The Importance Of Environmental Accounting

Measuring environmental performance and setting targets is a critical component for organizations to become more productive, more profitable, and more sustainable (Freedman, et al., 2006). Monitoring key metrics such as energy, waste, and water usage leads to reductions in greenhouse gas emissions as well as operational efficiency improvements and cost savings. Environmental accounting is an inclusive field of accounting. It provides reports for both internal use, generating environmental information to help make management decisions on pricing, controlling overhead and capital budgeting, and external use, disclosing environmental information of interest to the public and to the financial community. Internal use is better termed environmental

In the early 90’s the UNEP and the World Bank set out to examine the feasibility of physical and monetary accounting in the area of natural resources and the environment and to develop alternative macro indicators of environmentally adjusted and sustainable income and product. Simultaneously, the Statistical Division of the United Nations (UNSTAT) also developed methodologies for a System of Integrated Environmental and Economic Accounting (SEEA).

Environmental accounting at organizational level aims to address the needs of organization to measure the economic efficiency of their environmental conservation and the business activities of the company as a whole (Kundu & Hauff, 2009). Environmental accounting includes environmental management accounting. In environmental management accounting, there is a particular focus on material and energy balance aspects and environmental cost information. This accounting is further classified into segment environmental accounting which is an internal environmental accounting tool to select an investment activity, or a project, related to environmental conservation from among all processes of operations, and to evaluate environmental effects for a specified period (Maunders,

It is an internal environmental accounting tool to support sustainable environmental management activities (Toms, 2001). Corporate environmental accounting which is a tool to inform the public of relevant information compiled in accordance with the environmental account is also under environmental accounting. This could be referred to as corporate environmental reporting. For this purpose the cost and effect (in quantity and monetary value) of its environmental conservation activities are used (Hauff, 2009). The second form of environmental accounting according to Kundu (2009) is environmental financial accounting. Environmental financial accounting concentrates on reporting environmental liability costs and other significant environmental costs. The last form of environmental accounting is environmental national accounting. In the national level accounting the particular focus is on natural resources stocks and flow environmental costs and externality