Management accounting and control in the adoption of triple bottom line in circular-economy startups: a loosely-coupled systems perspective

The circular economy refers to designing out waste and pollution, keeping products and materials in use for the maximum duration and regenerating natural systems (Kirchherr et al., 2023). The circular economy is a foundational element of a circular-economy startup (CES), which will seek to address environmental challenges while promoting economic prosperity (Bocken and Konietzko, 2022; Henry et al., 2020; Rok and Kulik, 2021). However, a CESs must address how to balance short-term financial drivers and long-term sustainability goals (Pelz, 2019; Boll, 2018; Von Kolpinski et al., 2023). In addition, there have been calls for research from an accounting perspective to understand how the integration of the circular economy leads to sustainability in business (Etxeberriaa et al., 2023).

The triple bottom line (TBL) is an established framework to measure environmental, social and economic sustainability in business. It encourages firms to assess and report on performance in three dimensions of sustainability: economic, social and environmental (Elkington, 1998). The economic (profit) perspective focuses on financial sustainability and long-term profitability by applying a combination of traditional financial performance measures, while the social (people) perspective involves an organization’s commitment to social responsibility and focuses on employees, customers, communities and suppliers. The environmental (planet) perspective addresses the global environmental impact of operations (Slaper and Hall, 2011; Ding and Runeson, 2020; Correia, 2019). This study addresses the research gap regarding adaptation and balancing the TBL approach in management accounting and control practices in CESs.

Previous research demonstrates the lack of research and practical guidance on how management accounting and control systems can manage multiple and sometimes conflicting objectives of the TBL (Sundin et al., 2010; McWilliams et al., 2014; Schaltegger et al., 2022). Although there are frameworks available for managing and controlling sustainability (see e.g. Svensson and Funck, 2019; Günther et al., 2016; Henri and Journeault, 2010), there have been calls for more research of greater depth (see e.g. Beusch et al., 2022; Lisi, 2015; Ruiter et al., 2021). Particularly, there is a lack of research in sustainability management control systems in small and medium-sized enterprises (Johnstone, 2021; Hasu et al., 2025). Previous research has shown that small firms have a strong interest in the TBL framework, but they lack the knowledge, skills, resources and time to integrate it into their business planning and reporting (Depken and Zeman, 2018; Gionfriddo and Piccaluga, 2024). Therefore, the research question in this study is:

Integrating TBL perspectives is challenging because the environmental, social and economic sustainability goals involved are not easily aligned and may even have contradictory outcomes. Furthermore, while the control systems for economic sustainability are well developed, that is not the case for environmental and social sustainability and attention is more easily directed to economic outcomes in management and control systems. However, there is growing pressure from both internal and external sources to integrate social and environmental aspects with economic and financial ones and there is a need to better understand the integration of TBL perspectives within management accounting and control systems. To address this, we propose a loosely coupled systems framework for examining TBL and management accounting and control practices in CESs. The concept of loosely coupled systems originates in organizational theory (Orton and Weick, 1990) and was proposed to study elements that are responsive but retain independence. We argue that the loose-coupling perspective can illuminate the parallel development of TBL approaches in CESs. That, in turn, supports developing management accounting and control systems that can advance sustainable circular-economy principles in business.

We present a multiple-case study of four CESs operating in Finland. The government of Finland has implemented a circular-economy strategy since 2021 and Finland’s Innovation Fund (SITRA) has reported on companies developing circular-economy solutions since 2017 (Kulmala and Lehtinen, 2021). Accordingly, Finland provides a relevant context for studying the CES phenomenon. The data comprise interviews and documentary material on each company and content analysis was used in the analysis of the data.

The results of the study present TBL practices in CESs and provide a discussion of management accounting and control systems fostering sustainability. A contribution of this study is to enrich the understanding of TBL in small and medium-sized enterprises (Depken and Zeman, 2018). Our findings show that the balance in the TBL depends on the need to consider the financial survival of CESs and the consequent prioritization of options to balance the perspectives over time and across measures (Ittner et al., 2003; Johanson et al., 2006). Furthermore, our study shows that management accounting and control practices support the adoption of the TBL in CESs by adding visibility through measurements, quantification and reporting requirements. Collectively, those boost understanding about comparability, reliability and objectivity of the measured and reported issues in the enterprise (Hasu et al., 2025; Beusch et al., 2022).

The remainder of this article is structured as follows: Section 2 provides an overview of management accounting and control and loosely coupled systems in connection with TBL. Section 3 reports on the empirical study and research methods. Sections 4 and 5 present and discuss the study’s findings and Section 6 summarizes the practical implications and offers suggestions for future research.

Management accounting and control supports organizations in managing environmental and sustainability issues (Contrafatto and Burns, 2013; Günther et al., 2016; Henri and Journeault, 2010; Oyewo, 2021). Management control is pivotal to implementing and formulating general and sustainability-oriented strategies and policies (Riccaboni and Leone, 2010; Svensson and Funck, 2019; Gond et al., 2012). Sustainability accounting focuses on the integration of social, environmental and economic qualities of activities through recording, analyzing and reporting (Beusch et al., 2022; Kerr et al., 2015; Schaltegger and Burritt, 2010).

Prior management accounting and control literature has shown that balancing several different dimensions of sustainability can be challenging (see e.g. Sundin et al., 2010; Solovida and Latan, 2021). Management accounting and control systems may focus on different periods, as some of the effects and results in the performance measures may occur immediately and some only appear in the longer term (Nørreklit, 2000). In addition, unclear objectives can prompt contrasting interpretations of goals and key measures and result in a continuous tradeoff between activities and timing (Johanson et al., 2006; Mundy, 2010). Das et al. (2022) identified the lack of data and knowledge, the low priority of measuring the environmental impact, time-consuming activities, cost and a lack of feasible tools as barriers that hinder measuring the environmental impact of circular business models. Frandsen et al. (2013) argued that the integration of the sustainability management control systems approach is too rigid and should be understood in a more loosely coupled way to better reflect the real-world organizational challenges in sustainability issues. Additionally, Pencle (2022) critiqued the dominance of traditional sustainability management control and called for a more balanced approach embracing these tensions rather than resolving them.

Orton and Weick (1990) demonstrated that loose coupling refers to a situation where connected elements respond to one another to some extent while maintaining their independence. Loose coupling occurs when the mechanisms linking elements are present but weak, for example, when they interact only infrequently. Loose coupling can also result from indirect relationships where the elements cannot control one another. Loosely coupled systems can be analyzed in terms of the degrees of independence and distinctiveness among their elements, which in turn shapes whether components are characterized as more responsive to one another or as relatively distinctive within the system.

Orton and Weick’s (1990) view of loosely coupled systems has been widely applied in organizational studies and in sustainability-focused research, it has been applied to explain and understand how system elements function both independently and in relation to one another. For instance, Ditillo and Lisi (2014) examined various components of sustainability management control systems and highlighted how different control mechanisms within sustainability initiatives may operate independently while still maintaining a degree of responsiveness to one another, allowing flexibility and adaptability in managing sustainability. Yuan et al. (2011) studied corporate social responsibilities and established that initiatives therein can be connected to core business routines in varying degrees, but in a way that affects the organizations’ corporate social responsibility operations. Laine et al. (2017) used financial environmental information to investigate why gaps between actions and figures exist. Pencle (2022) examined the tensions between economic, environmental and social goals within the TBL framework and argued that loose coupling could provide a means to manage the coexistence of conflicting sustainability demands without requiring full integration, enhancing flexibility and responsiveness in sustainability accounting systems.

Organizations rarely operate as seamlessly integrated wholes, but different parts (e.g. elements in management control systems) can be loosely connected. Orton and Weick (1990) asserted that the concept of loose coupling can be examined from the perspective of the kinds of loose couplings and their characteristics that exist in an organization, how different parts are connected and what effects loose couplings have on organizational operations. In addition, the activities of the independent parts can be explored from a supportive perspective. That might involve asking what kind of additional resources are required for the integration and achievement of organizational performance goals. In this study, we apply Orton and Weick’s (1990) approach to understand how TBL elements relate to each other but simultaneously operate independently.

This research uses a qualitative case study approach. We have chosen a multiple-case study method (Yin, 2018) because we seek to illustrate similarities and differences between the cases. In addition, the case study method is particularly suitable for analyzing a phenomenon in its natural context to build a rich understanding of the empirical setting and to contribute to theory development (Yin, 2018; Ketokivi and Choi, 2014).

The CESs provided a rich setting to study the balancing of multiple perspectives of TBL because these companies were small and agile and directly tied tto the sustainability business logic. Our case companies were forerunners in implementing the circular economy in Finland. Two were software companies with the knowledge to accelerate circularity and two were manufacturing companies with competence in circular material flows (Table 1). The software firms, CES1 and CES2, develop software platforms for vehicle renting and vehicle leasing services, respectively. Both were targeting efficiency of resource use: CES1 usd unused vehicle capacity and CES2 promoted the use of durable, high-quality products. The third case firm, CES3, was a manufacturing company focused on extending the life cycle of clothing products to improve resource efficiency. The fourth firm, CES4, was a manufacturing startup offering circular raw materials for clothing and had outsourced its production. All case companies were 100% circular-economy businesses.

The interview data were collected through semi-structured interviews in Spring 2023. Our informants came from the senior management ranks of each firm to ensure we were interviewing people with a good understanding of the relevant business processes, sustainability and environmental issues. In CES1, the interviewees were the co-founder and sustainability coordinator; in CES2, the founder and CEO were interviewed; in CES3, we surveyed the finance and research managers and in CES4, it was the sustainability director. Each interview lasted approximately 60 min and was recorded and transcribed. Each interview elicited information about the company, aspects related to sustainability and circular-economy decision-making in the company, the values of the company and the implementation of the TBL, management accounting and control practices, measures and indicators used and their connection to TBL. In addition to interview data, annual reports, internal and external documents and company web pages were used as secondary data sources. The document data covered the period 2021–2023 to post-audit the business development in each firm.

The review of the collected material relied on abductive content analysis (Creswell, 2009), a qualitative method that is used to generate theory from empirical findings. After the initial coding, all authors were involved in the analysis of the findings. The analysis process proceeded in five iterative steps. First, data-driven familiarization was performed through reading the empirical data several times to detect the business operations and the strategic goals of each company in detail. Second, we conducted a theory-driven analysis to identify the TBL perspectives in the data. Third, we explored how the TBL dimensions operated independently and in integration. Fourth, the management accounting and control practices and forms of loose couplings of TBL dimensions were identified. In the final step, theoretical contributions of the findings were drawn based on the analysis of the empirical data and reflection on previous research. The abductive approach suited the current research particularly well because it allowed for both data-driven analysis to enrich the diversity and depth of the data and theory-informed analysis in the identification of the TBL. The iterative process between analyzing the empirical data and previous research facilitated the development of insights related to balancing the multiple perspectives of TBL in CESs.

The CESs had incorporated TBL perspectives in their mission statements, strategic goals and business plans, meaning TBL perspectives guided decision-making and sustainability reporting. The companies stated that increasing environmental and social well-being while minimizing the negative impacts of business was considered in business decisions and profitability assessments (see Table 2). For example, the companies would reject business opportunities that were not aligned with their sustainable business idea.

Environmental sustainability was considered in decisions on product development, partnerships, communication and partner cooperation. The firm CES1 cooperated with environmental protection organizations, donated funds to environmental preservation projects and made decisions based on environmental criteria on materials and product designs in its operations and those involving partners. The other software firm, CES2, rejected business opportunities that were not aligned with the company’s environmentally sustainable business model, monitored and reported on carbon emissions, targeted a carbon-negative status and overcompensated for emissions caused by the operations of the company. The manufacturing firm, CES3, focused on environmental aspects of product development and production and used environmental sustainability systematically as a criterion in products, production and business models. CES4 implemented environmental sustainability by following the developments in environmental regulations and standards, monitoring energy and water consumption efficiency and engaging in emission control in the company’s own operations and in the partner network. Management accounting and control systems were used in the environmental assessments, which included risk evaluations, evaluations of environmental and climate impact, resource efficiency and greenhouse gas (GHG) emission calculations. In addition, the environmental risk of suppliers’ operations was evaluated and with attention to evolving environmental standards and directives, relevant data was collected to report on the environmental impact of the operations. Regarding environmental sustainability, CES1 and CES2 were primarily oriented toward enhancing environmental responsibility among the firms’ customers, whereas CES3 and CES4 focused on improving and controlling production processes.

Social sustainability was connected to equality and accessibility, staff diversity, customer safety and the well-being of employees. The management team at CES1 emphasized advancing equality and safety with its clients. It engaged in initiatives on immigrant integration into the local community and collaborated with social services. The management of CES2 focused on staff diversity and client well-being issues. The management at CES3 monitored traceable working conditions and ethical manufacturing matters and addressed the firm’s working culture. Social sustainability in CES4 focused on responsibility for its own operations, evaluation of country risks and human rights issues in the partner network, product safety and the assessment of consumer ease of use. No major differences were identified between the companies on social sustainability in their internal practices, but CES3 and CES4 closely monitored their subcontract and raw material chains. The management accounting and control tools used in support of social sustainability were equality assessment (CES1), employee measurements, monitoring payable taxes, work well-being measurements, diversity assessments, work-related accident records, employee net promoter score (CES2), supplier risk evaluation, customer feedback (CES3) and data collection and learning about social sustainability (CES4).

Economic sustainability in each CES was emphasized in terms of profitability, growth, stabilization of the business and securing capital and funding. These issues were managed and controlled with traditional financial reporting methods, using balance sheets, profit and lost statements (P&L), objectives and key results (OKR), value-based measures, ESG-report performance measurement systems, budgeting, forecasting, profitability analysis, business planning, cost analysis and monitoring of financial performance. The purpose was to provide information to aid internal decision-making but also for stakeholders. However, these practices were implemented in the startups with varying intensity. Management accounting and control practices were mainly undertaken by the chief finance officers (CFOs), controllers, administration and finance managers. All startups had outsourced their financial accounting, whereas management accounting and control remained in-house.

The above observations illustrate how TBL elements can operate quite independently. However, our findings reveal interactions among the elements too. For example, transparency and openness toward different actors may enable a better understanding of cross-cutting issues. For instance, CES1 provided employees with open access to the agendas and notes of the executive committee meetings. In CES3, decisions were shared so everyone knew what had been decided. Tighter coupling of TBL elements is particularly seen in reporting, where the components of the elements are intentionally combined. Each case CES undertook sustainability reporting.

Loose coupling was also evident in the sense that tight integration was not possible in the circular economy startups. The challenges to the tighter integration of TBL elements were scarce management resources, insufficient knowledge and skills, quantification issues, a lack of standardized frameworks and data-gathering setbacks. Implementing TBL practice in an organization requires people who will drive the integration of sustainability dimensions into decision-making processes. Sustaining sustainability in an operation necessitates having someone taking care of it and conveying the interest in sustainability to the whole staff. Controllers are not necessarily the people best placed to support the social and environmental aspects of businesses. Another challenge identified was the data sources and functions producing the data for the TBL being collected beyond the accounting functions. In many cases, the human resources function provided information about social aspects, while a sustainability coordinator gathered data on environmental issues. There were no information system linkages that could ensure the social and environmental data flowed to the finance function for reporting.

Furthermore, the quantification of social and environmental issues, as well as the lack of standardized frameworks for measuring and reporting, was a challenge. Common and generally accepted measurements or protocols were missing and social and environmental impacts were difficult to quantify objectively. Financial data was exact and rapidly changing, while the environmental impacts of certain processes remained the same for a long time. In addition, as some transactions took place only occasionally, such as acquiring new materials or new suppliers, assessments and comparisons were on an ad hoc basis instead of being subject to constant measuring, because updating the information required considerable effort.

As a summary of the findings of loose coupling of TBL, the financial dimension was equal to or more important than the other aspects of the TBL. However, the loose coupling of the TBL perspectives involved varying prioritization depending on the situation and the time frame of decisions.

This study examined TBL practices by using the loose-coupling approach (Orton and Weick, 1990). Our study responds to the prior literature exploring the balance of differing sustainability objectives alongside sustainable management accounting and control (Frandsen et al., 2013; Pencle, 2022). The study also contributes to previous research on managing tensions and conflicts between economic and environmental objectives by highlighting mechanisms that appear to hinder achieving a balance between different perspectives (see e.g. Sundin and Brown, 2017; McWilliams et al., 2014). Our findings highlight that in small CESs, a TBL approach does not necessarily operate as a tightly coupled system, but the elements can be loosely connected. Loose couplings keep the parts separate but integrated and are related to management capabilities, prioritization of issues and accounting practices.

Financial goals may not be fully aligned with environmental and social goals in the short term, but they can support each other in the long term (Nørreklit, 2000; Johanson et al., 2006). Investments in environmental issues may initially reduce profits, but in the long term, they can bring competitive advantage and cash flow. The findings also show that a company can, for example, set long-term environmental goals without immediately having to adjust its financial goals. In addition, from a social perspective, a company can offer its employees flexible working conditions without weakening its short-term financial performance. Examples of these include donating funds to environmental protection projects, offsetting emissions despite the cost, considering human rights impacts and minimizing negative impacts in the form of cost.

Our findings also indicate that startups lack the resources to implement formal controls and thus must rely on informal controls (Johnstone, 2021; Depken and Zeman, 2018; Pelz, 2019; Boll, 2018). This may have resulted from the companies’ reluctance to allocate resources to develop measurement options. Data collection and updating are time-consuming and the lack of suitable data or measurement systems seems to impede the establishment of formal sustainability management control systems. The objectivity of measuring sustainability was also questioned and it was expected that an external party could perform that measurement.

The findings also indicate that sustainability management control tools are not yet sufficiently easy to integrate into CESs. However, our study shows that the role of management accounting and control for TBL in CESs is important. Management accounting and control were used both in the implementation of strategies and operational performance, producing information, such as forecasts and profitability analysis, which ensures the allocation of resources for activities, controls profitability and supports investor and stakeholder communication on TBL perspectives (see Figure 1). Management accounting and control provided detailed financial information on resources and operational processes but could not provide sufficient information on social and environmental sustainability. The main reason for this was a lack of standardized methods for collecting relevant information. In addition, there were no system interfaces that would have allowed data to flow between information systems.

Figure 1 summarizes how balancing TBL elements in small circular-economy enterprises can be managed through prioritizing the time horizon, developing transparency between TBL elements and applying integrated assessments and reporting within their organizational context, as well as by using management accounting and control (Hasu et al., 2025; Solovida and Latan, 2021; Beusch et al., 2022).

The TBL concept is linked to sustainability management control systems, which, according to previous research literature, aim to integrate various elements into a cohesive whole (see e.g. Beusch et al., 2022; Svensson and Funck, 2019; Günther et al., 2016; Henri and Journeault, 2010; Burrit et al., 2003). However, our research shows that small enterprises require flexibility and loose coupling among the TBL elements. The findings of this study establish that management accounting and control in small enterprises does not solely prioritize integration but encompasses the independent functioning of individual elements (particularly if information systems do not exist between the elements). There may be a need for tighter integration in sustainability management control; however, it may be beneficial to allow flexibility and autonomy among the elements (see also Frandsen et al., 2013; Pencle, 2022).

The current research also indicates that sustainability frameworks presented in prior studies (e.g. Günther et al., 2016; Svensson and Funck, 2019) exceed the resources and time available to small companies (see also Depken and Zeman, 2018). Accordingly, our findings indicate the need for an accessible, light, systematic and harmonized framework to measure and evaluate all aspects of sustainability on TBL, with a particular focus on startups (Gionfriddo and Piccaluga, 2024; McWilliams et al., 2014).

The study’s findings are particularly relevant for startup companies in the early growth phase. Prior literature indicates that as an organization grows, it benefits from more formal sustainability management control systems, as well as information system integration (Günther et al., 2016; Beusch et al., 2022). However, companies in the early growth stages that nevertheless want to pursue sustainability goals also need to maintain flexibility in their governance systems (Orton and Weick, 1990; Frandsen et al., 2013; Pencle, 2022).

This study makes a practical contribution by illustrating that the loose-coupling perspective enhances the understanding of how to balance the three TBL aspects. It is not essential to integrate the TBL elements, as they can develop in parallel: A company can promote environmental goals and social responsibility without immediately compromising financial profitability and an organization can make small changes to each aspect at different times without changing the entire business model. Each aspect can develop at its own pace but still support the others in the long term. Loose coupling allows the economic, environmental and social perspectives to develop in parallel, especially in small CESs.

The study sought to examine how the TBL manifests, is adopted and is balanced in CES enterprises. We conclude that TBL elements exhibit loose coupling and are subject to variation over time and across different contexts. Although the coupling may be loose in the short term, such that the TBL elements function relatively independently, they can be permitted to operate in parallel, given that they collectively contribute to one another. Our principal observation is that the function of management accounting and control appears to be the enhancement of these responsive elements while maintaining autonomy.

The TBL or the three pillars of sustainability in a startup context, has received little attention in previous literature. As sustainability reporting is generally associated with larger or publicly listed companies, startups are less frequently examined from this perspective. All the case companies in this study were startups targeting rapid growth, so our findings are particularly apposite for company growth in the early lifecycle stages. We can conclude that the lifecycle stage of a company sets different requirements for TBL elements in terms of measurement, reporting, people resourcing and communication and in terms of balancing those aspects. Therefore, this research can provide a basis for several future research avenues in the CES context.

The managerial implications of this study are that if a company wants to move toward establishing TBL practices, it must intensify the cooperation between staff responsible for accounting, sustainability and human resource management; create methodological (including information systems) capabilities for collecting data on all three TBL dimensions; and understand that the TBL approach does not require the development of all dimensions simultaneously and with equal emphasis, but that all parts can progress in parallel and at their own pace.

This study has limitations that can also provide opportunities for future research. First, this explorative study highlights the need for a clear, harmonized, standardized and accessible framework to enable SMEs to measure the TBL elements. That is an area requiring further research that constructs a proposition and tests it on a broad sample. Second, researchers might investigate how controllers and CFOs could build competencies to optimally support the TBL aspiration. Third, given that all the circular economy startups that were featured here had outsourced their accounting, it would be constructive to examine whether and how the knowledge and competence in sustainability matters existed in external accounting agencies and how it could be improved (in interorganizational relations) to correspond with the demand for TBL perspectives.