Why Do We Need Environmental Accounting Accounting Essay

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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 Accounting (EA) is a cover heading used to define diverse features of this growing field of accounting. The emphasis of EA is as an accounting instrument used to make internal business judgments, expressly for practical ecological events. Environmental accounting is a critical step in developing true costs for products and services and will require a long-term and extensive multidisciplinary effort involving environmental and agricultural scientists, ecologists, fishery managers, farmers, ranchers, entomologists, naturalists, and accountants. EA was established to distinguish certain boundaries of unadventurous 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?

Substantial is a system of development which meets the needs of the present without compromising the ability of future generations to meet their own needs. 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).

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 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).

1.7 Forms of Environmental Accounting.

All characteristic of EA has a universal accounting form that assists as its groundwork, according to the EA 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 an 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).

1.8 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.

1.9 Chapterisation



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.