ENVIRONMENTAL ACCOUNTING

Can Environmental Accounting Be Used As A Tool Of Accountability?

Can Environmental Accounting Be Used As A Tool Of Accountability?

Introduction

I believe that environmental accounting be used as a tool of accountability because of the following reasons. The first environmental accounts were constructed by Norway in the 1970s and were slowly adopted by other nations. At the firm level, companies are becoming progressively more aware of the environmental and social liabilities pertaining to their operations and products, with associated financial effects. Patrick (2006) mentions uncertainties in measuring these financial effects can be addressed by using environmental evaluation and accounting techniques. Environmental accounting can support national income accounting, financial accounting, or internal business managerial accounting. It is an effective tool for a company's greener management practice. Moreover, the term environmental cost has at least two major dimensions: it can refer solely to costs that directly impact a company's bottom line, or it can also encompass the costs to individuals, society, and the environment for which a company is not accountable. Government involvement is a critical factor for corporate accountability for the environment (Patrick, 2006). Corporate environmental accounting is also a strategic management tool for the improvement of corporate policies and decision-making practices.

Aims of the Study

My dissertation will look at the history and evolution of environmental accounting and critique the usefulness of it through analyzing several case studies and questioning the motives of companies who use environmental statements in their accounts.

Objectives of the Study

The primary objectives of the paper will be to consider the concept of environmental accounting and to evaluate the development and impact of EA.

A Brief Literature Review

The principal goal of environmental accounting is the identification of decisions that will enhance profitability and lead to environmental improvements. There are several major problems that occur when identifying and measuring environmental costs. For example, while it is feasible to value a forest in terms of its possible source as wood, no calculation can be made for that tree as part of a rainforest in which it is home for a rich ecosystem. Environmental costs are one of the many different types of costs businesses incur as they provide goods and services to their customers (Patrick, 2006). Some critics argue that modern environmental accounting models have been developed based on procedural liberal frameworks that limit the proposals for reforms, namely concerning the role of the companies and their impact on nature.

Many environmental costs can be considerably reduced or eliminated as a result of business decisions. Environmental costs (such as wasted raw materials) may provide no added value to a process, system, or product. Uncovering and recognizing environmental costs associated with a product, process, system, or facility is important for good management decisions, and requires paying attention to current, future, and potential environmental costs. How a company defines an environmental cost depends on how it intends to use the information (for example, in cost allocation, capital budgeting, and process/ product design). Moreover, it may not always be clear whether a cost is “environmental” or not: some ...