| Environmental Accounting |
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An environmental accounting system is composed of environmentally differentiated conventional accounting and ecological accounting. Environmentally differentiated accounting measures impacts of the Natural Environment on a Company in Monetary terms. Ecological accounting measures the impact a company has on the environment, but in physical units (e.g. kilograms of waste produced, kilojoules of energy consumed) rather than in monetary units. WHY ENVIRONMENTAL ACCOUNTING? There are several reasons why businesses may consider adopting environmental accounting as part of their accounting system. # Possible significant reduction or elimination of environmental costs # Environmental costs and benefits may be over looked or hidden in overhead accounts # Possible revenue generation may offset environmental costs (e.g. transfer of pollution allowances) # Improved environmental performance which may have a positive impact on human health and business success # May result in more accurate costing or pricing of products and more environmentally desired processes # Possible competitive advantages as customers may prefer environmentally friendly products and services # Can support the development and running of an overall environmental management system, which may be required by regulation for some types of businesses. DIFFERENT ENVIRONMENTAL ACCOUNTING DISCIPLINES Environmental accounting can be broken down in to three disciplines: Global Environmental Accounting, National Environmental Accounting and Corporate Environmental Accounting. Corporate Environmental Accounting can be further sub-divided in to Environmental Management Accounting and Environmental Financial Accounting. Global Environmental Accounting Global environmental accounting is an accounting methodlogy that deals with energetics, ecology and economics at a global scale. The earth is the system of interest with the input, sequestration, and dissipation of solar energy - which constitute its energy budget (Odum 1996, Tennenbaum 1988). National Environmental Accounting National environmental accounting is an accounting approach that deals with economics on a national level. National environmental accounting is a Macroeconomic measure that looks at the use of Natural Resources and the impacts of national policies on the environment. Corporate Environmental Accounting In contrast to national environmental accounting, corporate environmental accounting focuses on the cost structure and environmental performance of a company. Environmental management accounting Environmental management accounting is used by companies to make internal business strategy decisions. It can be defined as: “''…the identification, collection, analysis, and use of two types of information for internal decision making: 1) Physical information on the use, flows and fates of energy, water and materials (including wastes) and 2) Monetary information on environmentally related costs, earnings and savings.”'' As part of an Environmental Management Accounting (EMA) Project in the State of Victoria, Australia, four case studies were undertaken in 2002 involving a school (Methodist Ladies College, Perth), plastics manufacturing company (Cormack Manufacturing Pty Ltd, Sydney), provider of office services (a service division of AMP, Australia wide) and wool processing (GH Michell & Sons Pty Ltd, Adelaide). Four major accounting professionals and firms were involved in the project; KPMG (Melbourne), Price Waterhouse Coopers (Sydney), Professor Craig Deegan, RMIT University (Melbourne) and BDO Consultants Pty Ltd (Perth). In February 2003, John Thwaites, The Victorian Minister for the Environment launched the report which summarised the results of the studies; Environmental Management Accounting: An Introduction and Case Studies (Adobe PDF file, 446KB). These studies were also supported by the Department of Environment and Heritage of the Australian Federal Government , and appear to have applied some of the principles outlined in The United Nations Division for Sustainable Development publication Environmental Management Accounting Procedures and Principles (2001) Environmental financial accounting Environmental financial accounting is used to provide information needed by external Stakeholders on a company’s financial status. This type of accounting allows companies to prepare financial reports for investors, lenders and other interested parties. EXAMPLES OF ENVIRONMENTAL ACCOUNTING SYSTEMS Emisoft's TEAMS - Total Environmental Accounting and Management System Green Accounting for Indian States Project REFERENCES |
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