Environmental Accounting

INTRODUCTION

Environmental Accounting is defined as an important tool for understanding the role played by the environment in the economy as a mutual relationship is identified between the two. Environmental accounting prepares accounts that exhibit the cost of environmental conservation during the normal course of business. This article highlights the growing importance of environmental accounting, lists the countries adopting it and finally explains its various methods.

The relationship between the environment and economy is close and mutually beneficial. Environmental accounting is an important tool for understanding the role played by environment in the economy. Environmental accounts furnish data pertaining to the role of natural resources in bringing economic well-being and the costs imposed by pollution or resource degradation. Environmental accounting prepares accounts that exhibit the costs and effects of environmental conservation activities. Introduction of environmental accounting helps in improving the effectiveness of one's conservational activities. It is also sometimes referred to as "resource accounting", "green accounting" or "system of integrated economic and environmental accounting" (SEEA).

English: UNEP FI Logo

English: The International Resource Panel at work

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The Ministry of Environment, Japan in its Environmental Accounting Guidelines, 2002 states that the aims of environmental accounting are to achieve sustainable development, maintain a favorable relationship with the community and pursue efficient and effective environmental conservation activities. Precisely speaking, it allows a company to identify the cost of environmental conservation during the normal course of business, identify benefits gained from such activities, provide the best possible means of quantitative measurement (in monetary value or physical units) and support the communication of its results.

According to IUCN of the World Conservation Union, environmental accounting refers to the modification of the System of National Accounts (SNA) to incorporate the use or depletion of natural resources. The UNSTAT (United Nations Statistical Division) prescribes a standard format for the preparation of SNA to calculate major economic indicators like...