Critically evaluate this statement



To ensure long-term success for an organisation, environmental accounting has played an important role over the past decades and has been providing reports for growing companies to ensure that they comply with the environmental law (Yakhao & Dorweiler, 2004). Environmental accounting highlights contribution to the economic from natural resources and the well- being of the cost imposed by the pollution done by an organisation (Mylonakis & Tahinakis, 2006). Environmental policy identifies the environmental issues on its' products and services and improves on its quality performance (Dunk, 2002). Moreover, it concerns environmental issues and increase public's focus on the environment (Mylonakis & Tahinakis, 2006).

Management and Financial Accounting's role toward environment in an organisation

Environmental accounting issues is one of the main key concerns for the business world and is referred to as identification and compiling data of environmental information to assist mitigation of the environmental downsides of activities and systems (Dunk, 2002). The public and financial community's interest in environmental information is provided in the report of management decision on pricing analysis, and capital budgeting (Yakhao & Dorweiler, 2004; Mylonakis & Tahinakis, 2006)

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According to Yakhou and Dorweiler (2004) business activities impact on environment can be identified in three ways. The media, targets and global sites. An array of pollutants, and from this choices, integration of management decision and accounting report are needed using multiple disciplines for analysis of effects. Environmental impact can be determined by using some terms such as full cost accounting (FCA), life-cost cycle (LCC), total quality environmental management (TQEM), total cost assessment (TCA) and life-cycle cost analysis (LCCA) (Yakhou & Dorweiler 2004). Environmental Management Accounting (EMA), analyses the environment related financial cost and benefit that contribute to the recognition of the high and increasing level of capital and operating expenses and the environmental taxes (Yakhou & Dorweiler 2004).

Capital budgeting and expense budgeting; financial and non-financial performance measurement; budget control and product costing, this are the multiple functional activities and has a clear distribution of task and functions at operational and institutional levels (Yakhou & Dorweiler 2004).

The purpose of environmental policy in a business is to ensure the production, quality and consumption is understood and how it impacts the environment (Mylonakis & Tahinakis, 2006). Mathew (1997) emphasised on a framework to provide a general fit over the area regulated such as raising awareness of environmental issues, developing guide lines and practice to assist evaluation and reporting in environmental accounting issues with recommendations on best practices (Yakhou, Dorweiler 2004).

Environmental taxes motivates organisation in changing their attitude towards being more green and ecological in the use of natural resources as well as when financial sources (Mylonakis & Tahinakis, 2006). Result of full-cost pricing and 'eco-accounting' is included in the environmental reporting and as for business policy and environmental policy is concern; they are intertwined (Yakhou & Dorweiler 2004).

Problem and Issues

A company in today's globalization is not considered environmental oriented except if the company is adhere by the law (Mylonakis & Tahinakis, 2006). Environmental cost in accounting and accounting education will play an important supporting role in an organisation (Yakhou & Dorweiler 2004). There is difficulty in adopting business friendly environment project in some countries as there is lack of strategic planning activities towards the environment and because of legislations (Mylonakis & Tahinakis, 2006; Yakhou & Dorweiler 2004). An organisation's poor performance in environment issues will result in penalties and actions taken against the organisation which reduces the stock price of the company (Dunk, 2002).

In the research of Ginoglou et al, (2003) cited in Mylonakis and Tahinakis (2006), environmental resources such as water and air is said to be considered as "free goods" which is not stated in the financial statement

Failure of a product argued by Post and Altman (1992) cited in Dunk (2002) is addressed to the wrong approach of environmental method. The importance of having an environmental strategic report is to plan and control on which environmental operational activities is undertaken (Dunk. 2002).

That being said, customers prefer products that are within the environmental policy which avoids the adverse effect during use and do not mind paying more for this environmental harmful free product (Dunk, 2002). Gurnningham (1994) stood up and argued that organisations should redesign their product to ensure it's free from harmful materials (Dunk, 2002). Organisations that wish to elliminate environmental issues more systematically face the challenge of selecting the appropriate management systems and tools, together with collection of the appropriate data (Dunk, 2002). In one of the site visit to Sydney by Dunk (2002), the general manager mentioned that there were no proper reports on the environmental issue until recently they made it a key project of mentioning it in the agenda meeting with it in the Profit & Loss report (Dunk, 2002)

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In the cost-benefit analysis model, time spent by organisation on environmental training, monitoring and compliance toward the environmental policy may result in higher labour cost (Mylonakis & Tahinakis, 2006).


In conclusion management accounting and financial accounting both play a role in the development of a robust environmental policy that will contribute to long-term organisational success. The role of financial accounting and management accounting in the environmental policy is to support both the environmental and corporate strategy which relates to the environment (Mylonakis & Tahinakis, 2006). Environmental issues can be a problem to the organisation if it is not managed properly. This problem can be rectified by producing report on environmental issue which will benefit the public and financial communities (Mylonakis & Tahinakis, 2006).