What Is Environmental Management Accounting?

Environmental management accounting information is mainly for the internal accounting and decision-making of the organization. Its procedures for internal decision-making include both physical and energy consumption, processes and physical procedures for final disposal, as well as the costs, savings and Monetary procedures for revenue.

Environmental Management Accounting

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Environmental management accounting information is mainly for the internal accounting and decision-making of the organization. The procedures for internal decision-making include both material and energy consumption, processes and physical procedures for final disposal, as well as those related to potential environmental impact activities.

(I) Definition of Environmental Management Accounting

In the 1990s, the American Environmental Protection Association first proposed environmental management accounting. Since then, environmental management accounting has been introduced in more than 30 countries in the world.

Tellus Institute: Environmental management accounting is a specialized accounting for the organization's use of materials and environmental costs for its business. Material accounting is the method of tracking the material flow of a factory or operating site and reflecting its inputs and outputs to achieve the purposes of evaluating resource efficiency and discovering opportunities for environmental improvement. And environmental cost accounting is to confirm the environmental cost and allocate it to the material flow or other tangible aspects of the company's operations.

International Federation of Accountants: Environmental management accounting is to achieve the purpose of effective management of environmental and economic performance by developing and implementing appropriate environmental-related accounting systems and practices. It includes the disclosure of environmental-related accounting information and

1. Helps businesses accurately calculate costs and price products

The establishment of an environmental management accounting system can overcome the subjectivity of traditional costing methods and the singularity of apportionment standards. The environmental-related costs can be separately identified and measured, which can quantify the impact of various economic activities of the enterprise on the environment. On the one hand, it enables companies to better understand the environmental costs that may occur in the product's life cycle, to identify opportunities to reduce costs and improve performance, and to reduce environmental risks; on the other hand, effective environmental cost information can ensure the integrity of product costs and Authenticity helps companies to more accurately price their products and improve their financial performance.

2. Helps business management make the right decisions

Environmental management accounting not only provides monetary information (such as environmental costs and benefits) required for corporate decision-making, but also non-monetary information (such as pollutant emissions). With the assistance of the environmental management accounting system, management can effectively curb short-term behaviors, proceed from the long-term interests of the enterprise, and from the perspective of the dual interests of the enterprise and the society. In ecological design and clean production, rational planning, scientific management, and do Make optimal decisions. When the environmental factors are taken into account in the investment decision analysis, the analysis model changes accordingly. First of all, decision-making goals should be diversified, and decision-making analysis should no longer be based on pure economic parameters. Various social and environmental goals should be considered. Second, environmental factors should be included in the decision analysis indicators. Enterprises should pay close attention to the formulation of national environmental policies and environmental laws and regulations, estimate the possibility of various potential environmental expenditures, and fully consider the impact of environmental factors in the decision analysis. investment risk.

For example, a new product that an enterprise is about to put into production will produce a residue in the production process, which can be removed using the following two schemes.

Option 1, using steam removal method. The required equipment investment is 500,000 yuan; the annual expenditures are: 60,000 yuan for purchasing materials, 60,000 yuan for sewage charges, and 40,000 yuan for production control. This treatment method will produce a toxic exhaust gas, and the company currently does not have the ability to handle the exhaust gas. However, in recent years, the state will promulgate a regulation for the control of toxic exhaust emissions. Enterprises' actions are likely to face huge fines, and the fines are estimated to be up to 1.5 million yuan (assuming that the fines are paid in a lump sum when the equipment is scrapped).

Option 2, using an alkaline removal method. This process does not release any waste gas, but only produces an alkali-containing waste material that can be recycled to make fertilizer. The costs include: 1 million yuan in equipment investment, 80,000 yuan in purchasing materials, 20,000 yuan in sewage charges, 30,000 yuan in production control expenses, and 10,000 yuan in alkaline waste recovery (assuming that the two equipments have a service life of 10 years, using Depreciation is taken out of the average life method without residual value; the effect of income tax is not considered; the discount rate is 15%). The investment and present value of the two schemes are shown in Table 1.

As can be seen from Table 1, the net present value of option 1 is 1,422,838 yuan, which is greater than the net present value of option 1,100,376 yuan. Option 2 should be selected. If the penalty for environmental damage is not considered, the net present value of Option 1 is 1,052,068 yuan (1 422 838-370 770), which is less than the net present value of Option 2. Option 1 should be selected. This will lead to wrong investment decisions and cause considerable losses to the enterprise.

3 Helps enterprises to conduct environmental performance assessment and evaluation

The environmental performance evaluation system of environmental management accounting can help owners and managers of environmental resources to understand the stock and flow of environmental resources, as well as the distribution of resource assets and their possible changes, and can reflect the corporate environmental responsibility, prevention and governance itself. Environmental pollution resource input and performance information, through monitoring the specific implementation behavior of each link of the enterprise, find deficiencies, find differences from standards, analyze the reasons, and propose improvements to ensure that the company is not affected The threat of environmental risks continues to improve the economic efficiency and environmental performance of enterprises.

A large number of studies have proved that there is a positive correlation between environmental performance and financial performance of enterprises. After an enterprise regards environmental goals as its strategic goals, the information collected through environmental management accounting can be used to evaluate the company's environmental performance and financial performance in different implementation stages. Such as comprehensive consideration of environmental factors in decision-making, companies to improve product design, how much environmental performance for the company. Environmental management accounting evaluates the performance of corporate management to promote self-adjustment of corporate environmental management. Through comprehensive assessment of environmental performance, companies achieve sustainable strategic goals and create long-term value.