ENVIRONMENTAL ACCOUNTING

Through 1970s and 1980s Environment became an important factor, influencing and being
influenced by corporate action. Developing countries like India are facing dual problem of
protecting the environment and promoting economic development.
A study by world bank shows economic cost of air pollution in different countries. According to
this study, India incurred a loss of about $55.39 billion in 2013 or about 0.84 per cent of its gross
domestic product (GDP).
Environment accounting is the identification and reporting of environment specific costs like
liability cost, waste disposal costs. It is accounting for any cost and benefit arising from change in
firms product or process where change also involves a change in environmental impact.

NEED OF ENVIRONMENTAL ACCOUNTING

Without the proper accounting work, either by firm or government, it cannot be determined that
both are fulfilling their responsibilities towards environment or not. Increasing awareness among
public about the pollutants entering our soil, water and air, increasing media coverage on these
issues and industrial accidents like Bhopal gas leak (1984) has forced organizations to address call
for environmental judgement.

TYPES OF ENVIRONMENTAL ACCOUNTING

Environmental management accounting
Accounting focusing on material and energy flow information and environment cost information.
Segment environmental accounting: An internal environmental accounting tool that helps
in selecting activity, or project which is environmental friendly from among all available
options. It also helps in evaluating the environmental effects of the project for a certain
period.
Eco balance environmental accounting: Also an internal accounting tool helping in
performing sustainable environmental management activities.
Corporate environmental accounting: This is a tool for reporting firms cost and effects of
its environmental conservation activities to inform public and other relevant external
authorities.

Environmental Financial Accounting (EFA)

This includes financial accounting with focus on environmental liability costs and other significant
environmental costs.

Environmental National Accounting (ENA)

Environmental National Accounting focuses on natural resources stocks & flows, environmental
It helps to know whether the firm is performing its responsibilities towards environment or not
like meeting regulatory requirements, operating in a way so that impact on environment is
minimal, control over waste management etc.

MERITS
Identification of environment related cost and ways to reduce these.
Improves safety of workers which will reflect in their productivity.
Competitive advantage as eco-friendly products may be preferred.
Better knowledge of environmental cost can facilitate more accurate costing and pricing
of products.

LIMITATIONS
Social value given to environmental goods and services are changing so fast that the
estimates are likely to be obsolete before they are available for use.
Input for EA is not easily available because costs and benefits relevant to the environment
are not easily measurable.
There is no accounting standard for environmental accounting. Neither the latest company
law nor the accounting standards by ICAI prescribes the disclosure norms for
environmental related aspects in the corporate financial reports.
It involves inapplicable assumptions.
Environmental accounting is not a legal obligation except for few industries in India.
It lacks reliable industry data.
EA is a long-term process. Therefore, to draw a conclusion with help of it is not easy.

ENVIRONMENTAL ACCOUNTING IN INDIA

The Union Ministry of Environment and Forests has issued various instructions in to prepare
environment statements. It is mandatory in the country to get an environmental clearance for all
new projects that concerns both the Union Ministry of Environment and Forests and the
corresponding State Government department of environment.
A gazette notification on environmental audit has been issued by ministry of environment and
forests on 3-3-1992 which was amended through a notification on 22-4-1993(India: Environment
Statement, as a part of Environment Audit, Govt. of India, 1993) requires the submission of an
environment statement to the Central Pollution Control Board. This notification is applicable to
any person carrying out an industrial operation or process requiring consent to operate by under
section 25 of the Water (Prevention and Control of Pollution) Act 1974, under section 211 of the
Air (Prevention and Control of Pollution) Act, 1981 or both, or authorization under the Hazardous
Waste (Management and Handling) Rules, 198, issued under the Environment (Protection) Act,
1986. In this environment statement, the concerned industry is required to provide information
on:
 Water and raw material consumption
Pollution generated
Impact of pollution control measures on conservation of natural resources
Nature of hazardous and solid wastes produced and disposal practices adopted
Measures taken for environmental protection, and
Steps taken to popularize the benefits of environmental accounting and reporting among the
corporate sector.

REFERNCES

The Chartered Accountant November 2005; by Alnoor Bhimaani.

ICAI journal, Volume 54, No. 05, November 2005