Environmental Managerial Accounting- Inspiring Accounting

September 28, 2006 By 2 Comments

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Environmental Managerial Accounting (EMA) is defined by EMARIC as "the identification, collection, estimation, analysis, internal reporting, and use of materials and energy flow information, environmental cost information, and other cost information for both conventional and environmental decision-making within an organization."  As seen below, it can be used in many different contexts:

Environmental Management Accounting (EMA): Management Accounting with a particular focus on materials & energy flow information and environmental cost information.

Environmental Financial Accounting (EFA): Financial Accounting with a particular focus on reporting environmental liability costs and other significant environmental costs.

Environmental National Accounting (ENA): National-level accounting with a particular focus on natural resource stocks & flows, environmental costs, externality costs, etc.

Why Was EMA Created?:

  • The unintentional "hiding" of many environmental costs in overhead accounts
  • Inaccurate allocation of environmental costs from overhead accounts back to processes, products, and process lines
  • Inaccurate characterization of environmental costs as "fixed" when they may actually be variable (or vice-versa)
  • Inaccurate accounting for volumes (and thus costs) of wasted raw materials, and
  • The actual lack of inclusion of relevant and significant environmental costs in the accounting records at all.

    • Potential Benefits To Your Business:

  • The ability to more accurately track and manage the use and flows of energy and materials, including pollution/waste volumes, types, and fate
  • The ability to more accurately identify, estimate, allocate, and manage/reduce costs, particularly environmental types of costs
  • More accurate and comprehensive information to support the establishment of and participation in voluntary, cost-effective programs to improve environmental performance
  • More accurate and comprehensive information for the measurement and reporting of environmental performance, thus improving company image with stakeholders such as customers, local communities, employees, government, and finance providers

    • Click here to learn more about EMA

    Filed Under: Sustainable Business
    • Greg

      Sweet post. I wonder how long until the financiers of the world start accounting for the true economic cost of their investments. This could radically change financial theory and valuation.

    • Greg

      Sweet post. I wonder how long until the financiers of the world start accounting for the true economic cost of their investments. This could radically change financial theory and valuation.