Exploring governance-driven sustainability accounting in a developing economy

Abstract

Purpose – This study tests the operationalization of environmental and social sustainability accounting practices (ESAP) in the manufacturing sector and evaluates how internal and external governance mechanisms shape its adoption. Design/methodology/approach – Grounded in stakeholder theory, this study employs advanced analytical approaches, specifically partial least squares structural equation modeling (PLS-SEM) alongside probit estimation, to examine the factors shaping ESAP adoption across a sample of 200 manufacturing firms in Ghana. Findings – The findings indicate that although ESAP adoption remains modest, manufacturing firms more readily deploy activity-based costing (ABC), environmental management accounting (EMA) and lifecycle costing than customer profitability analysis or competitor accounting. Internal governance mechanisms, particularly IT capability, accounting department structure, and strategic orientation, significantly shape ESAP implementation. Externally, only market competition intensity exerts a discernible influence, with market orientation and environmental uncertainty proving negligible. Collectively, these findings underscore how governance architectures condition firms’ capacity to embed sustainability accounting within strategic imperatives and align with evolving stakeholder demands. Originality/value – The study contributes new empirical evidence on governance-driven sustainability accounting in a developing-country manufacturing context, an under-researched domain. It highlights the primacy of internal governance capabilities and market competition over conventional external pressures, offering a contextualized understanding of ESAP adoption in countries with weak regulatory environments. The findings inform policymakers, regulators and corporate leaders about structuring governance mechanisms to advance sustainability accounting and align with SDGs in emerging economies.