Assessing the Relevance of Traditional Cost Theory in the Implementation of Circular Economy Accounting Practices: A Case Study of Benin Electricity Distribution Company PLC, Nigeria

This study evaluates the applicability of traditional cost theory in circular economy accounting practices. The design and method adopted involve a case study of three states (Edo, Ondo and Ekiti), Benin Electricity Distribution Company (BEDC) electricity companies, putting cost theory into consideration, who created a value network for creating and implementing an innovative packaging solution by circular economy concepts. Content analysis was employed to explore the accounting tools employed. The findings indicate that innovation and circular solutions are found in new structural configurations in terms of value networks. In addition, managers' decision process completely avoided passing through the accounting function; they used informal accounting and life cycle analysis, which ensured a multi-stakeholder dialogue from the life cycle approach. The theoretical and practical implications of the study are concerned with management accounting systems' effectiveness in supporting organisations pursuing circular solutions, on which cost theory is based. The study concluded that in accounting for the circular economy, traditional cost theory does not apply well, especially in fast-changing technology-driven industries such as electricity distribution, as the traditional mechanisms of costs are unable to account for the complexities of circular value generation and lifecycle sustainability. Also, finding that managers of BEDC electricity companies use informal accounting and life cycle analysis over standard accounting practices. The study also illustrates a move towards a decentralized decision-making process in the management of circular economy projects. The study recommended that organizations such as utility companies, in particular of BEDC, should reorient their management accounting systems to include circular economy metrics such as life cycle costing, resource efficiency as a metric, and environmental impact assessments. On top of that, the accounting function needs to be brought back into the center of management decisions as a tool for ensuring cost considerations are in line with sustainability objectives and stakeholder demands and managers and accounting professionals need ongoing training in circular economy principles, sustainability accounting, and using innovative tools like life cycle analysis and environmental management accounting.