Management Accounting and Financial Accounting Both Play a Role in the Development of a Robust Environmental Policy That Will Contribute to Longer-Term Organisational Success.

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Management accounting and financial accounting both play a role in the development of a robust environmental policy that will contribute to longer-term organisational success.

In recent years, the relationship between business activity and the environment has become of significant interest to business organisations due to the impact in which ignorance can have to business operations and success (Tilt, 1997; Guthrie et al 2007).

As current society becomes more environmentally conscious, added pressure is placed on companies to adhere and be more responsible in terms of corporate social responsibilities and the overall impact in which their activities will have on the environment. Initially, the chemical and oil industries were of main focus for environmental issues due the visible nature of the processes required within production and the operating of their final product (Brown, 1996). For example the infamous 1989 Exxon-Valdez oil spill in America, (Deegan et al, 2002; Magness, 2006] where over 11 million litres of oil was spilt into Prince William Sound, Alaska during the transportation of oil to Long, Beach, California (Gray and Bebbington, 2001) causing mass damage to the environment and the surrounding wildlife. High profile corporate failures such as the aforementioned have resulted in the increased emergence of environmental publication, legislation and regulation within the mainland Europe – enforced by the European Union, the USA and Australia have become more stringent with new policies such as “green taxes and charges” being implemented (Howes, 1999). This, in effect, has placed greater attention and pressure on companies within varied industries to act cautiously, be more accountable and take full responsibility for their environmental obligations. Businesses that choose to conform and comply with such regulations enter a social contract of environmental performance with terms enforced by regulatory agencies such as the Environmental Protection Agency (EPA) and Securities Exchange Commission (SEC) using legislative statues and legal administrative procedures related to environmental issues. (Mobus, 2005)

In order to be more compliant there has been an increase in the implementation and development of both voluntary and compulsory environmental standards, disclosure and policies such as the process of environmental certification under ISO (International Organisation of Standardisation) 14000/ 1 Environmental Management Systems and the Eco-management and Audit Scheme (EMAS). As a consequence, there has been a greater requirement for various business disciplines such as marketing, law and accounting to be involved within the development and execution of environmental standards and policies due to the unique skills each area has to offer. This paper will focus on the latter more specifically financial and management accounting, to determine the role such disciplines play within the development of an environmental policy.

An environmental policy outlines an organisation’s “mission and driving force behind objectives, targets and management programmes” (www.envirowise.gov.uk) in terms of the environment. In the United Kingdom there are no legal requirements for an environmental policy, however, companies from varied industries such as Shell, Price Waterhouse Cooper (PWC) and Cadbury’s voluntarily disclose such information due to the high-profile corporate failures in terms of ethics and the environment. Companies do not want to be seen as irresponsible and accountable for any harm as negative public perception which could ultimately affect success and performance (Clarke and O’Neill 2005). The targets and statements of objectives set in corporate environmental policies should reflect environmental issues that are of significance to the operations of the organisation (De-Silva, 2006) and implemented as a means to overcome such issues and encourage future sustainability. In general, the aims set in an...
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