Environmental and Sustainability Accounting

Question 1

Elkington (1994) Business and the Environment

Answer 1

• Anti industry, anti-profit and anti-growth orientation

- Businesses must play a central role in achieving the goals of sustainable development strategies

Question 2

Sustainable definition

Answer 2

‘meet the needs of the present generations without compromising the ability of future generations to meet their own needs’

Question 3

Accounting practices used for environmental pupose

Answer 3

Capital investment assessment methods
Budgets
Performance measures
Incentive Systems
ABC
Balanced Scorecard 
Quality Costing
Life Cycle Costing

Question 4

Capital Investment Assessment methods

Answer 4

Environmental Costs and revenues can be considered when working out the revenues can be considered when working out the revenues from investments

Question 5

Budgets

Answer 5

Targets for environmental costs and revenues can be set

Question 6

Performance measures

Answer 6

Appropriate environmental performance indicators can be established to control environmental performance

Question 7

Incentive Systems

Answer 7

Environmental performance targets can be connected to promotions and/or bonus system.

Question 8

ABC

Answer 8

Can be used to identify environmental costs and charge it to products/service based on the activities demanded by these products/service and which caused the environmental costs to occur.

Question 9

Balanced Scorecard

Answer 9

Can be extended to include an environmental dimension

Question 10

Quality Costing

Answer 10

Differentiates between: failure cost , monitoring costs, prevention costs.

(Not so much)

Question 11

Life Cycle Costing:

Answer 11

Considers all product/service cost across its whole life cycle. It accounts for BOTH operating environmental costs (e.g. energy usage, waste disposal, compliance cost) and future contingent environmental costs.

Question 12

Lamberton (2005) Sustainability Accounting Practices

Answer 12

Sustainability Cost, Natural inventory accounting, Full cost accounting, Input Output analysis.

Question 13

Sustainability Cost

Answer 13

Amount of money an organisation would have to spend at the end of an accounting period in order to place the biosphere back into the position it was in at the start of the accounting period.

Applying an accounting principle to natural rather than financial capital.

When sustainable cost > accounting profit, unsustainability is measured in monetary terms.

Question 14

Full cost Accounting

Answer 14

Attempts to capture the total cost resulting from an organisations economic activity including social & environmental costs attempting to value these impacts in financial terms.

not necessarily the same as the sustainable cost method

It attempts to identify the total cost of an organisation’s economic activities including social and environmental costs.

Question 15

Natural Capital Inventory Accounting

Answer 15

• Is to record the stock of natural capital over time where a change in the stock level indicates to the quality fo the stock
• Therefore, NCIA can be non-financial
• Examples of Natural Capital: Critical natural capital, Non-renewable/non-substitutable/substitutable/Renewable.

Question 16

Input-Output Analysis

Answer 16

• Accounts for the physical flow of materials & energy inputs & product & waste outputs in physical units.
• Aims to measure all materials inputs into the process & output of finished goods, emissions, recycled materials & waste for disposal

Question 17

Bennet and James (1997) Benefits from EMA and Sustainability Accounting

Answer 17

1) Reveal the impact of environmental related activities on balance sheets and income statements
2) Identify opportunities for cost reduction and improvements.
3) Help to prioritise environmental actions
4) Better product pricing decisions
5) Assess the sustainability of a company’s activities.

Question 18

Triple Bottom Line

Answer 18

John Elkington (1994) first coined the phrase

Economic, Social and Environmental

Question 19

Advantages of TBL

Answer 19

1) it encourages management to focus on a wider range of stakeholders
2) TBL assumes that by improving the amount of information reported about the organisation’s impact on society and environment, organisational changes towards sustainable behaviour will occur.

Question 20

Limitations of TBL

Answer 20

• The 3 separate accounts can not easily be added up to evaluate performance
• This form of reporting is not obligatory and this raises questions regarding quality of information reported.
• Companies are less likely to collect and report sufficient information on the social and environmental aspects as they do on the economic aspect.

Question 21

Global Reporting Initiative

Answer 21

Developed by US non profit organisations in 1997

it is a long term, multi stakeholder, globally applicable sustainable reporting guidelines.

GRI assumes that by improving the quality of information reported about the organisations impact on society and environment, organisation change toward sustainable behaviour will occur.

Question 22

GRI Dimensions

Answer 22

Economic, Environmental, Social

Question 23

Implementation Challenges of the GRI

Answer 23

Voluntary versus statutory compliance

The Auditing of sustainability reports by qualified and independent third parties

The cost of producing sustainability accounting information

GRI did not attempt to define sustainability and so doubt exists regarding its ability to promote sustainability among companies.

Question 24

Circular Economy

Answer 24

Involves the decoupling economic growth from the extraction and consumption of scarce resources with negative footprints and making existing resources productive for as long as possible.

1) Recycle more and better
2) Rent goods
3) Lengthen the longevity of products

Question 25

The role of Financial and Management Accountants (Medley 1997)

Answer 25

Financial Accountants - To understand environmental assets, liabilities and contingencies and to report them accurately.

Management Accountants

• to identify and manage environmental costs from both and operation and a product perspective.
• to develop reliable measures for environmental costs
• to report environmental impacts to managers, directors and the broad community.
• to identify, understand and report the costs of non-compliance.