Posts tagged "Environmental Accounting"

Environmental “green” Accounting Primer

As we all know, businesses are formed to deliver services or produce products in order to earn a profit. In the 21st century accounting goes beyond the bottom line of black or red – – it includes “green”, too. With the growing green consumer awareness, companies are more than ever expected to align its business strategies with environmental initiatives. Environmentally conscious companies have already discovered that they can generate business strategies to help them reduce their carbon footprint, minimize their environmental impact, make the best use of natural resources, become more energy efficient, reduce costs, and exhibit social responsibility – all at the same time. Companies who are ready to become an integral part of President Obama’s Green Economy through governmental initiatives will need to expand their accounting staff by hiring accountants who specialize in “green” or environmental accounting. Definition of Green Accounting

The term, green accounting, has been around since the 1980s, and is known as a management tool used for a variety of purposes, such as improving environmental performance, controlling costs, investing in “cleaner” technologies, developing “greener” processes and products, and forming decisions related to their business activities. Green Management Accounting

According to the EPA, green or environmental management accounting is “the identification, prioritization, quantification or qualification, and incorporation of environmental costs into business decisions.” Green Management Accounting uses “data about environmental costs  and performance for business decisions. It collects cost, production, inventory, and waste cost and performance data in the accounting system to plan, evaluate, and control.” Environmental management accounting thus represents a combined approach which provides for the transition of data from financial accounting and cost accounting to increase material efficiency, reduce environmental impact and risk, and reduce costs of environmental protection. Green or Environmental Accountants

Green accountants are held responsible to identify and track green costs often times working with site, research and development, and production managers when planning their budgets. In the past, such costs were buried in overhead preventing a clear picture of the cost savings and benefits to the product, process, system or facility responsible for the green initiatives. Green accountants help management recognize that the tax benefits, rebates and lower costs of being environmentally friendly add up to a real bottom-line reward for doing the right thing. “Public environmental, social and sustainability reporting is the main route through which corporate accountability and integrity can be demonstrated,” claims the London-based Association of Chartered Certified Accountants in its report, Environmental, Social and Sustainability Reporting on the World Wide Web.

Environmental Accounting: Taking our Part in Saving the Earth

While the goal of a company or firm is sustainability, the goal of the human species is to sustain themselves as well. Sustainability is a state of being that can be maintained indefinitely. Sustainable development, as defined by the United Nations General Assembly, meets the needs of the present without compromising the ability of future generations.

Companies prefer not to break even, but sustain themselves with a higher margin of safety. Similarly, we’d like to see human kind sustain themselves for many, many years to come. Unfortunately, we are not leading ourselves towards that path. The declining state of our environment has become a global epidemic, centered on consumer-focused countries like the United States of America. It is essential that we, as educated and responsible citizens, take action now in order to save the sacred place which we thrive upon.

Many people ask “How can I make a difference?” Although there are many simple solutions (consume recycled products, reduce energy use, etc.), environmentalism can even fit into our everyday lives – into the profession of accounting. Environmental accounting has been under discussion since the 1960s, but has expanded greatly in the last three decades. Now that environmentalism is in the public eye, it is more pertinent to the profession than ever.

Environmental accounting is a wonderful opportunity for individuals to pair their interest in the environment with a skill set in accounting. Despite the slowing economy, it is certain the demand for environmental accountants will rise. The demand for these specific professionals, however, is tied to environmental regulations originated in Washington, D.C. With the upcoming presidential election in November 2008, the future for these professionals is not predictable. It is clear, however, that the majority of front-running candidates have proposed actions within their platforms for the environment. Despite the politics of environmental regulation, it is very apparent America has taken an interest in environmental issues.

Although companies do not often recruit for these specific positions, it is something that students may specialize in later on in their career. Large companies, as well as accounting firms, often have environmental accountants on staff. Until this point, there have not been academic programs focusing on environmental accounting, nor a professional certification relating to the field. A great way to start towards this path would be with a college minor in environmental studies. Continuing Professional Education (CPE) courses focusing in this area will also serve accounting professionals well. Communication is a key skill environmental accountants must possess. They must be able to convey their knowledge to scientists, risk managers, public relations professionals, marketing staff and even senior executives.

Not only will environmental accountants serve as a vital part in a company’s social responsibility effort, but they will also be able to cut costs in an environmental friendly way. Companies may perform an environmental audit to determine which legislation is applicable to the company, assess the compliance, and provide environmental solutions. Accountants are able to understand the distribution of costs and use of resources – and can analyze ways companies will be able to lessen their ecological footprint. In this way, environmental accountants can take action for environmentalism on a much bigger scale.

While it is the environmental accountants’ responsibility to adhere to government guidelines, we should not overlook their role in improving environmental conditions. It is pertinent that environmental accountants work with public relation as well as marketing professionals, in order to promote the most eco-friendly products. Now, more than ever, America has begun to realize its’ ecological footprint on the Earth. The marketability of some commercial products depends on its level of environmental friendliness. Using recyclable materials will not only cut costs, but also impress consumers.

In upcoming years, environmental accountants will play a key role in business strategies. Environmental accountants have the power to satisfy management with financial figures, as well the community with social responsibility. These specific professionals will hold the key role in following environmental regulations. With hope, environmental accountants can do their part in moving towards sustainability.

While we may be able to connect our professional lives with the condition of our environment, I urge you to take action individually as well. Every small action has the power to make a difference. You can measure your ecological footprint at www.ecofoot.org. This will give you a greater understanding our impact on the environment, and how sustainable our practices are.