Essay on What Is The Environmental Accounting
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A successful environmental management system
should have a method for accounting for full environmental costs and should
integrate private environmental costs into capital budgeting, cost allocation,
process/product design and other forward-looking decisions. Most corporate
information and decision systems do not currently support such proactive and
prospective decision making." (Glennester, 2008)
Environmental accounting is a significant
instrument for understanding the role played by the natural environment in the
economy. Environmental accounts offer facts which focus mutually the influence
of natural resources to economic welfare and the costs obligatory by pollution
or resource deprivation. Environmental accounting occasionally stated as
"resource accounting", "integrated economic and environmental
accounting" or "green accounting" (Glennester, 2008).
What is Environmental Accounting?
Environmental Management Accounting (EMA) is a
cover heading used to define diverse features of this growing field of
accounting. The emphasis of EMA is as a management accounting instrument used
to make internal business judgments, expressly for practical ecological
managing events (Perry, 2012).
EMA was established to distinguish certain
boundaries of unadventurous management accounting tactics to environmental
expenditures, significances, and impressions. For example, overhead accounts
were the destination of numerous environmental costs in the historical. Cost
allocations were imprecise and could not be tracked back to products, process
lines, or processes. Wasted raw materials were also erroneously accounted for
the period of manufactured (Perry, 2012).
What is substantial?
The definition of sustainability as provided by
United Nations World Commission on Environment and Development (1987)
comprehends both meeting the requirements of the ecosphere’s poor population
and upholding conservational capitals for the forthcoming generation. The
conceivable meanings and inconsistencies essential in the term sustainability
range to the perception of sustainable growth (Zulkifli, 2011).
Subsequently, according to Bebbington (1997,
2001), the meaning of what establishes a “sustainable society” turn out to be
under-specified. According to Bebbington, the main structural enquiry
deep-seated in sustainable expansion give the impression to be how to
accomplish the economic systems such that growth takes place without damaging
the environment, on which all contemporary and any upcoming progress rests. In
this regard, it is proclaimed that accounting shows a vigorous supporting part
in the formation and continuation of the existing economic order (Hines, 1988;
Tinker, 1991).
Given this, any effort to account for
sustainability will need to replicate the strains which occur amongst
conventional accounting with its record of wealth build-up and its emphasis on
the pursuit of profit and the demands for a just and reasonable society
(Zulkifli, 2011).
Why do we need Environmental Accounting?
The environmental accounting (EA) at the company
level supports the organization to recognize whether the corporate has been
settling its accountabilities in the direction of sustainable progress though
meeting the business objective. Environmental accounting addresses the
following issues meeting regulatory requirement, encourage a culture and
attitude of environmentally safe working among its employees; operate its
factory in a way that environmental damages do not happen; ensure safe handling
and disposal of hazardous waste and disclosure to shareholders the amount and
nature of the precautionary actions taken by the management (Harvard, 2005).
Scope of Environment Accounting
The scope of Environmental Accounting (EA) is
widespread and comprises corporate, national and international level. The
subsequent characteristics are contained within in environmental accounting.
Firstly, the direct investments made by a corporate for minimization of damages
to environment. It takes into account of investment complete into the tools or
devices that benefit in decreasing probable harms to the environment. This can
be effortlessly monetized. Secondly, indirect losses happen due to business
operation. It mostly contains degradation and devastation for example loss of
biodiversity, air and water pollution, hazardous waste as well as bio medical
waste, coastal marine pollution etc. Furthermore, depletion happens because of
non-renewable natural resources. Beside that deforestation and land uses
measuring and monetizing them can be complex (Amenta, 2013).
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What are types of Environmental Accounting?
There are a variety of concepts within
environmental accounting. These guidelines cover environmental accounting as
shown in the diagram below (Howard, 2012).
Macro Environmental Accounting
National Economy
(Natural Resources Accounting, Environmental
Economic Accounting)
Micro Environmental Accounting
Individual Company Level
Accounting for Physical units
(Tracking physical units for eco-balance,
environmental conservation benefit)
Accounting for monetary value
(Tracking monetary value of environmental cost)
Environmental Accounting as expounded within
these guidelines.
Environmental accounting within the context of
these guidelines mainly targets companies and other organizations. It is the
framework for integrating the accounting concepts of both physical units and
monetary values, and addresses the issue of cost performance (cost versus
benefit) (Harvard, 2005).
In addition, it consists of environmental
resource accounting which attempts, as best as possible, to consistently and
comprehensively record information on environmental pollution and natural
resources using an accounting framework. Environmental accounting also
encompasses eco-balance, in which a table of input and output data for
environmental impacts is created to measure and report the amount (Harvard,
2005).
What do environmental accounts measure?
It tracks the relations amid the environment and
the economy at EU, national, sector and industry level. It measure what impacts
the economy has on the environment (e.g. pollution) and how the environment
contributes to the economy (e.g. use of raw materials, resource efficiency,
etc.) by using the accounting framework and concepts of the national accounts.
It list, in computable terms, for instance, the quantity of pollution formed by
diverse businesses, which may in turn be compared with employment and the worth
of production produced by these industries (Harvard, 2005).
Forms of Environmental Accounting.
All characteristic of EMA has a universal
accounting form that assists as its groundwork, according to the EMA
international website. The subsequent illustrations designate the wide-ranging
accounting category followed by the environmental accounting corresponding.
Firstly, Management Accounting (MA) requires the identification, collection,
approximation, examination, and usage of cost, or supplementary material used
for organizational decision-making (Amenta, 2013).
Secondly, Environmental Management Accounting
(EMA) is Management Accounting with a emphasis on resources and energy movement
data, with environmental cost facts (Perry, 2012). Thirdly, Financial
Accounting (FA) encompasses the expansion and organizational reporting of
financial material to external parties, for instance, bankers and stockholders.
Fourthly, Environmental Financial Accounting (EFA) builds on Financial
Accounting, concentrating on the reporting of environmental liability
expenditures with further important environmental costs (Perry, 2012).
Fifthly, National Accounting (NA) is the
improvement of economic and additional facts used to define national income and
economic wellbeing. Sixthly, Environmental National Accounting (ENA) is National
Accounting converging on the stocks of natural wealth, their physical flows,
environmental costs, and externality costs (Perry, 2012).
Limitations of Environmental Accounting
Environmental Accounting suffers from numerous
serious boundaries for example there is not any standard accounting system,
besides, contrast between two organizations or nations is not potential if
technique of accounting reporting is dissimilar which is relatively noticeable.
Moreover, input for EA is not effortlessly obtainable since the costs and
benefits applicable to the environment are not simply quantifiable,
additionally, various corporate and the Government organizations does not
effectively trail the usage of energy and material or the cost of incompetent
materials use, waste management and linked matters. Countless organisations,
consequently, suggestively underestimate the cost of poor environment
performance to their organization (Wilmshurst & Frost, 2010).
It is primarily contemplates the cost internal
to the corporation and eliminates cost to the public and EA is a long-term
procedure. Hence, to draw a assumption with benefit of it is not easy.
Moreover, EA cannot work individualistically. It ought to be united with the
financial accounting, which is not easy also and EA must be examined along with
supplementary phases of accounting for the reason that costs and benefits
connected to the environment itself depend upon the consequences of the
management accounting, financial accounting, tax accounting, cost accounting, national
accounting, etc. Likewise, the user of information contained in the EA requires
sufficient awareness of the procedure of EA along with guidelines and protocols
dominant in that country whichever directly or indirectly connected to
environmental characteristics (Wilmshurst & Frost, 2010).
Problem Statement
There is a lack of empirical research on public
environmental accounting and the majority of the studies are focused largely on
Lynas Corporation background, and more specifically on country such as
Australia, China and Malaysia. This kind of experimental study does not have a
custom in Malaysia, particularly in public. Thus, my study adds to
international literature on public environmental accounting in local entities a
snapshot of Malaysia’s situation from which empirical evidence is still
relatively unknown.
Objective of research
The objective of this paper is to empirically
identify some potential determining factors of the use of a set of
environmental accounting practices in Malaysia. I have focused on my study on
individual according to age group because I believe that, as a result of their
close proximity to their municipalities’ environmental problems; they can play
an important role in the environment conservation. On the other hand, although
traditionally individual activities have not been considered highly polluting,
more and more it is assumed that, directly or indirectly, their actions have an
effect on the environment. Therefore, similarly to private or public companies,
international companies have to assume an environmental commitment and to
implement environmental management practices and tools aimed to reduce and
prevent pollution. Consequently, they will need environmental information which
will be provided by their accounting system.
Chapterisation
CHAPTERS
DESCRIPTION
Chapter 1 – Introduction
This chapter gives an insight about the
background of the study. It provides an overview of the research scope and the
delimination of the study. The aim of this chapter is to allow the
understanding of the objective, and why is the research done.
Chapter 2 – Literature Review
This chapter presents the previous studies and
theories related to the study. It provide on insight on the past results and
what are the theories and assumption that go around this study. Journals and
articles are reffered to in this chapter to provide a basis of reference and
foundation for the study.
Chapter 3 – Research Methodology
This chapter explicates the research methodology
that is adopted in this study. The mode of research, sample selection, data
collection, method for analysis, limitation to research, operational
definitions and research questiosns are laid out.
Chapter 4 – Research Analysis
This chapter explains and presents the findings
and results from the information obtained in this research. Charts and graphs
are provided to ease the reader in understanding the analysis and results
presented.
Chapter 5 – Summary and Conclusion
This chapter summaries the significant finding
and results from Chapter 4. A conclusion is made and scope for further study is
suggested.
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