Environmental Management Accounting

Topics: Management accounting, Cost accounting, Costs Pages: 12 (2862 words) Published: October 10, 2014
1.0Introduction
In the past, the companies are managed their environmental problem by internal managers. Nowadays, the government is need companies to comply with good environmental performance. Environmental management accounting is a new technique to identify environmental cost flows of a company. Environmental Management Accounting (EMA) also can defined as the identification, collection, estimation, analysis, internal reporting and use of material and energy flow information, environmental cost information and other cost information for both conventional and environmental decision-making within an organization (Tellus Institutes). EMA simply defines as management accounting with a focus on physical information on the flow of energy, water, products and material as well as monetary information on environmental costs and revenues and projects related to environmental protection (Christine Jasch, 2005).

The uses and benefits are various. EMA is very useful for the internal management with a specific target on environment such cleaner production, supply chain management, green environment or production and environment management system. EMA is not only improving the environmental management system rather than help to improve all the management activities. Its helps to track and maintain the accurate use and flow of energy and material include the pollution, waste volume and fate. EMA also helps to identify the more accurate environmental types of costs. It’s also gives exact and comprehensive information for the measurement and reporting of environment performance, which improve the company image with stakeholder such as customers, investors, employees, government and etc (Tellus Institutes).

2.0Traditional management accounting system
Traditional management accounting system is the one of the system which is used by all the company to provide their financial performance. Unfortunately, these systems are unable to provide report with environmental costs. Traditional method is no longer sustainable in business world because of some reasons. These are:-

2.1Accounting records does not contain more information

Traditional accounting system does not contain much information on future environmental management costs. This system lack of many information regarding the environments cost. The company lost their sales to customer who cares the environmental issues when they conduct the poor management. This will lead to lost in marketing strategy level with environment-related product and lost access to financing when business partners are refuse to take on the potential environmental risk associated with a partnership business. There following types of cost has the difficulties in the estimation, but they can be both real and consequential to an organization monetary health. These costs must be noted that cost accounting tools increasing an average risk premium to production costs to reflect less tangible issues (IFAC,2005).

2.2Cost and flow of an information not trace and track adequately

There are many company generate records data as their material movements from ERP and other software system. The information’s provide are still not sufficient and accurate for environmental management in order to other decision making purposes. For example, the company posting the details about purchasing is not giving accurate identification of the amount and value of various categories of purchased materials. Some company provides the details of purchasing into an account and the number of material and amount are posted into stock management. Some company has been requested their suppliers to provide the proper details instead of having difficulties to extract from the system. Even though, this might be cost-efficient way for a specific project, in general a company must set up its own data system to provide the information of material which needed by material flow management and environment management...
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