The role of management control systems in sustainability: A case study from a developing economy

The role of management control systems in sustainability: A case study from a developing economy ABSTRACT Little is known about the role of management control systems (MCS) in managing strategic responses to institutional pressures. To enhance our understanding of this phenomenon, this study examines (i) how organisations strategically respond to institutional pressures for sustainability? (ii) how organisations use MCS in strategically responding to institutional pressures for sustainability? and (iii) how competing institutional logics shape organisational strategic responses to institutional pressures for sustainability. Drawing on DiMaggio and Powell s (1983) notion of institutional isomorphism, Oliver s (1991) typology of strategic responses to institutional pressures, and Friedland and Alford s (1991) concept of institutional logics, the study employed a case study method. Data were collected from a key apparel manufacturing organisation operating in Sri Lanka through conducting semistructured interviews with sustainability managers, analysing internal and publicly available documents, and observations. The research provides evidence suggesting that contrary to the long standing belief that the survival and success of organisations operating in developing countries is a function of conformity to institutional pressures, the case organisation strategically responded to institutional pressures for sustainability, in particularly, using avoidance and manipulation strategies. While acquiescence was the most commonly used strategic rationality by the organisation, the study did not find any evidence to support the use of defiance strategy. Further, results also demonstrate that information generated by MCS play an important role in strategic responses to sustainability pressures subject to top management commitment, usefulness of MCS information, measurability and ability to collect sustainability data, nature of institutional pressures, and public image of the organisation. Of particular interest is the role of institutional logics, the data indicate that strategic responses to institutional pressures for sustainability are shaped by competing logics of organisational culture and the role of industry analysts. Keywords Management control systems, sustainability, institutional pressures, strategic responses, competing institutional logics 1. Introduction This study explores how organisations strategically respond to institutional pressures for sustainability using MCS. The question of how organisations respond to institutional pressures for sustainability has gained much attention due to its inevitable impact on organisational success and, in turn, consequences on the society at large (e.g., Ball and Craig, 2010; Bansal, 2005; Delmas and Toffel, 2008; Durden, 2008; Norris and O'Dwyer, 2004). Contemporary institutional researchers contend that organisations tend to strategically respond to institutional pressures with active agency and organisational self-interests rather than merely complying with them (Lounsbury, 2008; Oliver, 1991). From the MCS perspective, management accounting academics and professional bodies have been emphasising the necessity of integrating MCS into the implementation of sustainability practices (e.g., ACCA, 2013; Arjaliès and Mundy, 2013; Bebbington, and Thomson, 2013; CIMA, 2010, 2013; Durden, 2008; Gond et al., 2012; Merchant, 2012; Schaltegger, 2011). However, scant attention has been paid to reveal evidence on (i) how organisations strategically respond to institutional pressures for sustainability, (ii) how organisations use MCS in such responses, and (iii) how institutional logics shape strategic responses to sustainability pressures. 1

The study was motivated by several emerging themes in the literature and practice. While the role of behavioural accounting in sustainability has been utmost important in the contemporary organisational setting than ever before, recent literatures (see e.g., Arjaliès and Mundy, 2013; Berry et al., 2008; Durden, 2008; Gond et al., 2012; Herzig et al., 2012; Merchant, 2012; Moore, 2013; Schaltegger, 2011) accent that very limited attention has been paid to examine the role of MCS in sustainability implications. In fact, by proposing sustainability as an emerging theme in MCS, Berry et al. (2009) concluded that literatures of control and sustainability have not adequately developed yet. Moreover, according to Schaltegger (2011, p. 342), a more encompassing management control approach towards sustainability management is thus missing, so far. Interestingly, not only academics, but leading professional management accounting bodies (ACCA, 2013; CIMA, 2010, 2013) have also been claiming the usefulness and necessity of integrating MCS into sustainability responses. For instance, CIMA (2010, p. 2) highlight that management accountants have a key role to play in driving sustainable strategic and operational decisions. But CIMA s research shows that even where finance teams engage in climate change related activities, it has often been on an ad hoc basis. While there are few studies to support the role of MCS in sustainability as indicated above, to the best of our understanding, we did not find literatures on how organisations strategically respond to institutional pressures for sustainability using MCS. Thus, by responding to lack of academic research and practitioners demands, this study was motivated to examine the role of MCS in strategic responses to institutional pressures for sustainability. To fill this gap, the study builds on new institutional sociology (NIS), a strand of institutional theory (e.g., Ball and Craig, 2010). The cornerstone of the NIS bases on the perception that organisational success is a function of conforming to the institutional environment and, in turn, organisations become homogeneous (isomorphic) as being of compliance to common institutional expectations (DiMaggio and Powell, 1983). Conversely, researchers (Lounsbury, 2008; Oliver, 1991) focused on organisational self-interests and active agency oppose this early institutional thought of homogeneity by proposing that organisational success is not merely based on blind conformity to the institutional demands. However, strategic responses to institutional pressures (Oliver, 1991) and institutional logics (Lounsbury, 2008) explain the organisational heterogeneity and practical variances. The review of literatures summarises that this strand of research aligns with propositions that (i) organisations strategically respond to institutional pressures (Oliver, 1991), (ii) the use of MCS is a function of the institutional environment (Abernethy and Chua, 1996; Scott, 2001), and (iii) institutional logics, which prevails in the organisational institutional context (e.g., Lounsbury, 2008; Thornton et al., 2012), shape the strategic responses to institutional pressures (Guerreiro et al., 2012). Accordingly, this study provides evidence on how organisations use MCS in strategically responding to institutional pressures for sustainability with the aim of gaining legitimacy, and enhancing operational efficiency. The research underpinning this study is based on a depth case study conducted by interviewing sustainability managers and analysing corporate documents in a large scale apparel manufacturing Organisation based in Sri Lanka. The Organisation pursues proactive sustainability strategies aiming at corporate sustainability and social legitimacy. Contrary to the long standing belief that the survival and success of organisations operating in developing countries is a function of conformity to institutional pressures, the study demonstrates that the Organisation strategically responded to institutional pressures for sustainability, in 2

particularly, using avoidance and manipulation strategies. Further, the data reveal that MCS play a significant role in (i) specifying and communicating sustainability objectives through sustainability policies, sustainability planning, internal sustainability operational structures and procedures, (ii) monitoring sustainability performance through MCS tools, such as sustainability data collection, sustainability investment appraisals, sustainability budgeting, and life-cycle assessments, and (iii) motivating to accomplish sustainability objectives by linking rewards to sustainability achievements through performance measurement systems. In particular, the study demonstrates that information generated by MCS play an important role in supporting strong active strategies, such as compromise, avoidance, and manipulations. Finally, the findings assert that competing institutional logics of organisational culture and role of industry analysts reflect a hybrid influence on the strategic responses to institutional pressures for sustainability. By exploring the use of MCS in strategic responses to institutional pressures for sustainability, the study delivers several key contributions to accounting, sustainability, and organisational literatures. First, this study examines the role of MCS in strategically responding to institutional pressures for sustainability for the first time. Thereby, the study explores both formal and informal MCS from a holistic approach by responding the call for research to study MCS as a comprehensive package rather than individual aspects (Malmi and Brown, 2008), and to examine the role of formal and informal MCS in sustainability (e.g., Arjaliès and Mundy, 2013). Second, addressing the limitations of institutional theory, the study integrates different institutional perspectives in terms strategic responses to institutional pressures, and institutional logics by comprehensively expounding rationales behind organisational responses to sustainability pressures. This approach contributes the suggestions by Ball and Craig (2010) to examine combination of insights from new institutionalism to expound social and environmental accounting. For instance, Ball and Craig (2010, p. 292) underscore that a combination of insights would produce a more complete theory of change. This is important because explanations of actions to develop social and environmental accounting normatively have not made their understanding of action explicit. Next, the study examines how competing institutional logics, in terms of organisational culture and role of industry analysts, shape organisational strategic responses to institutional pressures for sustainability. Thereby, the study incorporates the impact of organisational culture to examine intra-organisational dynamics on organisational responsiveness to institutional pressures for sustainability (e.g., Colwell and Joshi, 2013; Wood, 1991). Finally, the focus of the research to examine MCS and sustainability practices in a developing economy addresses the contextual sustainability implications (Arjaliès and Mundy, 2013; Matten and Moon, 2008), the lack of studies in this context, and in particularly, implications in the context that matters sustainability issues mostly. Prior literatures (e.g., Bansal, 2005; Bansal and Roth, 2000; Schaltegger et al., 2012; Sharma and Henriques, 2005) outline that most of the leading sustainability studies have predominantly focused on developed economies, such as North America, Europe, and Australia thereby leaving a research gap on developing economies despite of their significant contribution to the world economy (e.g., Lodhia, 2003). The remainder of this paper is structured as follows. Next section presents the review of background literature and theoretical foundations followed by the study framework. Section 3 briefs the research method. Findings of the case study are presented in the section 4 followed by the discussions in the section 5. The concluding comments are presented in the last section. 3

2. Literature review and theory 2.1 Literature review Arguably, terms of sustainable development or sustainability have been the most discussed and challenging themes for business organisations in the 21 st century. While there is no unique definition of sustainability (see Montiel, 2008), the World Commission on Environment and Development (WCED) (1987, p. 43) defines sustainable development as the development that meets the needs of the current generation without compromising the ability of future generations to meet their own needs. Gray (2010, p. 53) refers sustainability as a state of human nature relationships while the sustainable development as a process through which we move towards that state. According to WCED (1987), the sustainable development essentially requires the simultaneous integration of environmental integrity, social equity, and economic prosperity principles. The environmental integrity principle guarantees that human activities are designed to protect the earths land, air, and water resources (Bansal, 2005). The aim of the social equity principle is to create a society where all members have the equal access to resources and opportunities (Bansal, 2005). Finally, economic prosperity principle ensures the quality of human life through creation and distribution of goods and services in a fair and a transparent manner (Bansal, 2005). Changing perceptions towards the sustainability have created enormous impact on business organisations to think of implementing sustainable practices, such as introducing green products, embedding sustainability into production and service processes, investing in energy efficient technologies, and enhancing corporate social responsibility. For instance, world leading business organisations, such as General Electric, Toyota, Xerox, Wal-Mart, and Home Depot have already taken various large scale initiatives to mitigate their negative social and environmental impacts, and to enhance their competitive advantage through sustainability. Literatures (e.g., Arjaliès and Mundy, 2013; Colwell and Joshi, 2013; Laszlo and Zhexembayeva, 2011) show the extent to which organisations are committed to sustainability would largely determine the corporate success, in particular achieving sustainable competitive advantage. However, the manner in which organisations approach to sustainability would be varied depending on different facts, such as the context in which the organisation operates, internal organisational philosophy, sustainability orientated strategies, and institutional pressures for sustainability. This study focuses on how organisations respond to institutional pressures for sustainability as a means of achieving corporate sustainability. Researches reveal that institutional pressures for sustainability have been rapidly increasing, and the intensity of such pressures varies depending on the nature of business and the context in which the organisation operates (Matten and Moon, 2008). Internal and external institutions that pressure sustainability include governments and regulatory bodies (Bansal, 2005; Colwell and Joshi, 2013; Clemens and Douglas, 2005; Delmas and Toffel, 2008), transnational organisations, such as International Labour Organisation (ILO), International Organization for Standardization (ISO), United Nations Global Compact (UNGC), Worldwide Responsible Apparel Production (WRAP), and Greenpeace (Hussain and Hoque, 2002), professional and industry associations (Bansal, 2005; Colwell and Joshi, 2013), competitors (Bansal, 2005), community and interest groups (Delmas and Toffel, 2004), customers and investors (Christmann and Taylor, 2001), and internal organisational directions such as board of directors (Basu and Palazzo, 2008; Norris and O Dwyer, 2004). Examining how organisations strategically respond to institutional pressures has been a popular research theme among academics over the last two decades (e.g., Abernethy and 4

Chua, 1996; Järvinen, 2006; Rautiainen and Järvenpää, 2012; Oliver, 1991). The strategic response approach explains that organisations do not merely accept institutional pressures, but, rather strategically respond based on organisational self-interests and active agency (Oliver, 1991). Typically, organisations implement sustainability practices for different reasons derived internally and external to the organisation, such as reconstructing eroded legitimacy and gaining competitive advantages (Bansal, 2005; Gond et al., 2009, 2012). In particular, with the increase of institutional pressures for sustainability, researchers in diverse disciplines have focused to understand how organisations strategically respond to such pressures. Prior researches in strategic responses to institutional pressures have examined how multinational corporations strategically respond to conflicting institutional pressures for global climate change (Levy and Kolk, 2002), organisational adoption of environmental management practices in respond to institutional pressures (Delmas and Toffel, 2008), intraorganisational factors that explain variance of ecological responsiveness to institutional pressures (Colwell and Joshi, 2013), and how firms respond to institutional pressures through strategic sustainability initiatives (Iarossi et al., 2013). However, scant attention has been paid to incorporate other aspects, such as the use of MCS as a means of strategic responses to institutional pressures, and how institutional logics shape such strategic responses. While the interest of the strategic responses approach is increasing as a mechanism of addressing sustainability pressures, researchers tend to contend the instrumental approach 1 of strategic responses which ignores the importance of institutional logics that is prevailing in the institutional context (see e.g., Lounsbury, 2008). The institutional logics concept itself reflects multiple and competing logics in organisational operations (Lounsbury, 2008; Marquis and Lounsbury, 2007). Recently researchers have attempted to enhance the explanatory capacity of accounting applications in responding to institutional pressures by integrating the competing institutional logics (see e.g., Guerreiro et al., 2012; Hyvönen, et al., 2009; Kantola and JÄrvinen, 2012; Lander et al., 2013; Rautiainen and Järvenpää, 2012; Reay and Hinings, 2009). It is therefore apparent that the application of institutional logics in accounting research is still in the emerging stage in the literature, and, thus, Lounsbury (2008) proposes that there is a great potential to contribute in other accounting applications, in particular, management control practices. With reference to the competing institutional logics, organisational responses to sustainability may be driven by either organisational culture (e.g., Bansal et al., 2012; Linnenluecke and Griffiths, 2010), or, on the other hand, organisations may take sustainability decisions based on recommendations drawn from industry analysts. Thornton et al. (2005) categorized these two competing factors under the informal control mechanisms of corporate logics (organisational culture) and market logics (industry analysts). Prior researchers have suggested that organisational cultural influences the design and implementation of MCS (Henri, 2006) and the implementation sustainability practices (Crutzen, 2013; Linnenluecke and Griffiths, 2010). Wood (1991, p. 707) suggests that it is worthy to examine the role of organizational culture in mediating the transmission of ideas, support, information, and resources relevant to social responsiveness. Hence, this study contends that organisational culture would shape the manner in which organisations strategically respond to institutional pressures for sustainability. In contrast to the organisational culture logic, the study argues that strategic responses to institutional pressures for sustainability may also be influenced by 1 Instrumental approach to rationality indicates that social actors are willing to take any action that would enhance their interest with the institutional change regardless of constrains exert by the existing institutional arrangements, such as individual values, culture, community, law etc. (Lounsbury, 2008; Seo and Creed, 2002,). 5

the industry analysts or consultations recommendations. Consequently, this study proposes that organisations may use MCS as a means of strategically responding to institutional pressures for sustainability, and competing institutional logics would shape such strategic responses. The term management control has been developed as a multifaceted practice: however, in general, MCS imply the applications of systematic and formal procedures (Simons, 1995). Typically, MCS reflect three components: (i) specifying and communicating objectives, (ii) monitoring performance through measurements (feedback/control), and (iii) motivating employees to accomplish objective by linking reward systems to objective achievement (Lindsay, 1996; Norris and O'Dwyer, 2004; Otley and Berry, 1980). The conventional wisdom of implementing MCS has been to provide information in enhancing technical and operational efficiency through planning and control (Burns and Scapens, 2000). Nevertheless, researchers (e.g., Burritt and Schaltegger, 2010; Durden, 2008; Gond et al., 2012; Norris and O Dwyer, 2004; Otley, 1994) contend this narrow focus nature of traditional MCS that merely based on shareholders financial interests that ignores the broader stakeholder needs, such as social, environmental, and economic concerns. In fact, organisational success is not merely based on technical and operational efficiency, but gaining social legitimacy is also essential (e.g., Abernethy and Chua, 1996; Järvinen, 2006). However, unfortunately, conventional management control approaches neglect sustainability issues as long as they are not directly expressed in monetary terms (Schaltegger, 2011, p. 341). Thus, organisations are expected to choose and use MCS by strategically understanding the environment in which it operates to better serve stakeholder needs (Merchant and Otley, 2007). According to Merchant (2012), sustainability is one of the prominent concerns that practitioners and organisations have been struggling to deal with, which in turn management accounting researchers are expected to contribute in resolving such complexities. Durden (2008) stressed that MCS should support practitioners in achieving not only shareholders, but all stakeholders goals including social responsibility. Contributing to this perspective, the extant literatures have largely focused on the role of management control in the environmental aspects (e.g., Bennett et al., 2011; Burritt et al., 2009; Burritt et al, 2010; Burritt and Saka, 2006; Henri and Journeault, 2010; Herzig, et al., 2006, 2012). In fact, as the role of MCS in sustainability is still in the emerging stage in the literature, it requires widespread research attention (e.g., Crutzen et al., 2013; Merchant, 2012; Rodrigue et al., 2013; Roth, 2008). Responding to this demand, Schaltegger (2011) introduced the concept of sustainability management controls based on sustainability balanced scorecard that delineates how to use key performance indicators and related information in corporate sustainability. Gond et al. (2012) examined diagnostic and interactive use of MCS in configuring sustainability into organisational strategies, and compared the traditional MCS with sustainability control systems. The growing awareness and concerns on the organisational impact of sustainability implications, particularly social and environmental impacts, have been influencing organisations to account and manage MCS, such as performance measurement systems (e.g., Gray and Collison, 2002), environmental performance indicators (Rodrigue et al., 2013), and sustainability strategy (Arjaliès and Mundy, 2013). While the interest on the role of management accountants in sustainability is growing, todate, limited research attention has been given to understand how organisations use MCS in strategically responding to institutional pressures for sustainability. For instance, CIMA 6

(2010, p. 2) emphasized that failure for management accountants to get involved now, when key decisions are being taken in areas like carbon trading and compliance with new climate change related regulations, could result in far higher costs, lost opportunities or reduced competitiveness. Further, Epstein (2010, p. 18) calls for further research indicating much research is also needed on the evaluation of stakeholder impacts and the integration into management decision making. By examining how management controls influence managers social responsive decision making, Norris and O Dwyer (2004, p. 176) also highlight that in order for corporate social responsiveness to prevail it therefore needs to be supported by a management control system which promotes or institutionalises decision making in this holistic vein. The adoption of MCS in respond to institutional pressures for sustainability is more likely to be an imperative managerial task for the achievement of competitive advantages by fulfilling stakeholders goals. However, in order for an organisation to operate in a socially responsible manner an integrative approach is required where there is alignment and fit of both external and internal social information needs (Durden, 2008, p. 677). Hence, it is apparent that the insignificant attention given on the role of MCS in sustainability highlights the scepticisms in the context. Consequently, the study aims to address following research questions. (i) (ii) (iii) how organisations strategically respond to institutional pressures for sustainability? how organisations use MCS in strategically responding to institutional pressures for sustainability? how competing institutional logics shape organisational strategic responses to institutional pressures for sustainability? 2.2 Theoretical foundations 2.2.1. New institutional sociology NIS posits that the organisational survival is primarily based on conforming to social norms of acceptable behaviours because it promotes the success and survival of organisations (Covaleski and Dirsmith, 1988; DiMaggio and Powell, 1983; Meyer and Rowan, 1977). Therefore, the fundamental of the NIS is that organisations tend to become isomorphic by complying with the common institutional environment in attaining legitimacy (DiMaggio and Powell, 1983). Further NIS emphasises on legitimacy, the embededness of organizational fields, and the centrality of classification, routines, scripts, and schema (Greenwood and Hinings, 1996, p. 1023). DiMaggio and Powell (1983) proposed three mechanisms of institutional isomorphic changes, namely coercive, normative, and mimetic isomorphism. Coercive isomorphism is based on political influences and the problems of legitimacy (DiMaggio and Powell, 1983, p. 150), and, thereby institutions directly impose coercive pressures on target organisations. Sustainability coercive pressures may derive by imposition of regulations to control environmental pollutions, payment of minimum wages, and imposition of penalties on the violation of environmental and labour laws (e.g., Bansal, 2005; Clemens and Douglas, 2006; Colwell and Joshi, 2013). From DiMaggio and Powell s word (1983, p. 150), for instance manufactures adopt new pollution control technologies to conform to environmental regulations. Organisational inability to comply with coercive pressures would cause negative consequences, such as loss of earnings, a damaged reputation, or cancellation of license to operate (Bansal, 2005). 7

Mimetic isomorphism addresses organisational approaches to cognitive and socially established aspects. According to DiMaggio and Powell (1983), mimetic isomorphism underscores organisational voluntary imitation of highly legitimate organisations in the industry as a way of minimizing environmental uncertainties. DiMaggio and Powell (1983, p. 152) state that organisations tend to model themselves after similar organisations in their field that they perceive to be more legitimate or successful. According to Bansal (2005), organisations tend to capitalize the success of peers through imitation. Sustainability mimetic pressures include the modeling of energy efficient technologies, environmental friendly policies and corporate social responsibility practices implemented by peer organisations. Normative isomorphism focuses on organisation s social obligations, responsibilities, and conduct. DiMaggio and Powell (1983) note that organisations become socialised when they collaborate with peer organisations through the memberships and networks with professional and trade associations. Normative processes related to sustainability include the compliance with industry trade associations and professional bodies to implement environmental friendly businesses as a way of reflecting the industry membership. Typically, management accounting researchers have employed NIS to understand the impact of institutional pressures on changes in management controls (e.g., Hussain and Hoque, 2002; Munir et al., 2013). NIS examines the effect of both external (macro) and internal (micro) institutional context to understand changes of organisational practices from a general perspective (Burns and Scapens, 2000; Hussain and Hoque, 2002). This study draws on the NIS as it explains the organisational response to institutional pressures for sustainability (see e.g., Ball and Craig, 2010; Bansal, 2005; Colwell and Joshi, 2013; Delmas and Toffel, 2008). Bansal (2005) rationalised that institutional theory is relevant to sustainable development as (i) individual value and belief systems provides a considerable judgement on corporate commitment towards sustainability, (ii) actors diverse views on sustainability provide a comprehensive platform to establish norms and common beliefs, and (iii) sustainability characteristics increasingly become institutionalized through regulations and international agreements. Ball and Craig (2010, p. 283) also noted that neo-institutional theory can increase understanding of an organisation s general response to social and environmental issues and social activism. More particularly, it can frame an organisation s accounting responses. Further, prior researchers have employed institutional theory to examine organisational responsiveness towards the sustainability related practices conceptually (Delmas and Toffel, 2004; Jennings and Zandbergen, 1995), and empirically (Bansal, 2005; Bansal and Roth, 2000; Delmas and Toffel, 2008; Sharma and Henriques, 2005). 2.2.2 Strategic responses to institutional pressures While the NIS widely describes that organisational success is a function of conforming to the institutional environment, on the other hand, the theory has also been criticised for its inability to expound organisational self-interest and active agency in their reactions to institutional pressures (e.g., Abernethy and Chua, 1996; Lounsbury, 2008; Oliver, 1991). Further, Ball and Craig (2010, p. 292) comment that new institutionalism fails to answer several central questions about people in institutions, and about social order. Therefore, organisational response to institutional pressures for sustainability is more likely to be based on internal dynamics, interests and agency determinants. In order to understand organisational rational responses and practical variations towards the institutional pressures, the study incorporates strategic responses to institutional process framework (Oliver, 1991), 8

and institutional logics concept (e.g., Friedland and Alfords, 1991; Lounsbury, 2001, 2002, 2007, 2008; Thornton and Ocasio, 1999; Scott et al., 2000). Oliver s (1991) strategic response framework which is based on institutional and resource dependence theories explains organisational strategic preferences for institutional pressures by outlining practical organisational phenomenon, such as self-interest and active agency. The framework emphasises that organisations are not merely driven by long standing economic rationality but social legitimacy as well. Oliver (1991) further clarifies that organisations do not irrationally conform or acquiesce to institutional pressures; rather, may attempt to strategically respond by implementing different resistance strategies. Oliver (1991, p. 159) highlights that logical organisations strategically respond to institutional pressures by raising the questions of why these pressure are being exerted, who is exerting them, what these pressures are, how or by what means they are exerted, and where they occur. Accordingly, organisational strategic responses to institutional antecedents of cause, constituents, content, control, and context are predicted by five responses, namely acquiescence, compromise, avoidance, defiance, and manipulation (Oliver, 1991). Acquiescence proposes that organisations are motivated to comply with institutional pressures as a way of enhancing legitimacy and social support. The conformity is described by three tactics namely, habit, imitation, and compliance. Compromise demonstrates how organisations strategically respond to institutional pressures in a balanced approach by means of balance, pacify, and bargain. Avoidance explains strategic responses that organisations tend to prevent from compliance in advance. Manifested by concealing, buffer, and escape, organisations avoid institutional pressures by implementing modifying strategies. Defiance respondents totally deny the institutional pressures. Characterised by dismissing, challenge, and attack, organisations with defiance opinions actively resist the institutional pressures. Manipulation reflects the optimum level of active strategic resistance to institutional pressures. In this circumstance, the organisations motivate to co-opt, influence or controls the pressures. 2.2.3. Institutional logics: institutional rationality and practical variations Emerging themes of institutional analysis have further intensified organisational responses and behaviour towards the institutional environment. Institutional logics, primarily conceptualised by Friedland and Alford (1991), identify the society as an integration of interinstitutional systems reflecting diverse institutional orders where individual institutions depict unique rationalities. Thornton (1999, p. 804) defined the concept of institutional logics as the socially constructed, historical pattern of material practices, assumptions, values, beliefs, and rules by which individuals produce and reproduce their material substance, organize time and space, and provide meaning to their social reality. The central logic characterised by individual institutions enables and constrains the behaviour of individuals, organisations and society (Friedland and Alford, 1991; Thornton and Ocasio, 2008). Further, the concept of institutional logics explains the institutional rationality prevailing in the institutional context (Guerreiro et al., 2012; Lounsbury, 2008) shapes organisational responses to institutional pressures. Researchers contend the long-standing proposition of institutional stability and homogenisation expected by the NIS to that of heterogeneity and practical variations based on the perception of institutional logics (e.g., Lounsbury, 2002, 2007, 2008; Marquis and Lounsbury, 2007; Seo and Creed, 2002). Types of diverse institutional rationalities include 9

markets, corporations, professions, states, families, religions, and communities (Guerreiro et al., 2012; Thornton, 2004). Accordingly, the study argues that organisational strategic responses to institutional pressures for sustainability is not merely explained by strategic response framework, but is also constrained by the prevailing competing institutional logics. Lounsbury (2008, p. 351) emphasised the importance of studying competing logics as the given a more intent focus on actors, one important new direction for institutional analysis is the study of organisational heterogeneity and practical variation. This study examines the impact of competing institutional logics of organisational culture and role of industry analysts to understand organisational practical variations in strategically responding to institutional pressures for sustainability using MCS (see Thornton et al., 2005). 2.3 Framework of the study Figure 1 depicts the framework of the study. The framework integrates the theoretical perspectives of institutional pressures, strategic responses to institutional pressures, components of MCS, and competing institutional logics. Following DiMaggio and Powell (1983), the study identifies institutional pressures for sustainability in terms of coercive pressures, normative pressures, and mimetic pressures. Strategic responses to institutional pressures for sustainability are drawn from Oliver s (1991) typology of strategic responses to institutional process which categorises strategic responses as acquiesces, compromise, avoid, defy, and manipulate. The three components of MCS include: (i) specifying and communicating objectives, (ii) monitoring performance through measurements (feedback/control), and (iii) motivating employees to accomplish objective by linking reward systems to objective achievement (Lindsay, 1996; Norris and O'Dwyer, 2004; Otley and Berry, 1980). Finally, competing institutional logics that shape the strategic responses to institutional pressures are termed as organisational culture and the role of industry analysts (Thornton et al., 2005). The framework demonstrates how different institutions influence sustainability pressures, and on the other hand, the dotted arrow reflects the organisational strategic responses to such pressures. The second association portrays how the organisational use of MCS supports the strategic responses to institutional pressures for sustainability. Finally, it shows how the competing institutional logics impact on strategic responses directly and through MCS. Figure 1: Framework of the study Institutional pressures Coercive pressures Normative pressures Mimetic pressures Strategic Responses Acquiesces Compromise Avoid Defy Manipulate Components of Management Control Systems Communicating objectives Monitoring performance Motivating to accomplish goals 3. Research method Competing Institutional logics Organisational culture Vs. Role of Industry analysts 3.1. Research design The study followed case study method that allows a holistic investigation on the organisational strategic responses to institutional pressures for sustainability. Case studies 10

provide a specific platform to examine how and why nature contemporary research phenomenon within its real life context (Yin, 2013). Further, case studies undertake depth investigations in a specific organisation in obtaining research evidence from different sources (e.g., Ferreira and Merchant, 1992; McKinnon, 1988; Scapens, 1990; Yin, 2013). In particular, as the use of MCS in sustainability is still in the emerging stage in the literature, the case study method is more suitable to establish the concept compare to other research methods. Further, existing few empirical studies on sustainability and control systems (e.g., Durden, 2008; Morsing and Oswald, 2009; Norris and O Dwyer, 2004; Rodrigue et al., 2013; Riccaboni and Leone, 2010) have also followed case study methods. 3.2. Contextual significance The study was undertaken in the apparel manufacturing industry. The apparel manufacturing industry is primarily based on low wage countries in Asia and Latin America with widespread supply chains across continents. The industry plays a significant role in the world market by supplying increasing demand for ready-made garments. Further, the apparel manufacturing industry has been an excellent example to realize how nations that finally consume products have transferred sustainability issues to manufacturing nations. On the other hand, the industry has also been highly criticized for unsustainable manufacturing practices, specifically manufactures based in the developing economies context (Ascloy et al., 2004). Major sustainability issues in the industry claim for poor working conditions, labour exploitations, gender discriminations, employment of child labour, human rights violations, issues with carbon and energy footprints, unsustainable waste disposals mechanisms, excessive usage of chemicals, and unequal profit distribution throughout the supply chain, to name a few (e.g., Ansett, 2007; Ascloy, et al., 2004). Excessive availability of cheap labour, flexible government regulations and less manufacturing cost mainly facilitate to locate apparel manufacturing factories in developing countries. The study identifies Sri Lankan apparel manufacturing industry as a suitable research context due to its significant contribution to the world apparel market and to the country s Gross Domestic Production and employment. For instance, (i) the country is among the top apparelproducers in the world relative to its population, (ii) more than 50 per cent of country s export income generates from the apparel sector, (iii) the apparel industry employs more than 15 per cent of country s workforce, (iv) increasing foreign investors interest on this sector due to the greater emphasis on sustainable manufacturing practices compare to other manufacturing countries, and (v) the industry s sustainability commitment and reputation for Ethical Business and Manufacturing Practices, and greater emphasis on the production of Garments Without Guilt campaign. 2 3.3. The case organisation The case study was conducted in a privately owned large scale apparel manufacturing Organisation which is headquartered in Colombo, Sri Lanka. The Organisation was selected based on theoretical sampling approach (Chua, 1996; Ferreira and Merchant, 1992; Scapens, 1990) by considering industry condition, sustainability practices, and Organisation s outstanding public image for the commitment towards the sustainability compare to similar type of organisations in the country. Special care was taken to select the Organisation that would provide sufficient resources and evidences to investigate the research theme which in fact ensures the validity of findings (e.g. Durden, 2008; McKinnon, 1988). The Organisation 2 Sourced from the Sri Lanka Apparels Web (2013). 11

is a major apparel manufacturer to most of the respected global brands. Currently the Organisation has 38 manufacturing facilities spread over ten countries. With the industry reputation as one of the largest manufacturers of intimate apparels, performance wear and swimwear, the Organisation s annual turnover surpassed AUS$ 1 billion by 2013. It employs over 55,000 people and also generates equal number of indirect employment opportunities. Therefore, the Organisation is an appropriate research site for several of reasons: (i) use of formal and informal management control practices, (ii) availability of specific managerial divisions for sustainability management practices, (iii) employment of professionals to manage sustainability projects and practices, (iv) has been implementing sustainability management practices for years with national and global recognitions and appreciations, such as from the United Nations, (v) reputation for innovations and industry leadership for sustainability initiatives, (vi) long term alliances and joint ventures with world leading apparel retailers, and (vii) outstanding public image for sustainability practices. Prior researchers reveal that larger and more visible organisations are highly inclined and influenced to implement sustainability strategies (Waddock, 2008), and use formal and tight management control practices (Widener, 2004) than in smaller counterparts. In fact, corporate philosophy, resources availability, the extent to which the local and global appearance and legal requirements may also determine such initiatives in large organisations. The researchers directly approached the Organisation by explaining the research aim and objectives, and the Organisation s contextual relevance to examine the proposed theme. Initial access was granted by one of the three divisions environmental sustainability team and other two divisions also facilitated the study subsequently. The researchers did not have any personal or professional relationships with the Organisations. In fact, getting access to the research site without personal relationships reduces the personal bias towards the outcomes, and on the other hand, enhances the reliability and validity of outcomes (McKinnon, 1988). 3.4 Data collection, variables, and analysis Following the commonly referred data triangulation (e.g., Chua, 1996; Ferreira and Merchant, 1992; McKinnon, 1988; Scapens, 1990; Yin, 2013), the study collected data from multiple sources, mainly semi-structured interviews, internal and publicly available documents, informal conversations, and plant visits. Semi-structured interviews were conducted with senior and middle level sustainability managers in November 2013. Semistructured interviews have certain credits in this nature of study: focused attention, conversational and flexible discussions, and exploration of new questions and ideas (Rodrigue et al., 2013). Informed by the confidentiality and ethical adherence of the research, participants responded freely by revealing sensitive and specific information. Out of the fifteen of total interviews twelve interviews were audio recorded, and three participants did not agree for audio recording. Detail notes of non-recorded interviews were taken to verify the record of data (McKinnon, 1988). Interview transcripts of the non-audio recorded interviews were sent to respective participants for checking and verification. Except one interview, other interviews were conducted in English. The interview that was conducted in Sinhala language, which is one of the national languages in Sri Lanka, was translated by the first author, a native Sinhala speaker, and was verified by a native Sinhala speaking doctoral researcher in social sciences. Table 1 depicts the demographic details of interview participants. Ten participants represent the senior and middle level sustainability managers from divisional head offices while the 12

rest of the five participants represent senior and middle level sustainability managers from manufacturing plants. Gender representation of participants includes four females and eleven males. Participants divisional representation consists of nine participants from the Division 1, four participants from the Division 2, and two participants from the Division 3. Interviews were conducted in the corporate head office, two divisional head offices, and three manufacturing plants by representing all three divisions of the Organisation. The study employed a sampling process to select potential respondents for interviews by informing the Organisation s contact persons (McKinnon, 1988). The sampling criteria included (i) senior and middle level managers whose job involvement directly relates to sustainability practices, (ii) by representing three major divisions of the Organisation, and (iii) with at least 2-3 years of experience in the organisation. The contacted persons of each division introduced the most relevant respondents at the division. By complying with ethical adherence of the study, the Organisation name, names and job titles of the interview respondents have been kept as much as possible confidential and anonymous. The participants positions, organisational representations, and time durations of interviews are presented in the table 1. Table 1 Details of respondents and interviews Designation Organisational Date of Representation Interview Duration Senior Manager 1 Division 1 04/11/2013 00.50.51 Senior Manager 2 Division 2 08/11/2013 00.56.02 Manager 1 Division 3 29/11/2013 01.20.25 Manager 2 Division 1 27/11/2013 00.47.32 Manager 3 Division 1 04/11/2013 00.58.36 Manager 4 Division 1 13/11/2013 00.48.51 Manager 5 Division 2 06/11/2013 00.32.36 Executive 1 Division 1 04/11/2013 00.48.41 Executive 2 Division 3 29/11/2013 00.39.03 Executive 3 Division 1 05/11/2013 00.49.51 Executive 4 Division 2 20/11/2013 00.54.21 Executive 5 Division 2 06/11/2013 01.06.02 Executive 6 Division 1 04/11/2013 00.44.17 Executive 7 Division 1 13/11/2013 00.26.54 Executive 8 Division 1 04/11/2013 00.24.25 Total time duration 12.08.45 The interview guide encompasses four key themes by highlighting the focused research issues of the study as depicted in the study framework (see e.g. Alvesson, 2003; Dillard and Reilly, 1988): institutional pressures for sustainability, strategic responses to institutional pressures, use of MCS in strategic responses to institutional pressures, and influence of competing institutional logics. In addition to interviews, one day site visit was undertaken to the organisation s flagship green factory which is regarded as the world s first purpose built carbon neutral lingerie factory certified by the LEED Platinum certification of the US Green Building Council (Ralapanawe, 2011). The site visit was also facilitated with presentations about the Organisation s sustainability practices followed by extensive discussions and informal conversations with operational and factory managers. These informal conversations were very useful to further understand and clarify the Organisational sustainability practices. In addition to that, two observational visits were also undertaken to the rest of the manufacturing plants where the interviews were conducted. In fact, plant visits gave an important opportunity the researcher to observe how the Organisation practices sustainability in the real life context. Internal and publicly available documents referred in the study 13

include: sustainability reports, annual Communication on progress (COP) reports submitted to the UNGC, external sustainability research publications on the Organisation, sustainability policy documents, in-house magazines, news archives, and web information. In order to ensure the consistency of participants interview responses, interviews were compared with the documents obtained from internal and external sources (McKinnon, 1988). Further, the site observations also largely assisted to enhance the reliability of respondents responses and information appeared on variety of documents (McKinnon, 1988). The Nvivo qualitative data analysis software was employed for coding data. First, codes were identified from interview transcripts, and then analysis of corporate documents were incorporated into identified codes. Based on that, five main codes, namely current sustainability practices of the organisation, institutional pressures for sustainability, strategic responses to institutional pressures, use of MCS in strategic responses, and influence of institutional logics were identified including sub codes for each main code. The main codes were then analysed using within-category analysis method where sub codes were analysed separately, and then main codes were summarised as the integration of sub codes. Finally, relationships and trends were identified and compared with other main codes. 4. The Case Study 4.1. Sustainability practices at the case Organisation The Organisation has been practicing sustainability from its inception. The interview participants and documents analysis reveal that the Organisation engages in sustainability by understanding of the true meaning of sustainability rather than merely following a taken for granted approach or as a marketing slogan or branding campaign. The Organisation s annual COP report highlights that, During the past 25 years of operation, [the Organisation] has gradually evolved from a socially responsible corporate citizen to an organization that has strongly committed to creating sustainable livelihoods for their associates, and the communities which we operate in. It was never part of a plan, it was never strategic marketing. For [the Organisation], community endorsement has always been our licence to operate (COP, 2012, p. 56). Most of the interview respondents highlighted that the Organisation was the pioneer to initiate sustainable apparel manufacturing practices in the industry and to embed the apparel industry with professional qualities and social dignity. For instance, the Executive 4 stressed that the Organisation approached to sustainability practices primarily with the aim of changing the negative social perspective given to the apparel industry in 1990s. While it was the leadership that initiated sustainability practices with a strong belief that it is the right thing to do, respondents also informed that the external institutional influences have further intensified leadership s sustainability inspirations. Thus, it is the blend of external and internal institutional forces that drive the sustainability practices in the Organisation. The Organisation s sustainability agenda includes all three sustainability practices: environmental, social, and economic aspects. With the gradual improvements, the Organisation s key environmental sustainability practices are basically categorized into two streams: sustainability practices implemented external to the Organisation and internally. According to the Executive 3, external practices are more focused on the environmental 14

Corporate Socially Responsible (CSR) projects, such as working with schools and community to train on waste management projects and enhancing environmental friendly attitudes among young communities. In particular, external environmental sustainability practices are largely driven by the Eco-Go Beyond programme which is implemented with the collaborations of UNICEF and the ministry of education. Internal environmental sustainability practices consist of eight work streams: energy, water, emissions, waste, reporting, standards, products, and branding. The figure 2 depicts the Organisation s environmental sustainability strategic framework. Figure 2 The Organization s environmental sustainability strategic framework the to that the om run ating to to to to Source: COP (2012, p. 36) Social sustainability initiatives include various internal and external programmes that ensure employees receive the best facilities in all aspects, such as complying with labour laws, worklife balance, skills development, career advancement, rewarding excellences, wages, health, safety and wellbeing. In particular, the Organisation has launched a specific programme called the Women Go Beyond with the aim of empowering women who represent more than ninety per cent of the Organisation s work force. From women empowerment to environment sustainability, from creating opportunities for rural youth to sustainable education development, from uplifting the country s health infrastructure to strengthening sports facilities in rural schools, [the Organisation] has been creating and nurturing many sustainable initiatives across the country (COP, 2012, p. 56). The Organisation contributes to the economic sustainability by various means, such as operating a successful business that significantly contributes the country s gross domestic production, distributing income among over 55,000 employees and their dependents, contributing to the livelihood of indirect employees, and establishing manufacturing plants in the rural area. For instance, with the support of the USAID, recently the Organisation initiated to build two of their new manufacturing bases in the war affected areas in the Northern Province in Sri Lanka. The COP (2012, p. 11) explains the objective of the project: 15

The project is supported by USAID, as part of its Public-Private Alliances program. Collaborations such as this are helping recently-resettled populations in recovering regions resume their livelihoods. [The Organisation] is positive about the potential in [the City A in the Northern Province] and the great opportunity this affords us to progress together by providing more than just job opportunities, but working towards the prosperity of the community. Almost all the participants informed that the Organisation s sustainability practices are well ahead not only to the Organisations in the apparel industry, but the country at large. For instance, a leading global cement supplier to build the flagship Eco-Factory mentions the viability of the all three sustainability aspects of the factory: We must not forget that [the Eco-Factory] is a true proponent of sustainability because it combines not only environmental and social performance, but is also economically successful against stringent competition from other, less sustainability-minded manufacturers in the garment industry. [The Eco-Factory] clearly shows that a company can indeed do well by doing good (The Cement Limited, 2008, p.5). The Organisation has been rewarded by the industry and commended globally for the strong commitment towards the sustainability. For instance, the Globe Award for Sustainability Innovation in 2010, LEED Gold certification by the U.S. Green Building Council for New Construction under LEED Version 3 (2010), Award for Carbon Footprint Accounting at Asia s Best CSR Practices in 2012, appreciations from the UN Global Compact, to name a few. In summary, the Organisation implements sustainability practices encompassing all three principles with a strong internal commitment and by taking into account the external sustainability expectations as well. 4.2 Strategic responses to institutional pressures for sustainability 4.2.1 Strategic responses to coercive sustainability pressures Coercive institutional pressures that influenced the Organisation to implement sustainability practices include regulatory pressures generated by the government, pressures from transnational organisations, and board of directors sustainability directions. Sustainability pressures generated by regulatory bodies Participants indicated that the regulatory pressures related to environmental sustainability are primarily generated by the Central Environmental Authority (CEA), Board of Investment (BOI), and Sri Lanka Sustainable Energy Authority (SLSEA). The CEA requires organisations, depending on their pollution potential, to compulsorily obtain Environmental Protection License (EPL) in accordance with the National Environmental Act. The BOI is responsible for promoting country s investment climate where the organisations registered under the BOI should comply with prescribed regulatory requirements by the authority. As an energy conservation authority, the SLSEA has initiated an energy management scheme by proposing manufacturing organisations to appoint energy managers with the aim of establishing systematic energy management programs under an extraordinary gazette. The regulatory pressures imposed on social and economic sustainability practices mainly include labour laws, such as payment of minimum wages, overtime payments, working hours, 16

minimum employment age, health and safety conditions, employee welfare, employee grievances such as harassment and abuse. When asked about the Organisational responses to regulatory pressures, the Senior Manager 1 emphasised that the Organisation s rationality behind the practicing of sustainability is not the regulatory pressure at all; however, the Organisation is passionate to comply with sustainability as a habit. the basis of our sustainability practices is not the regulatory pressures it s not the reason we do sustainability, and we are ahead of the regulatory requirements. The whole idea is we are not doing it [sustainability] because of regulatory requirements. (Senior Manager 1) Most of the interview participants and Organisational document analysis highlight that while the Organisation fully adheres to regulatory requirements, in many situations the Organisation is over complying with them. For instance, when the government reduced the employment entry age to 16 years in 2011, still the Organisation keeps the minimum employment entry age as 17 years. We exceed all applicable regulatory requirements and implement programmes and processes to achieve greater protection, and develop innovative programmes that provide safeguards for the community, the workplace and environment. (COP, 2012, p. 19) In responding to contradictory institutional demands, the Organisation has also negotiated with relevant third parties to fulfil customers excessive requirements by compromising the excess use of resources in government owned industrial zones where manufacturing plants are located. However, the respondents stressed that the Organisation always obeys and committed to sustainability standards (Manager 1). At the time of building the Eco-Factory, the law did not have provisions for consumers to buy renewable energy from outsiders other than the Ceylon Electricity Board (CEB). In that situation, the Organisation was able to force regulators through influential people with the support of consultants to make special arrangements. For instance, The energy supply system in Sri Lanka is another locked-in factor that inhibits low carbon innovation. Although there is expressed intention to move national electricity supply away from the monopoly CEB, there is, as yet, no framework that enables consumers to buy their electricity from anyone else, and CEB generates electricity from imported coal, supplemented with some hydro the team and their consultants have good personal connections with influential people, they were able to create a special arrangement to supply them with renewable energy (Reason et al., 2009, p. 66). As indicated by the Manager 3, while the regulatory pressures have motivated the Organisation to some extent at the very beginning, it is apparent that the Organisation has developed a passion of doing sustainability practices going beyond the regulatory requirements. Sustainability pressures from transnational organisations The Organisation has also been influenced to implement sustainability practices by various pressures generated by transnational organisations, such as ILO, ISO, UNGC, WRAP, and Greenpeace. Pressures generated by the ILO are most likely to have compulsory obligations towards the sustainability practices. A number of respondents (e.g., Executive 3 and 4) 17

informed that ILO has the strictest regulations, such as minimum wages and ages, working conditions, and health and safety towards the apparel manufacturing industry compare to other transnational organisations. The Executive 4 commented that; Because since there is a very big requirement from our major customer, on the labour aspect we do consult them [ILO] and we do get their feedback because as customers what they force is ILOs when it comes to labour issues it s compulsory...there are some instances that say our customers require something and ILO says something, so always the ILO supersedes the customer requirements. Sometimes it s lean and sometimes it s most stringent but mostly the ILO is the superior one. As all the manufacturing facilities of the Organisation are certified by the ISO 14001 environmental management systems certification, it has been a compulsory obligation for the Organisation to implement and to comply with various types of environmental management standards required by the ISO. Most of the respondents pointed out that ISOs are very important for the implementation of sustainability practices, and, on the other hand, requirements from ISOs are mostly compulsory that Organisation has to comply with. The Executive 2 noted that in some situations ISO provides very useful guidelines that support the implementation of other sustainability practices as well. The Organisation is signatory to the UNGC since 2003 and, in turn, the Organisation has been continuously submitting the COP annually by adhering to the UNGC reporting requirements under the headings of human rights, labour, environment, and anti-corruption. Importantly, the Senior Manager 1 highlighted that while the UNGC influences the way how the Organisation practices sustainability, it does not determine what the organisation does. [The Organisation] has always strived to achieve the ten principles of the Global Compact through not only our day to day operational practices but also through specific target projects and programmes. The Global Compact gives us the ability to be exposed to the wider global sustainability objectives and to align ourselves to these in a more meaningful manner. As signatories we will continue to strive for greater excellence as a corporate citizen (COP, 2010, p.31). Board of directors directions towards the sustainability Interestingly, all the interview respondents revealed that it is the board of directors commitment, interest and leadership that primarily drive the sustainability practices in the Organisation. Respondents underlined that board s directions to implement sustainability practices are very strong and influential. Further, respondents also emphasized that appointing a board member who is responsible for sustainability at the top apparel board itself shows the board s influence for sustainability practices. There is a board member; our managing director is a part of [the Organisation s] board. He is the person who is driving sustainability for the entire group. That s a big representation which he takes the sound. (Executive 4) The board takes strategic decisions to practice sustainability with a robust policy implementation system of Hoshin Kanri 3. With Hoshin Kanri, the board directs a strong monitoring mechanism to ensure that sustainability strategic plans are properly implemented 3 Hoshin Kanri is a form of corporate-wide management that combines strategic management and operational management by linking the achievement of top management goals with daily management at an operation level (Witcher and Butterworth, 2001, p. 651). 18

and targets are achieved. Most of the participants (Executive 7 & 4, Manager 1) emphasised that board s directions to implement sustainability practices are compulsory and everyone has to comply with Hosin Kanri directions which are derived from the top apparel board. Primarily the board sets sustainability objectives through Hoshin Kanri and forwards to the next levels for the design of strategies to achieve objectives. It is apparent that the board pressure to achieve sustainability targets are very strong and the management teams who are responsible for implementing sustainability practices have been advocated with well-structured sustainability strategic plans. Respondents also commented that strong board leadership towards the sustainability is crucial without which it is impossible to implement bottom-up practices due to Asian cultural constraints. Accordingly, the board s directions to implement sustainability practices seem to have a very strong and positive impression among managers as they are properly designed and implemented through clear sustainability policies. Respondents commented on that: Our approach to the sustainability quite come from the board what we get from them is the intent. Intent is that how serious they want us to look into long term vision and where we need to go, in terms of articulation. And then what we do is we develop that into specific plans and strategies and convert them into actions. If you look at the amount of money that we actual spend annually, we can t do that without a proper board support. (Senior manager 1) In addition to the above major coercive pressures that influence the Organisation to implement sustainability practices, respondents also highlight the increasing influence coming from the community and suppliers as well. 4.2.2 Strategic responses to mimetic sustainability pressures The Organisation mimics sustainability pressures generated by various means, such as (i) exampling customers 4 sustainability best practices, (ii) following sustainability best practices implemented by leading companies in the apparel manufacturing industry and multinational corporations, (iii) benchmarking group level best practices, and (iv) learning sustainability best practices from sustainability forums and experts. Exampling customers sustainability best practices Modelling and imitating sustainability best practices implemented and required by customers has been one of the key influential factors that enhances the Organisational sustainability initiatives. Respondents informed that adopting what customers are doing is a mutual relationship where both parties benefit. On the other hand, it has also been the practice of customers to share whatever the new systems and sustainability practices they implement in their global manufacturing networks. Benchmarking may be from our customers, [Customer A] is leading. We constantly partner with them [customers] and we learn a lot from them. For example they have comprehensive chemical management procedures. We have observed how they do it and 4 Customers are referred to big retailors as the case Organisation is a manufacturing Organisation that does not sell products to end users. 19

now we are having our own system We are adapting how they are evaluating eco factories. So we have similar models here (Manager 3) Interestingly respondents (Manager 4) informed that what the Organisation is doing currently is mostly reflected by what customers are doing and what they need from the Organisation. In certain situations customers sustainability demands are more likely to be compulsory requirements. Further, customers also expect to enhance their corporate image towards sustainability by motivating manufactures to adhere with sustainability practices. It is interesting to note that how significant was the influence of the Eco-Factory, which was built as a response to customer s demand, to the future of the Organisation s sustainability agenda. According to the Senior Manger 1, it was the Eco-Factory that made an inspirational turning point for the Organisation to develop a group level sustainability framework. The Organisation has also been proactively bargaining with customers to enhance the sustainability practices by proposing better sustainable solutions in situations such as destroying excess garments as a way of protecting brand and market. The following example clarifies how the Organisation responded to customer demands with the aim of enhancing the sustainability practices. There was a customer requirement that you need to destroy extra garments to protect the brand and market. Destroying for them is burning; so we had to go and say that no we are not going to burn but we will cut them into small pieces so that you can t use them for the intended purpose. So there was a negotiation there and then implemented it. It was actually how we who implemented the more sustainability practices. (Executive 3) In another situation where customers asked the Organisation to certify that garments manufactured by them are free from hazardous chemicals, the Organisation has avoided to certify as they only contribute almost 20 per cent of the value chain. This fact was revealed by several respondents, and the Organisation explained their capacity within the value chain and inability to provide such an assurance for the entire product for which they are not accountable. The Senior Manager 1 explained the situation; one of the new things that s going on is the brands [customers] want their garments to be free of hazards chemical. They want us to certify that garments are made free of hazards chemicals. The problem is that hazards chemicals don t come from here. So, we don t have as much as leverage to look what [suppliers] are doing and giving. So this was a real issue to be sorted out. Because for the brands, they say that we buy from you, so, you tell us the story of hazards chemicals, but [suppliers] are the people who provide things with chemicals. That s a contradictory situation. We said no, but we can assure that we don t use hazards chemicals, but we can t give you an assurance of another supplier that they supply hazards chemicals free things. Exampling sustainability best practices implemented by leading companies Participants also revealed that the Organisation considers sustainability practices implemented by leading organisations in the industry, particularly, industry competitors. They informed that it has been a crucial task even for competitors to implement sustainability practices due to the increasing demand for green products. A respondent (Manager 1) also pointed out that those leading organisations in the industry also perform well in sustainability and there is a big competition among those organisations for sustainability awards awarded by the government and international bodies. 20

they [leading organisations] also do [sustainability practices]. Because simply since we won the Gold Award for Green last year, we had a big competition from others companies as well So we understood that they are also doing lots of projects on environmental sustainability. We had a tough competition and ultimately we won the prize. Further, the Organisation has also been learning sustainability best practices from other organisations in the industry. A respondent (Executive 4) revealed that some large scale organisations have even initiated sustainability practices that the Organisation has not been able to achieve so far. we ve been learning from [Apparel X and Apparel Y] as well, several stuffs, how they manage things like that. One of the great things that we have seen in [Apparel X] is that they did a big water initiative recently. They identify these things and they reduce their water footprint, which I shame to say that we couldn t do that so far. But, yes, in some aspects true, they are leading. So from them we see some opportunities with us as well. That s a big learning, I would say. An executive noted that they will implement whatever possible sustainability practices within their capacity and Organisational structure; however, may not be exactly what others are doing (Executive 6). However, on the other hand, respondents (Executive 5) also commented about the viability of the sustainability practices implemented by leading companies in terms of lack of proper communications and validity of the information that these organisations publish in publicly available reports. Benchmarking group level best practices The Organisation has also been comparing other plants at the group when implementing new sustainability projects or modifying existing ones. Respondents noted that there are many group level opportunities and procedures where strategic business units (SBU) can follow and share their experience with others. In addition to that the Organisation refers to best practices implemented by other partners locally and globally. A manager (Manager 1) shared his experience on how he consulted other plants in implementing a biogas project. Actually when it comes to implement a new project we always look at other plants. For example, now there is a project in pipeline for the biogas generation...we always refer best practices of others. For example, before we installed our energy efficient chillier, I also had visits to other factories, not only within the country but outside the country as well. We got their feedback and we always try to benchmark best practices and try to do the project. Sustainability learning from forums and experts The Organisation also tends to share best practices implemented by other organisations by sharing ideas through formal and informal seminars, workshops, conferences, and forums. A manager (Manager 2) explained that energy managers forum which is held for every three to four months period is one of such forums where they share experience and ideas of energy consumptions and innovations. 4.2.3 Strategic responses to normative sustainability pressures Normative institutional pressures that influence the Organisation to implement sustainability practices include (i) top management philosophy towards the sustainability, (ii) 21

organisational policies to enhance employees knowledge on sustainability, and (iii) the influence from professional bodies to implement sustainability. Top management philosophy towards the sustainability While there are formal policies and procedures to implement sustainability practices, interestingly, the top management has been empowered to initiate their personal sustainability interests within the Organisational agenda. Respondents shared number of examples where the top management has initiated sustainability practices with their personal interests that are not directly related to the Organisation s formal sustainability targets. For instance, At the [organisation], the unique thing is everybody is empowered If you have vision and if you have action plan and if your intentions are good, people will support you. At the Division 3, the director, he wanted the entire fabric park to be green, it s not coming from the apparel board, but it s just his thinking (Manager 3) An executive (Executive 1) also noted that top managers personal philosophy towards the sustainability is very influential to achieve sustainability goals. For instance, a report published on the Organisation s Eco-Factory revealed how the CEO at the Division 1 took the challenge to build the Eco-Factory and how he motivated his team towards goal achievement. When the challenge was put to [Division 1], the divisional CEO decided to create a small internal team to brainstorm possible responses that would move beyond the relatively limited environmental management they had done to that point. It was in his nature to rise to challenges: he was a keen boxing fan (and high-profile supporter of the national team) and liked to tell his staff: if you are knocked down once, get yourself up and get back in the fight (Reason et al., 2009, p. 61). However, the Organisational philosophy on the empowerment of employees towards the implementation of sustainability practices is not limited to the top management itself, but, equally applicable to all the hierarchies throughout the Organisation. Responded revealed that board of directors has very strong relationship with top management, and on the other hand top management also has empowered the middle level management to implement their own sustainability initiatives at the plant level. An executive (Executive 4) also highlighted that apart from the conceptual guidance came from the top management, primarily, most of the other programmes were the ideas came from the junior level managers and employees. Further, a manager at a plant highlighted how they implement sustainability practices, They [top management] don t tell us to celebrate the earth hour and everything, but we do it and we take photos and share it as it s the right thing to do. (Executive 7) Organisational policies to enhance employees knowledge on sustainability Continuing with the Organisational core values of the sustainability, the Organisation has taken various training and development initiatives to enhance the knowledge of all the employees from the day one of their recruitment. The Organisation filters people with sustainability academic and professional qualifications for sustainability specific job requirements, in particular to recruit members to the sustainability team. 22

Specifically for sustainability related recruitment we are very well aware of and we check their certification, their level of education, the depth of knowledge they have all of that. (Executive 8) Therefore, the Organisation s approach to select suitable employees for sustainability management positions enhances the goal congruence between personal interests and Organisational values. Once employees are recruited to the Organisation, it is mandatory all the employees to undergo through an induction programme in which there is a dedicated module for sustainability. Depending on the job requirements, after the sustainability induction programme, all the employees are provided sustainability related trainings programmes. In addition to that, the Organisation also celebrates most of the sustainability related national and international days together with various awareness programmes. Once recruited, [employees] are given sustainability trainings continuously through the induction programme, annual training sessions, health and safety trainings, and ISO 14001 trainings as well. They are also educated on how they can contribute to sustainability practices, such as in water conservations and waste management. We also organise various competitions to celebrate various international days, such as the earth day, environmental day. In addition to that we arrange lectures, quizzes, and poster campaigns to enhance their knowledge about sustainability. (Senior manager 2) Influence from professional bodies to implement sustainability Sustainability practices implemented by the Organisation have also been influenced by various professional bodies affiliated to the apparel manufacturing and business sector as a whole. In particular, the Garment Without Guilt certification programme initiated by the Joint Apparel Association Forum (JAAF) and Sri Lanka Apparel has influenced the Organisation to certain extent. The Organisation s news bulletin outlined the influence of JAAF for sustainability initiatives as follows. All [the Organisation s] units have been certified as Manufacturers of Garments Without Guilt an initiative which focuses on the ethical manufacture and sustainable development assuring the industry's commitment to ethical working conditions, free of child labour, free of forced labour, free of discrimination and free of sweatshop practices. (Sustainability news) Respondents also stressed that they do not feel that most of the institutional demands as pressures due to their over compliance with regulatory conditions and other institutional pressures. For instance, the Senior Manager 1 pointed out that there is no pressures that professional bodies like JAAF can impose on them as they have standards that tend to be much higher than the requirements prescribed by certification like Garments Without Guilt promoted by the JAAF. Further, respondents informed that sustainability related seminars and workshops organised by JAAF were also helpful the Organisation to shape up the sustainability practices. When the government increased the electricity tariff, the Organisation partnered with other professional bodies and industry associations, such as JAAF and SLSEA, to influence the government that the increased has negative impacts on the industry while they have taken number of sustainability initiatives to reduce the energy consumption. The general secretary of the JAAF has also expressed their effort to support the apparel manufacturing industry after discussing with government authorities. 23

The electricity tariff increase will jam our cost structure and the tariff increase for apparel factories will be around 15 per cent During our discussions with the Public Utility Commission (PUC) we requested them to consider the serious impact of the tariff increase on the export sector and repercussions on the economy and give us opportunities to face global competition. However, they have not considered our request and we are disappointed with the authorities not creating a conducive environment for export industries. (General Secretary: JAAF, a newspaper interview) 4.4 Role of MCS in responding to institutional pressures for sustainability This section discusses how the Organisation uses MCS in strategically responding to institutional pressures for sustainability. The section first analyses the use of MCS in implementing sustainability practices from a holistic approach by referring to three components of MCS (i) specifying and communicating objectives, (ii) monitoring performance through measurement (feedback/control), and (iii) motivating employees to accomplish objectives by linking the reward system to objective achievement. 4.4.1 Use of MCS for specifying and communicating sustainability objectives MCS used in specifying and communicating sustainability objectives in the Organisation include: internal sustainability policies, sustainability planning, and internal operational structures are procedures for managing sustainability practices. Internal sustainability policies The Organisation has developed explicitly written policies to implement sustainability practices. In particular, while there is a common sustainability policy for the entire group, on the other hand, there are divisional and plant wise sustainability policies depending on the specific requirements of the plant. Moreover, the common sustainability policies are further classified into divisions by encompassing environmental, social and economic sustainability aspects in order to closely monitor the progress of each aspect. Employees of the Organisation are informed these policies through a particular management control mechanism where the employees can access to all related laws to their employment. The COP (2011, p. 10) highlights that; [Division A] has a structured compliance management system guided divisionally. The division has come up with 52 internal policies on HR and Labour, Health and Safety and Environmental Sustainability which provide clear directions on implementing and maintaining the standards. The policies are accessible to all the [Division A] employees through the share point. Annual training programs are conducted by the compliance team to enhance employee knowledge and to ensure proper implementation. The share point provides easy access to national laws and legislation, customer standards and training and reference materials on compliance. Further, the sustainability policy framework has a clear focus on the Organisation s demanding areas that require special attention. In order to implement comprehensive sustainability practices by encompassing all stakeholders, the Organisation also takes into account their joint ventures, customers and other group level sustainability policies in the design of the sustainability policies. Sustainability planning 24

The Organisation has included sustainability into mainstream of corporate agenda starting from the vision and mission statements. More recently the Organisation has changed the vision from lean manufacturing to sustainability and innovations. For instance, a respondent (Executive 1) highlighted that sustainability is the main focus of the 2020 goals. We even have sustainability strategies, separate strategies are also in our main strategies as well as now they are linking it to maximising profits, reducing row material consumption. So, they are linking it to other strategies as well. (Manager 3) The Organisation uses the Hoshin Kanri for strategic planning for all Organsational practices including sustainability planning. An executive highlighted how the Hoshin Kanri helps the Organisation to design sustainability strategies properly and implement with systematic plans. Once sustainability targets are passed down from the board to divisions and then to plant level though Hoshin Kanri, the plant level managers are empowered to identify suitable strategies to implement sustainability targets according to Organisation s policies. The Organisation also constantly reviews the past sustainability plans and their respective achievements to set strategies for the next terms. For instance, the COP (2012, p. 35) highlights that the process as: After revisiting and evaluating the performance for the period 2010-2012, [Organisation] has launched a more aggressive strategy to address Organizational environment footprint for the five year period; 2013-2017 which is integrated with the core business strategy and systems. Internal operational structures and procedures for the implementation of sustainability practices The Organisation s internal operational structures and procedures for the implementation of sustainability practices are well defined are structured. All the respondents informed the similar Organisational structure for sustainability where there is a board member who is in charge of sustainability at the top apparel board of the Organisation. Under the board member, there is a director who is fully responsible for sustainability. Next to the director, a corporate team that mainly looks at strategy, implementation and monitoring of projects, funding and budgeting and all other tasks. From the corporate level team, there are three cluster teams headed by divisional managers. Finally, at the plant level sustainability champion and sustainability team are responsible for the implementation of sustainability projects. In addition to that, there is a central environmental sustainability steering committee that comprises people all across functions. The sustainability steering committee represents all the heads of these cross functional teams and all the heads of cluster wide sustainability teams. 4.4.2 Use of MCS for monitoring sustainability performance (feedback/control) The Organisation employs MCS tools such as sustainability data collections, sustainability investment appraisals, sustainability budgeting, and sustainability life-cycle analysis to monitor sustainability performance through various measurements. Sustainability data collection; objectives and procedures Sustainability data collected by the Organisation include all three aspects of sustainability. Further, sustainability data collection objectives aligns with the sustainability policies, 25

planning, strategies, and performance measurement systems. The Manager 3 summarised main objectives of sustainability data collection as to reduce consumptions, to understand whether the targets have been achieved, to know where the Organisation stands, and to decide what need to be done next. The procedure for the data collection is also in line with the internal operational procedures for the implementation of sustainability practices. Further, according to the respondents and documents analysis, the Organisation collects almost all possible data related to sustainability on factory wise and target wise. For example, separate data collection for air conditioners, compressors, and generators. The Organisation has different management systems to collect different sustainability related data. Environmental sustainability data are collected using a system called eco-tracker, which is an online system. Plant level sustainability champions are primarily responsible for entering and managing data into the eco-tracker on monthly basis. The COP (2012, p. 40) further highlights the standards and practices of data collection procedures of the Organisation: All [the organisational] facilities have implemented Environment Management Systems (EMS) of which 93% of Manufacturing Facilities have been certified with the ISO 14001:2004 standard. The EMS is aimed to minimize the environmental impact, adhering to legal and other requirements/ standards and continuous improvement. Two dedicated tools, [Organisation s] Energy Management System and Eco Tracker manages Groupwide environmental data ensuring attention to impacts, KPIs and improvements. Sustainability data related to employees and welfare are collected using a separate Management Information System (MIS), which is currently a manual system. Data collected on daily basis will be entered to systems on monthly basis, and then the Organisation quarterly generates a central sustainability report, which is circulated among all interested parties for decision making purposes. For instance, the table 2 depicts the outcome comparison of Eco-Go beyond sustainable development education programme. Table 2 Eco Go Beyond Sustainable Development Education Programme Measurement of outcome for 2012 compared with 2011 2011 2012 Total number of trees planted 987 3472 Total new grassy area 4162.55M2 21537.36 M 2 Total weight of compost produced 1674.4kg 2411kg Total number of unhealthy food removed from canteens 82 107 Total number of nutritious foods introduced to canteens 96 112 Total number of 5s Programme completed in Schools 67 105 Source: COP (2012, p. 41) Sustainability investment appraisals A number of respondents noted that now it is the Organsational norm to undertake sustainability analyses before initiating a project to verify sustainability impact and viability of the project. While it is a legal requirement for some large scale projects, the Organisation employs such analysis as a means of enhancing the quality and validity by minimising the negative effect to the environment and society. An executive commented that, we always look at all those three aspects in new projects. Let s say we are going for a new capital expenditure project, yes, we look at all three aspects; social, environmental 26

and also economic aspects. Feasibilities of all three aspects the evaluation is there on how the project would impact the society. (Executive 4) In some instances sustainability project appraisal is a prerequisite to obtain the EPL and other regulatory approvals from the government. However, the respondents informed that by doing such analysis the Organisation gains a real understanding of the impact of what they are doing. For instance, the COP (2012, p. 46) stressed how the Organisation assessed the sustainability impacts of their latest two manufacturing plants built in war affected areas in the Northern Province. All new facilities and infrastructure retrofits go through strict environmental assessments internally that also has significant emphasis on energy, water and emissions performance focusing on sustainable construction and operations. [Organisation s] new facilities in City A and City B are examples where the energy efficient fittings, equipment, efficient chillers, water treatment, water efficient fittings, waste management were integrated using environmental performance as primary criteria for selection/design. Interestingly the Organisation conducts depth studies even before replacing old machines and buying new capital expenditure machines in order to verify that machines comply with sustainable standards and have minimum negative impacts to the environment and society (Manager 1). While the Organisation had largely relied on the payback period in the early stage, now they have moved further to analysis with other techniques to enhance the validity of long term sustainability projects. The responsibility of undertaking sustainability project appraisals is not limited to the divisional sustainability teams, but it also goes to the implementing teams at plant levels as well. However, the Manager 2 emphasised that obtaining sustainability team s approval is very important before taking the best and balanced decision. Further, the sustainability project analysis is not just limited to assessing environmental and economic feasibility; the Executive 5 informed that they also consider people s behaviour and attitude before launching new projects. Respondents also highlighted that the Organisation only goes ahead with budgets and other implementation procedures once the factory certification is obtained for the initiation of the project. Sustainability budgeting Budgeting for sustainability has been one of the decisive managerial functions that drive sustainability initiatives smoothly and continuously at the Organisation. Currently the organisation s policy is to allocate minimum of 0.5 per cent out of the revenue of every plant for ongoing environmental sustainability projects. In addition to that, divisions or plants are also empowered to initiate suitable sustainability projects by requesting funds for new projects accordingly (Executive 3). In particular, while there is a fixed allocation for existing projects, depending on the specific sustainability initiatives the allocation will also be varied as a combination of fixed and normal budget. When asked about the procedure of budgeting for new sustainability investment while maintaining existing projects, a manager clarified that; it s actually subjective. If you have new investments it depends on where it comes and for what purpose. Let s say if you are expanding your business and if you are investing in another country then it s actually the budget is coming from the normal budget. But if you have sustainability initiatives then they own money from our budget and combination. (Manager 3) 27

The basis of budgeting for sustainability projects also depends on certain criteria, in particular, the payback of the project. However, many respondents replied that the Organisation always generously budgets for sustainability projects even if those projects do not meet the payback as expected from other projects. For certain projects related to energy and water we have the relaxed payback period. So these projects we can go with the extended payback period, and we have much more time to do that. If the X months are the regular approved project, for sustainability related initiatives, we can go to X plus Y, but normally we have not gone through. (Senior Manager1) The Senior Manager 1 also explained the importance and alignment of preparing budget and other Organisational procedures in order to achieve the next year s sustainability targets as set in policies and planning. We do things in a very efficient way every time before starting the year. Now for example, for 2014 we have completed all the budgeting for sustainability side, because we have been given a policy and under the policy it s clearly mentioned that we need to invest 0.5 per cent of out of our revenue for sustainability projects. That s for the factory...likewise every SBU needs to come up with their proposal to invest at least 0.5 per cent. Once funds are allocated for particular units or projects, it is the responsibility of the management to spend funds, and if not, they have to provide reasons for not spending the allocations. The Manager 3 stressed the responsibility of spending allocated funds as if a unit has not spent the allocation, it means that either they have achieved the targets or they are inefficient. Therefore, she asserted that sustainability budgeting is a very important MCS that drive the sustainability. Sustainability life-cycle cost analysis The Organisation undertakes life-cycle cost analysis for sustainability related products and projects. The first life-cycle cost analysis for products was undertaken for carbon neutral bras manufactured in the Eco-Factory in respond to one of the key customers requirement. A team member of the life-cycle cost analysis explained the usefulness of the analysis in decision making. the report [life cycle cost analysis] is a secondary thing. But we actually did this process and analysed it. So going forward, if we are trying to reduce the life cycle impact of our products then we can use the data that we have gathered here in order to see where is the best place actually we can minimize it. (Executive 3) He further emphasized that the outcomes of the life-cycle cost analysis for carbon neutral bras are very important for the Organisation to identify areas that require particular attention to reduce sustainability impact. On the other hand, the Organisation often analyses life-cycle cost in purchasing capital expenditure machines. Respondents explained that life-cycle analysis provides very useful information in selecting the best option in sustainability decision making. For example if you are buying a chillar and an air conditioner, then we do life-cycle analysis and then we decide if you take the investment always ACs are lower than the water cooler. If you analyses the life-cycle cost, water cooled chillars are very efficient. In that way we consider life-cycle cost analysis for high cost items. (Executive 1) 28

The Manager 1 also mentioned that they consider 15 years of life-cycle for a knitting machine and engineer service machine, like boilers. When asked who will do the life-cycle analysis, the respondent revealed that it is done by both engineers and finance members. While the organisation has taken initiatives to continue life-cycle cost for some other products, the Manager 2 described that they face various difficulties in gathering all the necessary cost information related to a particular product as the Organisation only account around 20 per cent in the entire supply chain. However, he stressed that within their capacity they will continue the analysis with simulations. 4.4.3 Use of PMS for motivation by linking rewards to sustainability performance Sustainability Performance Measurement Systems (PMS) has been an important aspect that integrates all other managerial functions toward the achievement of sustainability objectives. The Organisation measures sustainability performance targets using Key Performance Indicators (KPIs) in terms of environmental, social and economics perspectives. Basically the sustainability KPIs are circulated from the board to plants using Hoshin Kanri. According to respondents, the main environmental sustainability KPIs includes reduction of energy, water, emission intensity, and reduction of wastes. The COP (2012, p. 36) describes what bases are employed to determine KPIs and what the particular types of environmental sustainability KPIs are. Intensity driven KPI s govern the Group approach using a mix of Clocked hours as a broad measure of how long the shop is open for for Apparel Manufacturing facilities and kilograms signifying the output for Fabric and Accessories Manufacturing facilities. Our energy use within the group consists of both direct and indirect energy; direct energy is generated through stationary combustion, while indirect energy comes in the form as either electricity purchased from the national grid, or as energy used in the transportation of goods and people. Once the KPIs are delivered to the divisions and plants, then the management conducts continuous reviews to monitor the progress of the achievement of KPIs. The reviewing process carries out hierarchically and it is well structured. According to the Manager 3, when it comes to the factory, head or the general manager reviews KPIs every month. Performance at divisions is quarterly reviewed by directors. Above the directors, the apparel board reviews quarterly. The Organisation evaluates sustainability performance constantly, review progress, appreciate and reward divisions, teams, and individuals. The table 2 provides the outcome comparison of between 2011 and 2012 of the Eco-Go beyond sustainable development education programme. For instance, the following comment stated in the COP (2012, p. 36) highlights the progress of KPIs achieved by specific divisions during the 2010 to 2012. Both the [Divisions 1] and [Division 2] have achieved significant reduction in electricity intensity from 2010 to 2012. These reductions were achieved by a combination of investment into energy efficient infrastructure including retrofits, introduction of new technology, skilling and educating facility operators and creating awareness and kaizens focused on energy efficiency improvements. The Organisation has also developed a specific management control tool called Calibration tool to evaluate group wise sustainability performance in a common platform by mitigating the vast deviations of KPIs achievements. The reason behind the development of this tool is to evaluate sustainability practices of all the divisions from a holistic approach in line with group level sustainability targets. Accordingly, it is apparent that the Organisation has been 29

applying proper PMS systems to evaluate sustainability performance in all three aspects of sustainability. A number of respondents informed that PMS system is one of the key control mechanisms that help the Organisation to achieve sustainability targets. Particularly employees are very positive about the evaluation of KPIs and the liberty given them to perform sustainability practices through empowerment. 4.4.4 Significance of the MCS use in acquiescence strategies Participants indicated that MCS play a significant role in the implementation of sustainability practices in responding to institutional pressures with acquiescence strategies. In fact, most of the respondents highlighted that proper use of MCS is inevitable in implementing sustainability practices with acquiesce strategies. For instance, the Manager 1 stressed that: Because we always depend on the supplier information but we need to look at once we installed that one [machine] we need to figure out how much the actual savings. For that we need to have management controls. Otherwise we can install and run, but we don t know what s the real impact of it and actual savings are. With that having management controls systems like that we can always and then every month look at how it performs and how it behaves, what will be the savings and what will be the impact to the environment as well. So management controls are very important. The Executive 2 explained that budgeting is an important MCS tool for them to predict and analyse future sustainability opportunities and threats when formulating sustainability strategies. He further clarified that sustainability budgeting also plays a significant role in proactively responding to future sustainability pressures. In particular, the Manager 2 also stated that even though they implement sustainability practices, if the monitoring system is not effective the Organisation cannot achieve the targets as expected. The implementation may also be useless if a proper monitoring is not placed. Further, the Manager 3 highlighted that the role of MCS in sustainability is inevitable as all the operational functions are integrated. While the role of MCS was not that significant earlier, with the formal sustainability initiatives, it now plays a significant role by providing cost effective mechanisms. I would say now it [MCS] is coming into practice. Because everything is being integrated. So when you say management systems starting from all the KPIs review to use MIS, IT, software, and every system is now kind of integrating. It wasn t like that few years back. Now the companies are looking into it [MCS] because it s very cost effective. Further, it was also revealed that the interrelated and integrated nature of tools and techniques used in MCS are very supportive to rationalize sustainability projects with expected objectives (Executive 4). Respondents also reviewed that while the role of MCS is important and supportive, the fundamental driving force behind sustainability is the Organisational commitment. Therefore, the real impact of MCS begins after the inception of sustainability practices with the committed Organisational motivations. The Senior Manager 1 noted that while MCS are essential components in the implementation of sustainability practices, MCS do not invite the Organisation to follow sustainability practices. For most organisations sustainability is still an emerging area. So if you look at people who are the market leaders on that they are not really driven by management systems I don t subscribe that management control systems are driving [sustainability] I would definitely say that it [MCS] is important. And if you ask whether we can do sustainability 30

practices without management controls, no, it s not. The difference would be we never looked at management control systems role in sustainability as an invitation to do what needs to be done. For example, to find money, collect resources and find suitable people to do things. His proposition clarifies the Organisational approach to sustainability practices clearly in terms of initiations and implementations: initiations are driven by Organisational commitment towards the sustainability while the implementations of sustainability are supported by MCS. Similarly, respondents elaborated that in order to drive sustainability practices successfully, top management commitment and involvement is the crucial matter without which the achievement of sustainability targets is impossible. 4.4.5 Significance of MCS use in compromising, avoiding, and manipulating strategies Besides the role of MCS in implementing sustainability practices motivated by acquiescence strategies, respondents also demonstrated situations where the MCS were used for strong active responses, such as in compromising, avoiding, and manipulating strategies. While it is not clear to distinguish which MCS were used specifically to respond to different institutional pressures with different strategies, participants explained the usefulness of MCS in active resistance from a holistic approach. Most of the participants informed that the information generated by MCS provides strong evidence to proactively respond to institutional pressures with resistance strategies. Moreover, respondents discussed on how the information collected through MCS would help them to negotiate in rationalizing their arguments in compromising with institutions. We can use sustainability information [collected through MCS] to show them [institutional pressures] that we do not break the law, and future plans to bargain with them. (Senior Manager 2) In addition to the information collected though MCS internally, the Organisation can also use MCS as a means of responding to institutional pressures through the sustainability auditing procedures in terms of social and environmental compliance. Since we have management control systems in place, we have all the evidence and figures, collected and recorded throughout the years. I mean from 2010 all we have. We can clearly show everybody [institutional pressures] that how we have done from our side. So then we can turn them to anyway support from their side as well. So that s very important to have management control systems to have a big voice. (Manager 1) Further, a team member of the development of the Calibration tool explained that if the existing MCS tools are not capable of fulfilling the emerging institutional pressures, then they also can include those aspects into the new Calibration tool. Thus, the development of the Calibration tool would be a novel approach to respond to increasing institutional pressures for sustainability. So, there are certain sustainability demands there if however, there is something new demand, if it s viable and feasible if it s accepted by our company, then we can easily include them into this Calibration tool which is anyway going to all the plants and to look in to by all the GMs so since that s an effective tool we can quickly identify if we have any lapses of sustainability and correct those. (Executive 6) 31

While MCS may play a considerable role in actively responding to some institutional pressures for sustainability, obviously it may not be able to cater some specific institutional requirements, such as compulsory regulatory conditions imposed by the government (Senior Manager1). The respondent (Senior Manager1) was also concerned about the use of finance oriented MCS to play a role in non-financial practices such as sustainability. Similarly, an executive also claimed that the usefulness of MCS may also be limited to some extent when dealing with external parties due to inherited limitations of MCS. Well since those are internal practices we actually could not push outsiders to get into our boat with that, [it] will be hard. That s my view. (Executive 4) Other obstacles that prevent the effective use of MCS in strategically responding to institutional pressures for sustainability are the measurability of sustainability information and ability to collect all the necessary information as the manufacturing organisations only account for small portion of the entire value chain. Further, the usefulness of the information generated by MCS may also depend on the top management s commitment to strongly respond to institutional pressures and the practical implementation of such information. One respondent (Executive 3) was concerned about the use of MCS information to strongly bargain with the institutions like government as it could negatively impact the Organisation s outstanding image and commitment towards sustainability practices in the country. 4.5 Competing institutional logics: shaping strategic responses to institutional pressures for sustainability 4.5.1 Role of organisational culture Most of the respondents revealed that the Organisation s sustainability practices are always embedded with the organisational culture values. The study reveals evidence to support organisational sustainability cultural practices in (i) internal organisational platforms served as a medium of sharing and distributing sustainability issues and information, (ii) internal events organised with sustainability approach, (iii) employee participations in community projects, (iv) shared values, and (v) sustainability symbols and architectures. The Organisation maintains various internal communication mechanisms to distribute sustainability news and updates, and employees to contribute and share their sustainability related experience and thoughts. The Executive 1 informed that email fliers and notice boards are commonly used to distribute sustainability announcements, information, and ideas. In addition to that, the Organisation publishes an in-house news magazine which is distributed to all employees for every three months period. The primary focus of the news magazine is to disseminate sustainability news throughout the Organisation. Further, the Organisation has also launched an intranet site to promote sustainability. The COP (2011, p. 32) highlights that, As a step to make all at [the organisation] more aware and vigilant, an intranet site known as Sustainability Insights was launched in August 2011 where the Environmental sustainability steering team updated progress and the latest happenings in the Group; working towards connectivity, collaboration and an inclusive culture. Annually the sustainability steering team organizes a sustainability forum where employees who are driving the initiative across the Group join together to share the developments and the proceedings of the year in each of their divisions and the way forward. 32

Among the various internal mechanisms to disseminate sustainability news, the Organisation has also displayed wall notice boards for employees to communicate and share their own experience and what they think about Organisation s sustainability practices as well (Manager 2). Internal sustainability related events that are organised by the Organisation also reflect how the sustainability is embedded into culture. The Organisation organises various events and celebrates most of the international days related to social and environmental sustainability together with employee motivation and awareness programmes. According to respondents, special initiatives have also been taken to change the employees attitude and mindset toward the sustainability practices, such as sustainability training programmes, encouraging for food savings, and appreciating employee contributions by giving special recognitions. The sustainability cultural characteristics of the Organisation also include launching various community oriented projects for which employees can also voluntarily participate. The COP (2012, p. 5) underscores the Organisation s philosophy towards the community as follows. Our culture of belonging has organically moulded our corporate structure into more of a family, and extends beyond the organization to our communities. Through our community ties and initiatives, we have created lasting bonds with the localities in which our plants are based, giving us license to operate as we continue to thrive as a corporate entity. The Organisation s sustainability orientation towards the community and employees engagement reflect how the Organisation internalizes social responsive and ethical decision makings. In addition to various sustainability related projects that have initiated to promote sustainability culture, importantly, the Organisation has various shared sustainability values throughout the group. Above all, the top management leadership and commitment has always been encouraging the Organisation to proceed with sustainability. Interestingly, the culture of sustainability has also been embedded with each and every aspect of the Organisation, extending from employees day to day activities to long term investment decisions as well. An executive described that it is the passion within the people. Now even we practice in canteen we separated food, paper, and polythene. Now nobody throws out their paper or polythene to food dustbin. Now it has given a cultural theme. It has gone to their DNA as well. Nobody is leaving their place without switching off the lights as well. So I think now it s a cultural thing in the organisation. (Manager 1) Most participants expressed that people have very positive attitudes towards the sustainability projects, which makes it easier for managers to implement and achieve sustainability targets as planned. The Organisation is one of the pioneers in the apparel industry to establish sustainability organsational culture through the establishment of Eco-Factories and green buildings. The Organisation has also taken possible measures to adopt environment friendly technology and architecture to design and build factories and premises as much as possible, and updating the technology accordingly. For instance, the cement supplier to the building of eco-factory highlights the innovative sustainable architecture of the factory as, this innovative structure invites architects and industrialists to rethink the factory as a building type (The Cement Limited, 2008, p. 4). 4.5.2 Role of industry analysts Interview data together with the Organisational document analysis indicate that the role of industry analysts drives certain sustainability practices, such as large scale sustainability 33

projects, projects that involve advanced technical applications, expertise knowledge (e.g. regulatory and compliance), and innovative projects. For instance, the Organisation refers to recommendations from the industry analysts in situations where the Organisation does not have expertise knowledge in a particular area. These expertise may be sourced from universities and professional bodies as well. A manager explained the role of sustainability industry expertise: Since we are a private company, industry analysts really come into play. We do work with consultants in strategy implementation or in specific initiatives, they play an important role. Specially in technology related things and specifically related to innovation related efficiencies we work a lot with them. Because very difficult to hold that knowledge within the company. (Senior manager1) The Organisation mostly consults the industry expertise for sustainability projects that require high technical advices and recommendations. The Manager 2 also described that industry analysts role was very important when they build the Eco-Factory in responding to one of key customers demands. This reveals that the importance of industry analyst s consultations and recommendations to successfully respond to institutional pressures for sustainability. From the social sustainability aspects, for instance, the respondents (Executive 4) explained that they get recommendations from consultants on regulatory and compliance matters. A manager described an example where they were even able to win merit awards for a project when they consulted the industry analysts. According to him, in some situations, the industry analysts recommendations play a major role more than the role played by the sustainability culture. We had the clear vision for the sustainability that at that time. And also we applied for the national green award and that time also we had to comply with their standards and regulations. So more than the culture, we have been given some guidelines and instruction to practice and since we practice we could won the prize. So, that s external recommendations that drive sustainability. (Manager 1) 4.5.3 Impact of competing institutional logics The respondents revealed that competing logics, both the organisational culture and role of industry analysts, play a considerable role interchangeably in driving sustainability practices in responding to sustainability pressures. Most of respondents indicated that it is the combination of both competing logics that shapes organsational responses rather than merely relying on organisational culture or role of industry analysts. The Executive 3 highlighted the role of both competing logics seems to be merged and cannot be interpreted as separate logics. So that [industry analysis] has to be merged with what we are doing right now. So there is a bit of merging of things that needs to be done. There is an integration of these two. We get the outside bodies to come and help us for the programmes that we have already initiated. We are the one who drive it. The following comment appeared on a report published on the eco-factory depicts how the integration of competing logics contributed the building of the factory. the enabling culture of [the organisation], as personified by the CEO, was certainly helpful. A protected space in which the project team could work was created, and 34

resources were made available. Members of this team were diverse incorporating scientific and commercial perspectives and together they possessed a keen sense of the larger context and a strong sense of purpose. They felt that this was an important opportunity to show what could be done, in ecological terms (Reason et al., 2009, p. 63). While the role of competing logics is integrated from a holistic approach, respondents also mentioned separately that which sustainability practices are particularly supported by organisational culture and the role of industry analysts. While organisational culture drives small scale day to day sustainability practices, in contrast, large scale sustainability projects are considerably supported by role of industry analysts (Executive 4). One respondent categorized that while organisational culture driven sustainability practices are more likely to generate indirect savings, on the other hand, sustainability projects driven by industry analysis have direct savings. 5. Discussion and concluding comments Examining how organisations use MCS in addressing sustainability implications has been a much demanding theme in the contemporary literature and practice (e.g., Arjaliès and Mundy, 2013; Bebbington, and Thomson, 2013). To enhance our understanding of this phenomenon, the study investigated how organisations strategically respond to institutional pressures for sustainability and, in turn, how organisations use MCS in such responses. Further, the study also examined how informal control systems, termed as competing institutional logics of organisational culture and role of industry analysts, shape the organisational strategic responses to institutional pressures for sustainability. Integrating these aspects, theoretically, the study was built on the emerging NIS literatures on strategic responses to institutional pressures, competing institutional logics, and practical variations (e.g. DiMaggio and Powell, 1983; Lounsbury, 2008; Oliver, 1991; Reay and Hinings, 2009). 5.1 Strategic responses to institutional pressures for sustainability The analysis conducted in the case study demonstrates that internal institutional pressures, such as board of directors directions and top management s norms and philosophy to implement sustainability practices are the strongest forces that drive the sustainability practices in the Organisation. Next to the internal sustainability pressures, externally, customers were the strongest force that the Organisation was influenced. In fact, this can be rationalized as the case Organisation is a customer driven Organisation. Organisations in this nature extensively depend on few large scale customers whose pressures are the most influential for the survival and success of the Organisation. Additionally, data also indicate that other institutional pressures have influenced the Organisation at different capacities. On the other hand, the findings reveal that the case Organisation employs different strategic choices in responding to institutional pressures for sustainability. While acquiescence is the most commonly used strategy, compromise, avoidance, and manipulations strategies were also employed where necessary. However, the study could not reveal any response using defiance strategy. The findings demonstrate how the Organisation follows all three types of acquiescence tactics: habit, imitation, and compliance (Oliver, 1991). In fact with the Organisation s committed sustainability policies and practices, it is apparent that the acquiescence strategies are largely driven by the Organisation s genuine habitual intention to follow sustainability practices. The Organisation s habitual acquiescence tactics are largely driven by the board of directors sustainability commitment, top management philosophy, and sustainability culture 35

values. The Organisation was highly influenced by leading customers to imitate their sustainability best practices in responding to sustainability demands. It was revealed that most of the sustainability practices at the Organisation are reflected by customers sustainability agendas. In addition to customers, the Organisation also modelled sustainability practices from large multinational corporations and competitors as well. The data reveal that the Organisation has developed strong compliance tactics with institutional demands, such as regulatory conditions, voluntary requirements from third parties, and customer mandates. The Organisation s compliance strategies are not blind acceptance of institutional pressures rather reflect strong rational choices in respond to sustainability institutional pressures. In most situations respondents informed that the Organisation s fundamental strategy is to over comply with sustainability demands and to be a sustainability trend setter in the industry by doing the right thing to do. Accordingly, acquiescence strategies have brought number of advantages to the Organisation, such as maintaining lower level of internal and external risks towards operations, maintaining strong stakeholder relationship, achieving higher level of social legitimacy, increasing operational efficiencies and sustainable growth. While the Organisation has attempted to respond to institutional pressures for sustainability mostly with over complying acquiescence strategies, respondents also informed certain situations where the Organisation has negotiated and bargained in fulfilling certain sustainability institutional demands. The findings reveal that the Organisation responded to sustainability institutional pressures using the mix use of balance, pacify, and bargain tactics (Oliver, 1991). In particular, data indicate that the Organisation has mostly compromised with customers and government agencies. In particular, such negotiations and bargaining do not seem to have a considerable impact on customer-supplier relationship or violations of regulatory conditions, rather enhances the mutual understanding of capacities and capabilities of both parties. In fact, the Organisation s compromise strategic approach to institutional pressures for sustainability seems to be a proactive conformity (Oliver, 1991), where in many situations both parties benefit mutually. The Organisation s compromise strategies have created numerous advantages, such as strengthening stakeholder relationships, avoiding loss of business engagements due to proper negotiations, mitigating operational and compliance risks, and enhancing production and operations efficiencies. The paper also demonstrates evidence supporting the Organisational use of avoidance strategies in situations where the Organisation has been asked difficult to implement sustainability demands. For instance, this was apparent when the Organisation was asked to (i) certify garments free of hazardous chemicals, and (ii) submit sustainability related information which were not possible to generate due to the nature of production systems and nature of products. The Organisation has used escape tactic to avoid sustainability institutional pressures that are difficult to accommodate within the Organisational capacity at the moment of request. In certain situations it was revealed that the Organisation postponed such request until they get ready to facilitate demands. However, the study did not find evidence to support concealment and buffering tactics. In particular, the use of avoidance and manipulation strategies in responding to sustainability institutional pressures reveals novel aspects by organisations that are committed to sustainability. Iarossi et al. (2013) hypothesised that organisations with expressed commitment to sustainability may respond to institutional pressures only using acquiescence, compromise, and manipulation strategies, however, cannot be expected to respond using avoidance and defiance strategies. However, in contrast to Iarossi et al s (2013) hypothesis, this research provides evidence to support that the case Organisation responded using avoidance strategies when the Organisation confronted sustainability pressures that are out of the organisational capacity and scope. However, it 36

does not indicate that the Organisation is deviating from their expressed commitment to sustainability, but, rather strategically accommodated sustainability demands within the Organisational capacity. In many situations the avoidance responses have created positive avenues to enhance the sustainability practices by being trustworthy to stakeholder with whom they are dealing with. Interestingly, the study was not able to identify any situation where the Organisation has responded to sustainability institutional pressures with defiance strategies using dismissing, challenging, or attacking tactics. When asked about any situation that the Organisation had to defy, all the participants informed that all the sustainability pressures are practical and somehow affordable. For instance, respondents indicated that most of the regulatory pressures that come from external institutions are environmental friendly. Therefore, by any means the Organisation has not denied sustainability demands. Participants informed that while the implementation process might be different, but still the Organisation tends to accommodate such demands appropriately. In such situations the Organisation has postponed some demands instead of dismissing, challenging, or attacking them. In particular, participants emphasised that rejecting sustainability expectations is similar to the rejection of the business. Therefore, by knowing each other s capabilities, the Organisation attempts to corporate with stakeholders. In fact this nature of Organisational responses are not a surprise as the Organisation is committed to sustainability initiatives. This fact has hypothesised by previous scholars proposing that it would not be rational to expect a firm that has expressed a commitment to sustainability to engage in activities that could be construed as avoiding or defying (Iarossi et al., 2013, p 78). Further, Iarossi et al. (2013) also argue that organisations committed to sustainability would pursue sustainability promoting strategies though manipulation, compromise and acquiescence. Accordingly, the Organisation s strategic decisions not to respond to sustainability pressures with defiance strategies have strengthened its sustainability stand and commitment. According to Oliver (1991), the highest level of strategic response to institutional pressures is the use of manipulation strategies with co-opting, influencing, and controlling tactics. The study reveals situations where the Organisation has responded to institutional pressures for sustainability with manipulation strategies using co-oping and influential tactics. Manipulating strategies taken by the Organisation were mostly used respond to regulatory pressures that seem to have a real impact or consequences on the Organisation s sustainability practices. For instance, the Organisation connected to influential people in order to source hydro power to the Eco-Factory when there were not regulatory provisions to do so. Oliver (1991) noted that manipulating responses may be implemented using co-opting tactics through the connections of influential people, such as politicians. In other situations, the Organisation partnered to voice against the decision taken by the government to increase the electricity tariffs, and when the BOI unexpectedly stopped the dump of waste to their dumping yard. Indeed, the Organisational manipulation strategies reveal how such responses help not only the Organisation itself, but the industry and the society at large to enhance sustainability practices. While the study shows how the Organisation responded to institutional pressures using manipulating strategies with co-opting and influential tactics (Oliver, 1991), however, was unable to find situations in which the organisation responded with controlling tactics. 5.2 Role of MCS in strategic responses to institutional pressures for sustainability 37

The findings indicate that MCS play a significant role in strategic responses to institutional pressures for sustainability in terms of (i) specifying and communicating sustainability objectives through sustainability policies, sustainability planning, internal sustainability operational structures and procedures, (ii) monitoring sustainability performance through MCS tools, such as sustainability data collection, sustainability investment appraisals, sustainability budgeting and life cycle assessments, and (iii) motivating to accomplish sustainability objectives by linking reward systems to achievements through sustainability performance measurement systems. While these three components of the MCS significantly contribute to the Organisation s acquiescence strategies, further, the information generated by MCS play an important role in strategically responding to institutional pressures for sustainability using compromise, avoidance and manipulations strategies. Accordingly, while there is a great potential for organisations to use MCS as a mechanism of strategically responding to institutional pressures for sustainability, the usefulness of such applications may also be constrained by other factors such as the level of top management commitment, orientation and usefulness of MCS information (e.g., totally finance oriented and internal focused), measurability and ability to collect sustainability data, nature of institutional pressures (e.g. regulatory), and the public image of the organisation. 5.3 Role of competing institutional logics on strategic responses to sustainability pressures Contributing to the emerging literature, this study also integrated the concept of institutional logics into strategic responses, MCS, and sustainability literatures. This paper supports on how the use of competing institutional logics enhances the understanding of which sustainability practices are driven by organisational culture and role of industry analysis, and on the other hand, how organisational responses are shaped by such perspectives. It is revealed that competing institutional logics, both the organisational culture and role of industry analysts, play a considerable role interchangeably in driving sustainability practices in responding to sustainability pressures. Most of respondents revealed that it is the combination of both competing logics that shapes Organsational responses rather than merely relying on organisational culture or industry analysts. While the role of competing logics is integrated from a holistic approach, respondents also separated which sustainability practices are particularly supported by organisational culture and the role of industry analysts. While organisational culture drives small scale day to day sustainability practices, in contrast, large scale sustainability projects are considerably supported by role of industry analysts. Further while organisational culture driven sustainability practices are more likely to generate indirect savings, on the other hand, sustainability projects driven by industry analysis have direct savings. Outcomes support suggestions of prior researches (Rautiainen and Järvenpää, 2012; Reay and Hinings, 2009) that competing institutional logics shape the strategic responses by reflecting a collaboration or hybrid nature impact. Therefore, the stand of this study complies with the proposition that organisational development is a function of the balanced use of competing logics (Rautiainen and Järvenpää, 2012). 5.4 Academic and practical implications This study sought to understand how organisations strategically respond to institutional pressures for sustainability using MCS. The findings demonstrate insights on the organisational different strategic responses to institutional pressures for sustainability, the use of MCS in strategic responses to sustainability pressures, and the impact of competing institutional logics on organisational strategic responses to institutional pressures for sustainability. As suggested by Ball and Craig (2010), this study contributes the extant 38

literatures by combining different institutional theoretical insights to understand the role of accounting in responding to sustainability concerns. For instance, Ball and Craig (2010, p. 292) emphasised that for a thoroughgoing analysis of the role of accounting in sustainability concerns we need to incorporate developments in wider social theory which have affinities with institutional analysis of organisational sociology. In fact, the findings of this study show a wide spectrum of analysis on sustainability institutional pressures, strategic responses, and role of management controls. Contrary to the long standing belief that the organisational survival and success is a function of conformity to the institutional pressures, this study complies with the proposition that organisations are not passive actors but respond to institutional pressures by different means (Oliver, 1991; Scott, 2008). Indeed, these findings add novel insights to the sustainability context in which the general perception is that organisations that are committed to sustainability are less likely to respond with strong active strategies. In particular, the case Organisation strategically responded to institutional pressures for sustainability using acquiescence, compromise, avoidance, and manipulation strategies. The outcomes also comply with prior researches (e.g., Adams and McNicholas, 2007; Arjaliès and Mundy, 2013) suggesting that organisations engage in sustainability for legitimacy or compliance purposes would change their organisational practices due to various reasons, such as complying with external standards or in responding to demands from stakeholders. Specially, these findings underscore important insights on the Organisation s proactive strategic stand in the context of operating as a fully customer driven sustainability sensitive business with less autonomy, and operating under immense pressures from regulators and community. Arguably, this may be the first study to examine how organisations use MCS in strategically responding to institutional pressures for sustainability. Responding to the call for studies by Arjaliès and Mundy (2013), this study provides evidence of the impact of both formal and informal MCS by providing a comprehensive understanding of the use of MCS in sustainability. These findings also respond to call for studies by Crutzen et al., (2013) to examine organisational issues that prevent the effective use of MCS in implementing sustainability practices. For instance, Crutzen et al. (2013, p. 21) noted that investigating the behaviour of companies will allow identifying issues that prevent companies from using management control to implement sustainability effectively. In fact, the study empirically validates the phenomenon that the formal MCS should be supported by informal control mechanisms (Crutzen et al., 2013). These insights also respond to call for studies by Wood (1991) to reveal how the organisational culture values mediate the transmission of ideas, support, information and resources relevant to social responsiveness, and by Morsing and Oswald (2009) to explore how managers integrate informal organizational cultural control aspects into the sustainability. Moreover, the conclusion that organisational culture shape strategic responses to sustainability pressures also comply with the suggestions of Norris and O Dwyer s (2004) and Crutzen et al. (2013). Findings of this paper also provide insights to management accounting practitioners and managers in strategically responding to institutional pressures for sustainability using MCS. Specifically, respondents stressed that management accountants understanding of sustainability issues and involvement with sustainability teams are critical in many aspects in achieving sustainability goals. Managers should also be aware of the limitations of the use of MCS in strategic responses, such as top management commitment and willingness to strategically responding to sustainability pressures, measurability and ability to collect sustainability information, usefulness of MCS information, nature of institutional pressures 39

(e.g. regulatory) and the public image of the organisation as well. Evidence of the study also reveal useful insights to large scale retailers whose manufacturing facilities are located in emerging countries on (i) how manufactures understand and react to sustainability demands forwarded by retailers, (ii) how organisations internally drive sustainability practices, and (iii) how do manufactures comply with sustainability demands under different contextual settings. Regulators and governing bodies also benefit from the outcomes of the study. Specifically, respondents expressed their concerns on the lack of strong sustainability regulations and issues related to the practical implementations of available regulations that discourage organisations that are committed to sustainability. Furthermore, governing bodies in developing nations should develop national policies to sustainability practices, and introduce standard and comprehensive evaluation mechanism to appreciate sustainability practices of committed organisations and to encourage organisations that are lagging behind. 5.5 Limitations and future research Outcomes of the study should also be interpreted with following implications. Though the focus of the case study is a large single Organisation that provides deeper insights on the proposition, inherently, case studies in this nature limit the generalizability of findings. Also as the term sustainability is a broader concept that denotes an undefined amount of activities, the basis of strategic responses and the usefulness of MCS may be widely varied depending on the organisational context in which it operates. The study could not explicitly separate the use of individual MCS with respect to separate strategic responses. Future research could also contribute by examining the proposition of this research as comparative studies in different industries, applying different competing institutional logics, and by referring to other MCS approaches as well. While the study took all possible measures to collect sustainability data from most of the relevant people who are responsible for sustainability practices and observing flagship Eco-Factory, due to the size of the Organisation with large number of plants, the study was not able to visit and report all the sustainability practices implemented by the Organisation. There are fruitful research opportunities to employ longitudinal studies by examining individual aspects of institutional pressures, individual MCS tools, and individual strategic responses to expose a depth understanding of the phenomenon. While this study only accounts for one aspect of organisational approaches to sustainability, which is responding to institutional pressures for sustainability, future researchers should give priority to examine how organisations develop corporate sustainability strategies as a means of achieving sustainable competitive advantage and how MCS support in managing sustainability dynamic capabilities. In such analysis, Simons (1995) levers of control framework would be a useful avenue to contribute literature, particularly in testing quantitates frameworks (see Arjaliès and Mundy, 2013; Rodrigue et al., 2013). References Abernethy, M. A. and W. F. Chua (1996). A field study of control system redesign : The Iimpact of institutional processes on strategic choice. Contemporary Accounting Research, 13(2), 569-606. ACCA, (2013). The complete finance professional 2013: Why breadth and depth of finance capability matter in today's finance function: Association of Chartered Certified Accountants. Adams, C. A., & McNicholas, P. (2007). Making a difference: Sustainability reporting, accountability and organisational change. Accounting, Auditing & Accountability Journal, 20(3), 382-402. Alvesson, M. (2003). Beyond neopositivists, romantics, and localists: A reflexive approach to interviews in organizational research. Academy of Management Review, 28(1), 13-33. Arjaliès, D.-L., & Mundy, J. (2013). The use of management control systems to manage CSR strategy: A levers of control perspective. Management Accounting Research, 24(2013), 284-300. Ascloy, N., Dent, K., & Haan, E. d. (2004). Critical issues for garment industry. Amsterdam: SOMO. 40

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