Environmental accounting

Environmental accounting - Transcript

Environmental Accounting
Subject Financial Accounting for Management

Environmental Accounting
The main motive of any business is to make profit by optimum utilisation of resources All the businesses are corporate citizens and are responsible for their actions towards the society and community in addition to their economic performance In our country Environmental protection and Economic Development both are of great importance However some kind of trade off is needed between the two For this purpose Environmental accounting is required to measure the environmental impact of activities by Corporate Sectors Environmental accounting is an important tool for understanding the role played by the natural environment in the economy Environmental accounting deals with the identification and reporting of environment specific cost such as liability cost and waste disposal It is accounting for any costs and benefits that arise from change to a firm s product and processes where the change also involves a change in environmental impact IUCN International Union for Conservation of nature has launched a program the Green Accounting Initiative to help its members understand how this tool can help them improve environmental management However here in India standard system of this type has not yet fully stabilised and is still evolving Types of Environmental Accounting 1 Environmental Management Accounting It deals with material and energy flow information and environmental cost information

2 Environmental Financial Accounting It deals with reporting environmental liability costs and other significant environmental costs 3 Environmental National Accounting It deals with Natural resources stocks and flows environmental costs and externality costs Scope of Environmental Accounting Environmental Accounting has a very wide scope in present times It has applications everywhere at corporate level national international level At the corporate front it needs to work as a tool to measure the economic efficiency of environmental conservation activities and the environmental efficiency of the business activities of the company as a whole Environmental Accounting basically has 2 aspects 1 Internal From Internal point of view investment made by the corporate sector for minimization of losses to environment It includes investment made into the environment saving equipment devices This type of accounting is easy as money measurement is possible 2 External From external point of view all types of loss are indirectly due to business operation activities It mainly includes a Degradation and destruction like soil erosion loss of biodiversity air pollution water pollution voice pollution problem of solid waste coastal marine pollution b Depletion of non renewable natural resources i e loss emerged due to over exploitation of non renewable natural resources like minerals water gas etc c Deforestation and Land uses This type of accounting is not easy as losses to environment cannot be measured exactly in monetary value Further it is very hard to decide that how much loss was occurred to the environment due to a particular industry For this purpose approx idea can be given or other measurement of loss like quantity of non renewable natural re sources used how much Sq meter area deforested and total area used for business purpose including residential quarters area for employees etc how much solid waste produced by the factory how much wasteful air pass through chimney in air and what types of elements are included in a standard quantity of wasteful air type and degree of noise made by the factory etc can be used

Case Maruti Udyog Ltd
Maruti Udyog Limited MUL was established in Feb 1981 through an Act of Parliament to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system Maruti is the highest volume car manufacturer in Asia outside Japan and Korea It is the one of most successful automobile company since its inception Suzuki Motor Company was chosen from seven prospective partners worldwide The objectives of MUL then were Modernization of the Indian Automobile Industry Production of fuel efficient vehicles to conserve scarce resources and save environment Production of large number of motor vehicles which was necessary for economic growth Despite there being 11 companies now in the passenger car market in India Maruti holds about 60 of the total market share They been the leaders of Indian car markets for over two decades They are sold not just in India but in many other countries as well Environmental Accounting Practices In 1993 94 Maruti Udyog Limited adopted Enviormental Accounting practices The major steps taken were as follows 1 Modification of the existing effluent treatment plant With the increase in the production capacity with every passing year the quantity of additional effluents generated was increasing Maruti Udyog Pvt ltd then completely modified the effluent treatment plant to handle the quantity at hand 2 Regular Monitoring They made sure that all the data on non methane hydrocarbons in Paint Shop and Engine Testing shop ambient air quality stack emissions and effluents was regularly monitored and the parameters were maintained well within prescribed limits 3 Tree Plantation Drives They carried out huge plantation drives and developed green belt around gas turbine and R D areas