1. Environmental management accounting (EMA) involves the generation and analysis of bothfinancial and non-financial information in order to support internal environmental management processes.
2. It is complementary to the conventional management accounting approach, with the aim to develop appropriate mechanisms that assist the management of organisations in the identification and allocation of environmentally related costs.
Benefits
1. Organisations that alter their management accounting practices to incorporate environmental concerns will have greater awareness of the impact of environment-related activities on their profit and loss accounts and balance sheets. This is because conventional management accounting systems tend to attribute many environmental costs to general overhead accounts with the result that they are ‘hidden’ from management. It follows that organisations which adopt EMA are more likely to identify and take advantage of cost reduction and other improvement opportunities.
2. A concern with environmental costs will also reduce the chances of employing incorrect pricing of products and services and taking the wrong options in terms of mix and development decisions. This in turn may lead to enhanced customer value whilst reducing the risk profile attaching to investments and other decisions which have long term consequences.
3. Reputational risk will also be reduced as a consequence of adopting (EMA) since management will be seen to be acting in an environmentally responsible manner. Organisations can learn from the Shell Oil Company whose experience in the much publicised Brent Spar incident cost the firm millions in terms of lost revenues as a result of a consumer boycott.
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