Environmental Management Accounting

Abstract

The development and dissemination of environmental accounting systems go hand in hand with the attention to increasing towards the policies and the achievement of sustainable development. Major recent events of spills and chemical leak have led to a threat with regards to our current way of life, resulting in global agreements on actions to prevent against the future environmental damage. Even though the impacts of environment on humanity are crucial posing great threat for the future, yet there lies a general lack of appreciation of the significance of this issue amongst the accounting profession. The paper aims to discuss the increasing importance of environmental accounting and the need for change in the accounting procedures while coming out of the shell of ignorance.

Environmental Management Accounting

Introduction

The silhouette of ever rising environmental issues has been rising during the past decades and is well evident by recent major incidents such as Bhopal chemical leak in 1984, Exxon Valdez oil spill in 1989, and the recent incident that attracted global attention in 2010, the Gulf oil spill. These incidents increased concerns about issues such as global warming, depletion of major, costly, and non-renewable resources while leading to huge losses of natural habitats. These incidents have questioned the business practices, ethical considerations inviting propositions for major change. To the contrary, these issues have been raised by the United Nations, European Union, government of United Kingdom, the British Bankers Association, Insurance companies and pension funds and not by ecology related units, or group of eco warriors. The recent major events have led to a threat with regards to our current way of life, resulting in global agreements on actions to prevent against the future environmental damage. Some of them include the Montreal Protocol, the Rio Declaration, and the Kyoto Protocol (Heltzer & Mindak, 16-20).

Discussion

Businesses in the present situation have become increasingly aware and are getting more concerned and educated of the environmental implications of their products or services, or even their operations. Unlike other risks, environmental risks in its nature are not ignorable. They are now essential part of business units as any other functional unit such as marketing, product design and development, and sound financial foundation (Heltzer & Mindak, 16-20). After the recent Gulf oil spill, businesses realize the costs associated with poor environmental behaviour which may be in the form of fines, significant decline in brand equity, increased liability to environmental taxes, damage to the company reputation and sales leading to inability to secure finances, loss of insurance, lawsuits, and other liabilities.

Importance

Businesses are essentially affected by environmental pressures and each functional area of the business unit is prone to the changing variables of the environment. If we look in accounting perspective, initially these pressures were noted in the external reporting with environmental disclosure observed in the financial statements leading to making of separate environmental accounts (Cho & Patten, 639-647). There has been much debate in this area but environmental issues cannot be merely dealt with external reporting and has to be fared ...