Environmental Project, 1069 – Perspectives in the Development and Application of Environmental Management Accounting

Perspectives in the Development and Application of Environmental Management Accounting

2 Introduction to EMA

EMA has been defined by the UN as (2001, p. 8) thus: `EMA 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'. Another definition is in Bennett et al (2002, p. 1): “the generation, analysis and use of financial and non-financial information in order to optimise corporate environmental and economic performance and to achieve sustainable business'. Together, these two definitions highlight some key words as to what EMA is and what it is not:

EMA provides a more realistic picture of the costs structure by allocating environmental costs to the activities and products which give rise to such costs.
EMA focuses on the financial costs related to waste and consumption of water and energy.
EMA focuses on decisions. The whole point of EMA is to supply decision-relevant information for management so that they can make better decisions and thereby improve the financial and environmental performance of the enterprise.
EMA deals with management accounting. Management accounting is about recording, analysing and reporting costs, revenues, investments and debt. Therefore EMA concentrates on how these are calculated.
EMA involves focus on financial data. The key element of EMA is `translation' of `environmental language' to `financial language', and vice-versa.
EMA is a means to an end, not an end in itself. Therefore, EMA is a tool, which is primarily for use by management to make more informed decisions.
EMA is not primarily about external reporting in green accounts etc. Therefore, there is no requirement to standardise terminology, ensure comparability between enterprises over time etc. However, this does not mean that EMA cannot supply information which can be used in external reporting.