ENVIRONMENTAL adopted by Norway in the early 1970s. In

ENVIRONMENTAL ACCOUNTING AND REPORTINGThe Ministry of Environment and Forests has proposedthat “Every company shall, in the Reportof its Board of Directors, disclose briefly the particulars of the steps takenor proposed to be taken towards the adoption of clean technologies forprevention of pollution, waste minimization, waste recycling and utilization,pollution control measures, investment in environmental protection and theimpact of these measures on waste reduction, water and conservation of otherresources.”GreenAccounting, often known as environmental accounting, is the accounting thatpermits computation of income of the nation by taking into account the economicdamage and the depletion of natural resources. It motivates the adoption ofmethods that do not hamper the environment, while balancing the performance.GreenAccounting includes environmental costs into the financial results ofoperations so that not only the profits, but also the environmental stock ofassets are sustained. INTRODUCTIONThe developing countries like India are facing thechallenge of promoting economic development without neglecting the environment.A tradeoff between environmental protection and development is a great concerntoday.

The concept of environmental accounting was firstadopted by Norway in the early 1970s. In India, the application ofenvironmental accounting is limited to certain industries such as oil andpetroleum, cement, power and electronics, natural gas, steel, engineering andtextile industries.The concern of environmental responsibility and thesustainable industrial development has given birth to a new branch ofaccounting i.e. Environmental Accounting.

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 ENVIRONMENTAL ACCOUNTING: A CONCEPTUALFRAME WORKEnvironmental accounting refers to theidentification, measurement and communication of the data on the environmentallyresponsible performance of a business entity to facilitate economicdecision-making.  •           Itidentifies the resources used by abusiness and measures and communicates costs of its impact on theenvironment. •           Environmental accounting is all about makingenvironment related costs more transparent with the corporate accounting systemand reporting.

  Objectives of Environmental AccountingThe objectives of environmental accounting andreporting are as follows:1.      Tohelp in negotiation of the concept ofenvironment and to determine the enterprise’s relationship with the societyas a whole and the environmental pressure group in particular.2.      To segregate and collaborate allenvironmental related flows and stocks of resources.3.      Tominimize environmental impactsthrough improved product and process design.4.      To estimate the total expenditureon the protection and enhancement of the environment.

5.      Toassess changes in the environment interms of costs and benefits.6.

       To ensureeffective and efficient management of natural resources.Merits ofEnvironmental Accounting•           Thebasic advantage of undertaking the practice of environmental accounting is thatthe identification and increasedawareness of environmental-related costs gives the opportunity to find waysto trim down or to completely avoid these costs whilst improving environmentalperformance. •           Tobe more specific environmental accounting is an effective tool in order to place the environmental related issuesresolutely before the top management, to provide valuable data to informenvironmental and financial managers’ decision making process, and todemonstrate environmental commitment of the company to its stakeholders.  Benefitsto an organization that opts to disclose environmental issuesin their financial statements 1.      It enhances the image of the product andthe company which may have an impact on the sales and ultimately profitability.2.      Itimproves the safety of the workers,which in turn will help increase productivity.3.

       Itprovides a competitive advantage asthe customers may prefer environmental friendly products and services.4.      Ithelps to build up trust, confidence andgoodwill in the society.5.     Environmental cost can be offsetby generating revenues through the sale of waste or byproducts.

6.      Betterknowledge of environmental cost canfacilitate more accurate costing and pricing of products. Forms ofEnvironmental accountingEnvironmental accounting can be classified underthree forms:1.      Environmental management accounting:Environmentalmanagement accounting focuses on material and energyfrom information as well as environmental cost information. It can be studiedunder the following subclasses:(i)     Segment environmental accounting:This is an internal environmental accounting tool that facilitates theselection of an investment activity, or a project which is environment-friendlyfrom among all processes of operations.

It also helps in evaluating theenvironmental effects of the project for a certain period.(ii)   Eco-balance environmental accounting: This is also an internal accountingtool to support the firm for sustainable environmental management activities.(iii) Corporateenvironmental accounting: This is a tool to inform the public ofrelevant information compiled in accordance with the environmental accounting.It can be called as corporate environmental reporting and it uses the cost andeffect of its environmental conservation activities.

2.      Environmental Financial Accounting(EFA):Environmental financial accounting refers to thefinancial accounting practice with special reference to the reporting of environmental liability costsand other significant environmental costs.3.      Environmental National Accounting (ENA):Environmental National Accounting focuses on natural resources stocks & flows,environmental costs & externality costs etc.Relevance of Environmental AccountingEnvironmental costs and performance ought to haveenough management attention due to the following reasons:1.      Mostof the environmental costs can be effectivelyreduced or avoided as a result of better business decisions, ranging frombase level to top level, to invest in”green” projects.2.      Manyenvironmental costs such as the waste raw materials may provide no additionalvalue to the product or system.

Thus, environmentalcosts may be obscured in overhead accounts.3.      Bettermanagement of environmental costs can result in improved environmentalperformance and significant benefit to the society as a whole.4.      Theunderstanding of environmental costs and the performance of processes andproducts may lead to more accurate costing and pricing which will aid theorganizations in developing more environmental friendly products and servicesin the future.5.

      It isidentified that environmental cost can be writtenoff by generating revenues through sale of waste by products or transferablepollution allowances such as carbon credits.6.      Accounting for environmental costs supports a company’s development andfacilitate an overall environmental management system. Such a system will facilitate the company to obtain internationalstandards such as ISO 14001 developed by International Organization forStandardization.Challenges ofEnvironmental Accounting and ReportingEven though the environmental accounting andreporting practices are being attempted by many countries, the concept hascertain obstacles in implementation. The major limitations are as follows:1.

     Environmental accounting lackseconomic value.2.      Thereis no standard method of estimating thesocial value of environmental goods and services.

3.      Socialvalue given to environmental goods and services are changing so fast that the estimates are likely to be obsolete before they are available for use.4.      There is no accounting standard for environmentalaccounting.5.      It involvesinapplicable assumptions.

6.     Environmental accounting is not alegal obligation except for a few industries in India.7.      It lacks reliable industry data. CONCLUSION·        Environmental accounting is an importantmeasure for understanding the roleplayed by natural environment in the development of an economy.·        It providesdata that contains the contribution of natural resources to economic well beingas well as the costs imposed by environmental pollution and resourcedegradation. ·        In India, the level of environmental related disclosures in the corporate annualreports is poor.

·        Neither the latest company law nor the accounting standards by ICAI prescribes thedisclosure norms for environmental related aspects in the corporate financialreports. ·        As the environmental disclosures arevoluntary in nature, except few industries for which environmental accountingis mandatory such as oil and petroleum, natural gas, cement, steel, etc. thecompanies hesitates to implement the practice in their books of accounts. ·        The poorenvironmental performance of the company may also bind them to no-disclosure. The lack of awarenessand commitment on the part of company management about the social responsibilityof the firms keeps them away from reporting environmental costs and benefits.·        Thus, it can be concluded that the absence of a standardized environmentalaccounting practice and disclosure norms at national as well as internationallevels spur the companies to be away from the environmental accountingpractices and to shut their eyes towards the deterioration in the environment.Recommendations:Green Accounting/ Environmental Accounting should promotepaperless reporting in the form of digital accounting.

Eg:E-filing of taxes, Cloud computing to save energy, calculation of EnvironmentDomestic  Product (EDP) rather thanNational Domestic Product (NDP).    Bibliography ·        http://www.iosrjournals.org/iosr-jbm/papers/Conf.17037-2017/Volume-1/6.%2030-34.pdf·        http://www.yourarticlelibrary.com/economics/environmental-economics/green-accounting-need-objectives-problems-and-other-details/39675·        http://shodh.inflibnet.ac.in/bitstream/123456789/2037/1/rl-com-synopsis.pdf·        https://www.slideshare.net/KunalKapoor6/environmental-accounting-and-audit