Forced internalization of external environmental cost: experience of a South African Company

Michael Fakoya ()

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2014, vol. 16, issue 3, 797-807

Abstract: While environmental regulations are designed to ensure that organizations comply with minimum environmental standards, organizations may be compelled to pay penalties if they exceed the set standard. This study provides explanations on the effectiveness of a forced internalization of external environmental cost in a brewery in South Africa. A review of relevant literature indicates the apathy of organizations to internalize environmental costs. To see whether this apathy still holds, this paper uses the contingency theory approach to management accounting to analyze a case study on the effectiveness of forced internalization of brewery wastewater treatment cost by a municipality in South Africa. Findings reveal that the policy forced brewery managers to develop a waste-reduction strategy to improve production efficiency while limiting the volume of brewery wastewater and chemical oxygen demand emissions discharged to municipal waste treatment plant. A significant implication of this study is the forced internalization of wastewater treatment cost and the use of resources more efficiently and sustainably in production by the brewery as a result of the municipality’s policy to demand extra fees when agreed minimum wastewater discharges are exceeded. The importance of this policy is that it brought about improvements to the environmental, social, and economic performances of the brewery. The study suggests that environmental regulators should look beyond mere regulatory and monitoring roles to formulate policies to ensure that organizations take responsibility for external environmental costs they have created. Copyright Springer Science+Business Media Dordrecht 2014

Keywords: Externality; Environmental cost; Municipality; Brewery; Waste treatment plant; Internalization; South Africa (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s10668-013-9498-1

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