Driving SME Success through EMA Practices: An Analysis in Chenkalady DS Division of Batticaloa

Abstract This study examines the impact of Environmental Management Accounting (EMA) practices on the performance of Small and Medium Enterprises (SMEs) in the Chenkalady DS Division of Batticaloa, Sri Lanka. SMEs are crucial for economic growth and innovation but often face challenges in adopting sustainable practices while maintaining competitiveness. This research investigates how the integration of environmental costs into business operations through EMA influences the financial and operational performance of SMEs. Using a stratified random sampling approach, the study selects a representative sample of SMEs from the agriculture, manufacturing, and services sectors. Data are collected through a structured questionnaire that captures information on EMA implementation, financial performance, and non-financial performance indicators. Descriptive and inferential statistical methods are used to assess the relationship between EMA practices and SME performance. It reveals a gender disparity in ownership, with 66% male and 34% female ownership, and highlights the service sector’s dominance. Findings indicate moderate to strong EMA adoption, particularly in evaluating environmental performance and cost-saving. EMA positively impacts financial performance, though tracking financial benefits and compliance remains low. Recommendations include better financial tracking, compliance, and employee training, with future research exploring barriers and expanding to other regions.