Environmental Accounting

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Topic : 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. -------------------------------------------------

Introduction :

The developing countries like India are facing the twin problem of protecting the environment and promoting economic development. A trade-off between environmental protection and development is required. A careful assessment of the benefits and costs of environmental damages is necessary to find the safe limits of environmental degradation and the required level of development. This is where Environmental accounting comes into picture. So what exactly is environmental accounting?

Environment Accounting is the identification, collection, estimation, analysis, internal reporting, and use of materials and energy flow information, environmental cost information, and other cost information for both conventional and environmental decision-making within an organization, be it a government or a corporate organisation.

Unless the proper accounting work is done either by the individual firm or by the Government itself, it cannot be determined whether both have been fulfilling their responsibilities towards environment or not. Therefore, the need of environmental accounting The joint workshops organised by the United Nations Environment Programme (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. Parallel to this revision, the statistical division of the United Nations (UNSTAT) has developed methodologies for a system of Integrated Environmental and Economic Accounting (SEEA), issued as an SNA handbook on Integrated Environmental and Economic Accounting which is used as a framework for EA across the world.

In recent years there has been a trend in many public corporations to provide more information on environmental matters both within the management accounting system and in annual reports. This is in response to increased concern by the stakeholders and public awareness of environmental issues. These factors have put pressure on listed corporations to measure environmental costs and expenses and to develop and enhance environmental disclosure to different stakeholder groups. The process of environmental accounting seeks to embed the responsibilities of the senior management towards shareholders as well as other stakeholders in the company’s accounting and reporting procedures. Environmental accounting reveals the environmental conservation activities undertaken by a company or organization in a given period.

The range of environmental costs, energy and material use and waste disposal, insurance and fines and penalties, shows participation of multiple disciplines, along with accounting sub-disciplines. The yield of this effort is the decision support system, in which environmental impact can be determined specifically in the following terms: • Full cost accounting (FCC)

• Total cost assessment (TCA)
• Life-cycle costs (LCC)
• Life-cycle cost analysis (LCCA)
• Total quality environmental management. (TQEM)

An environmental accounting system is composed of environmentally differentiated conventional accounting and ecological accounting. * Environmentally differentiated accounting measures impacts of the natural environment on the company in nominal or monetary terms. * The ecological accounting measures the impact that the company has on the natural environment. The measurement is usually in physical units.

Environmental accounting can be broken down into three different disciplines: *...
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