Companies and managers usually believe that environmental costs are not significant to
the operation of their businesses. However, often it does not occur to them that some production costs
have an environmental component. By identifying and controlling environmental costs, environmental
accounting systems can help environmental managers to justify these cleaner production projects, and to
identify new ways of saving money and improving environmental performance at the same time

Aureliana Geta Roman

Cleopatra Sendroiu

Companies and managers usually believe that environmental costs are not significant tothe operation of their businesses. However, often it does not occur to them that some production costshave an environmental component. By identifying and controlling environmental costs, environmentalaccounting systems can help environmental managers to justify these cleaner production projects, and toidentify new ways of saving money and improving environmental performance at the same time

Directory of Open Access Journals

The Environmental Accounting: an Instrument for Promoting the Environmental Management

45The Environmental Accounting: an Instrument for Promoting the Environmental ManagementThe Environmental Accounting:an Instrument for Promoting the Environmental ManagementCleopatra ªendroiuPh.D. Senior LecturerAureliana Geta RomanPh.D. LecturerAcademy of Economic Studies, BucharestAbstract. Companies and managers usually believe that environmental costs are not significant tothe operation of their businesses. However, often it does not occur to them that some production costshave an environmental component. By identifying and controlling environmental costs, environmentalaccounting systems can help environmental managers to justify these cleaner production projects, and toidentify new ways of saving money and improving environmental performance at the same time.Key words: ecological efficiency; environmental accounting; environmental costs; performance.1. IntroductionA progressive environmental policy can contribute toachieve the objective of the European Council of Lisbon ofturning the European Union into the most competitiveknowledge-based economy. If the development of a greenmarket can be sustained and encouraged, the businesses andthe citizens will respond with technological inventions andwith an administration that will determine the growth, thecompetitiveness, the profitability and the creativity of work.The leaders of the organizations and of the companies havealready integrated the principles of the sustainabledevelopment into their business strategies. Solving the presentenvironment problems requires a strategic approach, too(besides a legislative approach), with the purpose ofintroducing the necessary changes in production andconsuming. It is absolutely necessary to optimally use a wholeseries of instruments and measures through which is influencedthe decision making process of companies, consumers, citizensand of the ones that adopt the policies from other fields.The environmental accounting represents a method ofmeasuring the performance of any type of organization(governmental departments, industrial producers, etc.) inrelation to the environment and in economic terms. Theenvironmental management accounting is a subsystem ofthe environmental accounting, used in general to offerinformational support for the decision-making process ofa company, even if the obtained information can be usedfor other purposes, too.At the level of an organization, the environmentalaccounting is used in order to identify measures thatpromote the sustainable environmental management.The implementation of measures that ensure a balancebetween the decrease of the costs and the decrease ofthe impact on the environment is a crucial aspect for thesustainable environmental management. The diagrampresents the general scheme of the environmentalaccounting (figure 1).46Theoretical and Applied Economics2. Internal instruments of the environmentalaccountingAs internal instruments of the environmentalaccounting can be used, interdependently, the following:the segments environmental accounting, the system ofenvironmental accounting EcoBalance, the corporateenvironmental accounting.The segment environmental accounting is aninstrument of the environmental accounting that allowsselecting an investment object, or a project connected tothe environmental protection from a series of projects oroperations carried out by the enterprise and the evaluationof the effects on the environment for a certain period. Theeffect of the investment in the environmental protectionwill be calculated on the basis of the concept “return oninvestment”. The calculation result is used internally forthe decision-making process in the sustainableenvironmental management.The system of environmental accounting EcoBalance:it is an internal instrument of the environmental accountingthat offers support for the activities of sustainableenvironmental management. All the processes andoperations are represented from the perspective of theenvironmental accounting, on the basis of the dataconcerning the impact upon the environment valid for eachactivity.The corporate environmental accounting is aninstrument that allows presentation to the public of theprocessed and compiled information. The data of theEcoBalance system are turned to good account and thereare calculated (as quantities and values) the cost and theeffect of the activities of preserving the environment, byusing indicators and formulas.The process of processing the environment-relatedinformation in an organization will logically follow the nextmajor steps: identifying the processes that are expensiveand have a major effect on the environment on the basis ofthe accounting system EcoBalance for each operation;examining the alternatives for the improvement plans thathave as purpose reducing the impact on the environmentthrough rational, economic approaches; establishing theefficiency of each possible approach by using the segmentenvironmental accounting, so that it is chosen the methodthat leads to the best results; measuring the economicefficiency of the activities of environmental protectioin andthe ecological efficiency of the activity of the company asentity, by using the corporate environmental accounting.The first step in developing an environmentalaccounting system is connecting the environmentalmanagement to the financial accounting. This is realizedby establishing the environment-related aspects of theorganization and by selecting the ones considered beingsignificant and about which the managers wish information.These represent cost objects of the environment.The expression “environmental aspects” is defined as:(a) Initiatives to prevent, reduce or remedy the harmsdone to the environment or to preserve the recyclable andnon-recyclable resources (such initiatives can be requiredby the environmental laws or norms in force, or by contract,or they can be carried out voluntarily);(b) Consequences of breaking the environment lawsand norms;(c) Consequences of the damage made to theenvironment, to others or to the natural resources; and(d) Consequences of the indirect obligations requiredby law (for instance, obligations for the damage made bythe previous owners).On the other hand, at the level of the financialaccounting, the environmental aspects affect the financialsituations under the following forms: Introducing environmental laws and norms can leadto asset depreciation and therefore, to the need toreduce their accounting value;Source: Toshiba Group (1999)Figura 1. Environmental accounting – instrument for the management Ecological risks Competitive advantages Environmental management External Benefits 3. Benefits for the Clients (Consumption of  electrical energy) 2. Assumed economic benefits  Internal benefits 1. Effective economic benefits  4. Benefits from the prevention of risks (respecting the regulations, ecological structures) 47The Environmental Accounting: an Instrument for Promoting the Environmental Management Failing to respect the legal requirements concerningthe environment aspects, such as exhaust fumes ordeversarile de waste or changes in legislation withretroactive effect, can incur remedy costs,compensation costs or legal costs; Some entities such as the ones from the extractiveindustry (gas, oil or mining exploitations), chemicalenterprises or recycling companies can createobligations related to the environment as a directconsequence of the carried out activities; The implicit obligations incurred by a voluntaryinitiative; for instance an entity could haveidentified the contamination of the soil and, withoutany legal obligation, could have taken the decisionto remedy this problem, because it is preoccupiedwith its long-term reputation and its relation to thecommunity; An entity may need to present the existence of somecontingent/probable debts if the expensesconcerning the environment aspects cannot beestimated reasonably; and In extreme situations, non-observance of certainenvironment laws and norms can affect thecontinuity of an entity according to the continuityprinciple and, as a consequence, it can affect theinformation presentation and the basis for drawingout the financial statements.The identification of the significant environment-related aspects for the environmental accounting willdepend to a great extent on the purposes of the old systemof evaluation of the environment aspects. A lot oforganizations have or are implementing environmentalmanagement systems that point out the environment-related aspects of the company’s activity and identify theresources and the results obtained from those activities.Still, the purpose of a management system that facilitatesthe environmental accounting can anyhow differ from themodel indicated by the international environmentalmanagement standards, such as ISO 14001.3. Environmental management indicatorsThe environmental management uses indicators toaccurately evaluate the level of the sustainablemanagement and to facilitate its subsequent improvement.With this purpose, the indicators must be based on thefollowing three reference elements as are shown in table 1,as the Toshiba Group (1999) used.Element Explanation Quantification Ratios Meaning  tenvironmen the protecting of CostsbenefitsEconomic  If this coefficient is higher than 1 (the economic benefits are equal or higher than the environmental costs), then the sustainable management is considered being efficient.    +tenvironmen the protecting of Costscosts social of DecreasebenefitsEconomic  If the presented indicator is higher than 1 (the economic benefits and the decrease of the social costs equal or exceed the environmental costs), then the sustainable management is considered viable. a) Economic benefits of the activities of preserving the environment  Shows how rational from an economic point of view are the activities of environmental protection. tenvironmen the protecting of Costsimpact ecological the of Decrease  This indicator is used to evaluate the positive evolutions in the efficiency of the investments and of other projects. units) value or vequantitati (inimpact  ecological TotalSales  This equation is used to evaluate if the ecological impact corresponds to the dimensions of the business.  b) The ecological efficiency of the economic activities  Shows if the ecological impact of the economic activities is acceptable and if these activities answer the social requirements. units) value or vequantitati (inimpact  ecological Totalactivitieseconomic  from value Added  The equation is used to establish if the profit corresponds to the impact on the environment. c) Environmental management It is used to establish if the process of environ-mental management is appopriate.  The internal audit, the local reports, the development processes of the ecological technology, ecological levels, „green” acquisitions and other aspect are analyzed.  The environmental accounting must function as aninstrument for the measurement of the economic efficiencyof the activities of environmental protection and of theecological efficiency of the activities. In this context, theobjective of any Romanian organization should consistsin setting the ground for an environmental accountingsystem that evaluates the sustainable environmentalmanagement and that offers support for assisting themanagerial decision. The development and the permanentimprovement of the environmental accounting systemrepresents an essential condition of the organization’ssustainability, so that this one becomes, on one hand, aninstrument that supports the decision-making process, andon the other hand, an indicator for the sustainableenvironmental management that accurately evaluates theactivities of environmental protection.Environmental management indicatorsTable 148Theoretical and Applied Economics ReferencesUnited States Office of Pollution EPA 742-R-95-001 EnvironmentalProtection Prevention And Toxics Agency (MC 7409),Washington (1995): An Introduction to EnvironmentalAccounting As A Business Management Tool: Key ConceptsAnd TermsUnited Nations Division for Sustainable Development  - UNSD(2003):  Handbook of National Accounting: IntegratedEnvironmental and Economic Accounting — An OperationalManualInternational Conference Economic and Social Research Institute(ESRI), Faculty of Environmental Studies, Nagasaki University(2005): New System of Integrated Environmental and EconomicAccounting (Trial Calculation on Hybrid Accounting Systemintegrating Environmental Pressures and Economic Activities)IASP 1010 International Statement on Audit Practice 1010Including the environmental aspects in the audit of the financialstatementsToshiba Group (1999): Environmental Accounting,www.toshiba.com

The Environmental Accounting: an Instrument for Promoting the Environmental Management

Abstract

Similar works

Full text

Available Versions

Directory of Open Access Journals

Directory of Open Access Journals