Strategic cost management and performance: The case of environmental costs

Abstract

a b s t r a c tDespite recent developments in the stream of research devoted to strategic cost management (SCM), there are limitations found with this research, notably the overemphasis on one component of SCM (executional cost management), the underemphasis on the other component (structural cost management), the insufficiency of links between those two components, and the absence of evidence supporting their link with performance. The aim of this study is to examine the relationship between both components of SCM, and financial performance. Two main research questions are investigated: (i) To what extent do executional and structural cost management influence financial performance? (ii) To what extent does structural cost management mediate the link between executional cost management and financial performance? In order to examine the link between SCM and performance, one specific context is investigated, namely environmental costs. The environmental costs reflect an 'executional' aspect aimed at managing, controlling and optimizing costs for a given environmental strategy, but also a 'structural' aspect based on their influence on the firm's cost structure notably in terms of product design, raw materials used and operational process design. Survey data have been collected on a sample of 319 Canadian manufacturing firms to examine the link between SCM and financial performance.

The Relationship between Waste Management Expenditure and Waste Reduction Targets on Selected JSE Companies

“…Henri et al (2016) also found a direct relationship between the tracking of environmental expenditures and financial performance [62]. They suggest that greater transparency and accuracy of waste and environmental information, in turn, improve managerial decision making, and leads to improved financial performance.…”

“…Waste reduction has continued to be a significant problem in the current century, and it is not surprising to observe that financial managers worldwide consider the reduction of these costs to be a critical sustainability driver (Wilburn & Wilburn, 2013;Henri et al, 2016;Hornsby et al, 2016) [19,61,62]. Wang et al (2014) indicate that companies with environmental expenditures were significantly more productive than companies without environmental expenditure [63].…”

“…In their study, Sukholthaman and Sharp (2016) indicate that firms spend a very high amount of their monthly expenses on the collection and treatment of waste, with an adverse effect on firm's profitability [58]. Businesses are currently facing environmental pressure; they need to implement strategies to manage and reduce cost, not only on a short term basis, but also over the long term (Henri et al, 2016) [62]. Wellens and Jegers (2014), and Henri et al (2016), found that environmental issues are a fundamental part of a firm's strategies, and also state that environmental costs represent an important portion of the manufacturing and operation costs [62,76].…”

“…Businesses are currently facing environmental pressure; they need to implement strategies to manage and reduce cost, not only on a short term basis, but also over the long term (Henri et al, 2016) [62]. Wellens and Jegers (2014), and Henri et al (2016), found that environmental issues are a fundamental part of a firm's strategies, and also state that environmental costs represent an important portion of the manufacturing and operation costs [62,76]. On the other hand, Li et al (2017) found that neglecting environment issues could result in short term gains or profitability, but in the long term, looking specifically at public goods, most notably, the environment and natural materials are likely to be lost, due to selfish incentives [77].…”

How to Generate Economic and Sustainability Reports from Big Data? Qualifications of Process Industry

“…The paper industry must pay more attention to knowledge on how much global warming gases and other emissions its sites are contributing to soil, air and water [55]. Henri et al [56] address that the environmental costs aimed at managing, controlling, and optimizing costs for a given environmental strategy. These environmental costs have an impact on the product design, such as raw material composition and operational product design.…”