A. Definition

EMA is broadly defined as the identification, collection, analysis, dissemination, and use of physical flow information (materials, energy and water flows), environmental cost information, and other monetary information for both conventional and environmental decision-making within an organisation. This definition of EMA is similar to the definition of conventional management accounting, but has several key differences:

• EMA places particular emphasis on identifying environmental costs, including the costs of producing waste;
• EMA includes information on physical flows and use of materials, water, and energy, as well as cost information;
• EMA information is particularly useful for activities and decisions with environmental impacts.

B. Main Features

Environmental Accounting is an important function that provides firms with a means to incorporate information with business decision making and business operations.

Information gathering Environmental monitoring Environmental auditing Environmental impact assessment Environmental risk assessment Life cycle analysis

Managerial Accounting Activity based costing Environmental accounting Value chain analysis

Business strategy Design for environment Green marketing Business re-engineering Environmental strategy Business operations Activity based management Total quality management Pollution prevention Product stewardship

Perhaps the most compelling reason for practicing environmental accounting is the growing body of evidence indicating that environmental costs can make up a much larger proportion of costs than firms realize. Environmental accounting will also serve as a solid foundation for an Environmental Management System (EMS), or increase the effectiveness of an existing one. In addition, having and environmental accounting system in place allows firms to:

• Better manage environmental costs
• Better formulate business strategies
• More accurately cost products and processes
• Discover new opportunities to offset or minimize environmental costs through environmental thinking
• Include potential environmental costs in appraisal processes and investment analyses

By implementing environmental accounting, organizations will benefit from:

• Better discern opportunities to minimize compliance costs and reduce operating costs
• Reduced costs through energy and resource conservation
• Strategic decision making regarding continuing or abandoning a particular product or process
• Competitive advantage by minimizing environmental impacts through improved design of products, packages, and processes
• Compliance and due diligence requirements

C. Case Studies and Examples

1. Services@AMP, Australia:
Based on Services@AMP’s activities, the most important environmental impacts identified in the study, either directly or through AMP, are the use of electricity, water and other resources, and the generation of solid waste (general waste, kitchen waste, waste paper) and wastewater. Changes to the management accounting system and processes were trialled - aiming to improve the availability of information on the costs and quantities associated with AMP’s main environmental impacts, which was used as a catalyst to identify cost and environmental improvement measures.

2. Healthy Hospitals study, USA:
A study by the Tellus Institute, covered applications of environmental managerial accounting in nine US hospitals. Based on interviews of materials managers and environmental, health and safety staff, opportunities were explored to apply environmental managerial accounting to improve environmental performance and reduce costs. It also enabled thehospitals to switch to mercury-free alternatives and Ethylene Oxide minimization.

D. Target Sectors / Stakeholders

Businesses, companies have extensively used EMA principles in their accounting systems. Local governments have also begun to adopt EMA in their public budgets.

E. Scale of Operation

Accounting systems in individual companies, businesses, local governments, public utilities etc.

F. Links

• UN DESA - Environmental Management Accounting Initiative (EMA)
• International EMA Website
• Centre for Social and Environmental Accounting Research
• Tellus Institute