Sustainability integration and control systems: Case studies from Sri Lanka

Udani Chathurika Edirisinghe

This thesis investigates how and why sustainability integration of Management Controls Systems (MCSs) varies in relation to companies’ strategic approaches to handling environmental and social issues. According to the extant literature, sustainability issues remain decoupled from MCSs used for strategic management purposes since academics and practitioners are more focused on developing individual sustainability controls for compliance and disclosure requirements. This study aims to close this research gap. In particular, this research investigates how the strategic approach to sustainability influences the integration of Sustainability Control Systems (SCSs) with regular MCSs. Further, by focusing on contingencies related to a developing country - in this case, Sri Lankan manufacturing companies, this research addresses the dearth of literature related to developing countries. The disparity in the contextual aspects of developed and developing countries lies in their socio-economic levels. This study is one of the few engagement-based multiple-case studies in a developing country context using in-depth semi-structured interviews to examine variations in sustainability integration. Building on Gond et al.’s (2012) scholarly work, a theoretical framework relying on two dimensions is proposed: (i) the extent of control integration (strong to weak) and (ii) the level of control complexity (complex to simple) of SCSs and MCSs to explore their link to the strategic approach (proactive, accommodative, and reactive). Data was collected from five Sri Lankan manufacturing companies through semi-structured interviews with senior managers, documentary evidence, researcher’s observations, and publicly available data. The data were analysed using pattern analysis to attest to each company’s plausibility with the configurations proposed by the theoretical framework that adopted replication logic. The study identifies four types of control configurations (complex-strong, complex-weak, simple-strong, and simple-weak) that explain each company’s strategic approach to sustainability. A company characterised by a proactive strategic approach integrates controls strongly while having complex attributes. In contrast, reactive companies do not have a similar impetus for integration as the SCSs remain decoupled from MCSs with simple control attributes. The accommodative approach explains the interim combination of simple-strong and complex-weak configurations. The study also demonstrates how contextual factors in developing countries, like Sri Lanka, play a critical role in fostering or hindering the integration of sustainability into control systems and strategies. Contrary to the literature, the findings of this study show that when companies advocate sustainability initiatives primarily through management systems, SCSs remains peripheral with limited contribution to the strategy development process. Due to the legislative system’s inefficiencies and corruption in countries like Sri Lanka, the present study concludes that regulatory forces are not sufficient drivers for sustainability integration. Further, customer influence for integration varies on the internationalisation of the products’ value chain position. Supporting existing literature, the analysis also found that several contingency factors, such as environmental uncertainty, organisational structure, and size, explain the extent of complexity in MCSs and SCSs. The main theoretical contribution of the study is the recommendation of a framework for designing control systems that fit the organisation’s contingencies while promoting sustainability within the strategy. As such, the insights and recommendations provided in this thesis have possible policy implications. The findings offer important empirical insights to senior managers, regulators, and stakeholders to understand the boundary conditions for designing the MCSs and SCSs that allow embedding sustainability in corporate strategy, especially for companies operating in similar contextual and cultural structures. Further, the findings of this thesis highlight the need for research in understanding the complexities of the integration process and provide avenues for future research.

Sustainability integration and control systems: Case studies from Sri Lanka

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