Environmental Accounting

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Companies across the world have started to adopt environmental accounting. What is environmental accounting? Should it be made mandatory? Does environmental accounting help the environment in any way? Give specific examples of how environmental accounting has benefited the environment.

Word Count :480 Words

Our planet is in great danger. Facing the modern age, the world is dealing with a lot of problems. The world is heating up because of global warming, corals and other marine life are dying because of oil spills and water pollution, and people with asthma are both dying and decreasing because of air pollution. But what would and accountant do? Auditing, Financial Statement, Taxation and Bookkeeping from mere looking at it, it’s all about accounting. Every professional and non-professional including accounting student knows that. But has everybody know about Environmental Accounting?

Environmental Accounting also referred as green accounting is defined as an important tool for understanding the role played by the environment in the economy as a mutual relationship is identified between the two. Environmental accounting prepares accounts that exhibit the cost of environmental conservation during the normal course of business Costs can include costs to clean up or remediate contaminated sites, environmental fines, penalties and taxes, purchase of pollution prevention technologies and waste management costs. Environmental Accounting generates, analyses and uses financial and non-financial information to support management. According to Bennett and James It is a complementary management accounting approach to the financial accounting approach. Key application fields for EA are assessment of annual environmental costs/expenditures, product pricing, budgeting, investment appraisal, calculating costs and savings of environmental projects, or setting quantified performance targets, to name only a few

The relationship between the environment and economy is close and mutually beneficial. Businesses have become increasingly aware of the environmental implications on their operations, products, and services. Even consumers and stakeholders are taking interest and ask to report on environmental behavior. Apart from this EA provides data that results in cost and competitive advantage. Companies like good year scrap tyre and Ricoh Group are even implementing it. As the EA benefits the company so does it benefits environment. Implementing of EA results in increase in awareness among business, stakeholders and society as a whole. It helps to build an environment friendly business culture. Companies incur costs in pollution prevention and waste disposal equipments that saves environment .EA has also led in awareness towards use of alternate raw material and recycling techniques. Company makes investment in new techonolgy to save their input cost at the same time they benefit the environment. For example Good-Year tyre of America is made from scrap .Though EA can measure the profits of the company but definitely it cannot measure the immense benefits EA has on the environment.

After assessing the mutual benefits of EA I think it should be definitely made compulsory or at least companies should produce environmental statements within their annual reports. As unless if it is not made mandatory people do not follow it and the greedy companies only concentrate on their profits . We often forget if nature provides us with world’s best gifts we also have a duty towards it.