Management accounting for a circular economy: current limits and avenue for a dialogic approach

Abstract

Purpose – This study investigates the implementation of a sustainable circular business model from an accounting perspective. Its goal is to understand if and how decision- makers use management accounting systems, and what changes are needed if these systems are to support the transition toward a circular economy. Design/methodology/approach – Dialogic accounting theory frames the case study of six companies that built a value network to develop and implement an innovative packaging solution consistent with circular economy principles. Content analysis was utilised to investigate the accounting tools used. Findings – The findings indicate that circular solutions generate new organisational configurations based on value networks. Interestingly, managers’ decision-making process largely bypassed the accounting function; they relied on informal accounting and life cycle analysis, which stimulated a multi-stakeholder dialogue in a life cycle perspective. Research limitations/implications – The research provides theoretical and practical insights into the capability of management accounting systems to support companies seeking circular solutions. Practical implications – The authors offer implications for accounting practice, chief financial officers (CFOs) and accounting educators, suggesting that a dialogic approach may support value retention of resources, materials and products, as required by the circular economy. Social implications – The research contributes to the debate about the role of accounting in sustainability, specifically the need for connecting for resource efficiency at the corporate level with the rationalisation of resource use within planetary boundaries. Originality/value – The study contributes to the limited research into the role of management accounting in a company’s transition to circular business models. Dialogic accounting theory frames exploration of how accounting may evolve to help businesses become accountable to all stakeholders, including the environment.