2.3 Descriptive statistics for MEMA practices .38 Table 2.4 Descriptive statistics for PEMA practices 39 Table 2.5 Descriptive EMA statistics for business scales 39 Table 2.6 Descriptive EMA statistics for operating durations 40 Table 2.7 Descriptive EMA statistics for environmental cost allocation 42 Table 2.8 Descriptive EMA statistics for ISO adoption 42 LIST OF CHARTS Chart 2.1 Commercial electricity output allocation 2019-2020 31 Chart 2.2 EMA practices in different business operating durations 41 Chart 2.3 EMA practices in enterprises adopting different ISO certificates 43 LIST OF FIGURES Figure 1.1 Environmental Accounting System Framework 10 Figure 1.2 The role of EMA in decision-making process 18 vi INTRODUCTION The rationale of the study Nowadays, environmental issues are becoming more urgent than ever and are gaining the attention of every nation During the last conference on climate change (COP 25) taking place from 12 to 15 December 2019 in Madrid, the participating countries were very ambitious about reducing global CO2 emissions and also limiting the greenhouse effect, which causes global warming However, the results obtained after the conference are still extremely meager This shows that we still will not be able to have specific and clear solutions to resolve the aforementioned problems It is a fact that current environmental issues, which are threatening human life such as pollution, climate change, global warming, come from the irresponsibility of the business Therefore, before any revolutionary solutions on a global scale take place, each enterprise itself needs to raise awareness about environmental issues In terms of accounting, traditional accounting only recorded and mentioned costs directly associated with the processes of creating products and services without tracking environmental costs and their impact on economic activities (according to the International Federation of Accountants (IFAC, 2005)) In the context of the lack of methods and standards to manage these costs for businesses, Environmental Accounting (hereafter known as EA) was born to meet the needs of environmental information in the school of business activities Environmental Accounting seeks and provides important and necessary information on environmental costs and revenues, guides businesses and project owners in making economic decisions, encourage them to make an effort in the use of natural resources, including man-made natural resources, in an effective manner and minimize environmental damage, pollution, and change behaviors with living environment Within the scope of a business, EA includes: environmental management accounting (hereafter known as EMA), environmental financial accounting (EFA) In particular, EMA with a scope focused from within the enterprise is the most important, effective EMA application allows the enterprise to be able to grow strongly outside Therefore, EMA is the next development step of traditional management accounting Recognizing the importance of EMA for the sustainable development of each country, Vietnam is also gradually applying this method to enterprises in different fields In particular, the electricity industry in Vietnam is highly specific when it is on a pathway turning from an exclusive market to a competitive retail market Moreover, the activities of the electricity industry have significant impacts on the surrounding environment Therefore, the application of EMA and factors affecting this application in electricity enterprises in Vietnam are matter of concern Through research, the author found that the level of application and views on EMA among businesses were different In order to have a better overview of the aforementioned issues, the author has chosen “Environmental Management Accounting practices in electricity enterprises in Vietnam” to be the graduation thesis topic Research background Environmental management accounting (EMA) has gained significant attention in academic research as well as in international organizations, professional accounting bodies and in various companies This is reflected in a large number of studies, including articles in specialized scientific journals, books and doctoral theses Across the globe, studies on EMA have been conducted in different sectors using various perspectives (Bennett et al., 2002; Bennett et al., 2003; Jasch, 2006), with considerable attention being given to manufacturing industries (Kim, 2002; Kokubu and Kurasaka, 2002; Seuring, 2003; Gale, 2006; De Beer and Friend, 2006) In addition, there are studies that focused on the education sector (Chang, 2006) or SMEs (Jamil et al., 2015) These studies generally used contingency theory and institutional theory in investigating factors influencing EMA practices Data collection method is a questionnaire with a likert scale combined with in-depth interviews Jalaludin (2011) with the research conducted on relationship between institutional pressure and EMA adoption among manufacturing companies reveal some influence of institutional pressure on EMA adoption Of these, normative pressure in terms of training and accounting body membership were the most forceful Jamil et al (2015) investigated factors and barriers which influence the practice