Creating a better Climate through Cultural Control - A case study on how a sustainability-oriented SME implements sustainability control through informal and formal management control systems

Abstract: SMEs make up a significant portion of the emissions in the EU, and given the deepening climate crisis, it is vital to investigate how these firms manage sustainability. Therefore, we have conducted an in-depth case study of how a sustainability-oriented SME in the clothing industry implements sustainability activities using formal and informal management control systems (MCS). Previous research has emphasized the importance of investigating formal and informal MCS regarding sustainability (Durden, 2008; Norris & O'Dwyer, 2004). Thus, the theoretical framework of this study (Malmi & Brown, 2008) includes both formal and informal controls. The research method of choice was based on semi-structured interviews. This study contributes to the extant literature on MCS and sustainability by showing that an SME can effectively implement sustainability through its MCS with strong cultural and informal controls with support from less developed formal controls. The cultural controls were mainly created by having a strong and clear purpose and values, hiring people who shared their values, strengthening their values through socialization processes, and having a CEO who enforced and lived according to the values. Additionally, it was found that strong cultural controls acted as a barrier to implementing formal control systems.