Does Environmental Management Accounting Enhance Financial Performance? The Role of Green Innovation
DOI:
https://doi.org/10.55606/jumia.v4i3.4449Keywords:
Environmental Management Accounting, Financial Performance, Green Innovation, Mediation Analysis, SustainabilityAbstract
The growing demand for sustainable business practices has encouraged companies to integrate Environmental Management Accounting (EMA) into their strategic decision-making processes to improve both environmental and financial performance. However, previous studies have reported inconsistent findings regarding the direct effect of EMA on financial performance, suggesting that other mechanisms may explain this relationship. Therefore, this study aims to examine the effect of Environmental Management Accounting on financial performance and investigate the mediating role of Green Innovation. This research employs a quantitative explanatory approach using secondary data collected from non-financial companies listed on the Indonesia Stock Exchange (IDX) during the 2021–2025 period. The sample is selected using purposive sampling, and the data are analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings indicate that Environmental Management Accounting has a significant positive effect on Green Innovation and Financial Performance. Green Innovation also significantly enhances Financial Performance and partially mediates the relationship between Environmental Management Accounting and Financial Performance. These results suggest that the financial benefits of environmental accounting are realized not only through efficient environmental cost management but also through firms' ability to develop environmentally friendly products and processes. The study contributes to sustainability accounting literature by demonstrating the strategic role of Green Innovation as a mechanism linking Environmental Management Accounting to superior financial performance. The findings also provide practical implications for managers and policymakers in promoting sustainability-oriented accounting and innovation strategies to strengthen long-term corporate competitiveness.
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