How to implement an environmental accounting system and its benefits

How to implement environmental management accounting

These are the main steps that an organisation could take to implement an environmental management accounting system:

1. Gaining support from senior management
2. Defining the boundaries of the proposed system
3. Ascertaining what are the organisation's significant environmental impacts
4. Determining, if at all, environmental impacts are being accounted for
5. Defining environmental costs
6. Determining who will be in the 'review team'
7. Reviewing the existing accounting systems
8. Identify environmental revenue or cost cutting opportunities that are currently being ignored
9. Suggest changes to the existing accounting system
10. Trial the environmental management accounting system by way of a pilot test.

Note: Continual communication and education about the project is extremely important to ensure its success and that staff understand the importance and benefits associated with being more environmentally focused.

Top

Benefits associated with environmental management accounting

A number of benefits should follow from the implementation of environmental management accounting. These benefits can span from direct (tangible) to indirect (intangible) and include:

• more informed decision-making – Explicit consideration of particular costs that are otherwise obscured by traditional accounting approaches – for example, obscured in overhead accounts – will lead to more informed decision-making, with consequent implications for improved profitability
• uncovering opportunities – An analysis of environmental costs might reveal opportunities, some of which might lead to revenues through recycling, or use of 'waste' in other activities
• improved pricing of products – Explicit consideration of particular costs will enable more informed pricing of products
• assistance with internal and external reporting – Identifying environmental costs will help organisations collect data about their environmental impacts for internal and external reporting purposes
• increased competitive advantage – Given the infancy of environmental management accounting, explicit consideration, and associated publicity, might provide an organisation with a competitive advantage
• improved reputation – Efforts to reduce environmental costs and related impacts will have reputation implications
• staff retention and attraction – It has also been argued that, by showing that an organisation is trying to manage and account for the environmental implications of its operations, this may in turn enable it to retain and attract better staff, as well as improve staff morale
• generation of societal benefits – Efforts to reduce environmental costs and impacts (which will assist in creating a cleaner environment) will generate human benefit.

Top