Environmental management accounting

Question 1

Role of a management accountant

Answer 1

M.A plays a central role and this involves

1. Identification of costs - staff cannot make saving s if they don’t know how much they are spending.
   Info system will be needed to identify these costs. some environmental costa are hidden within conventional costs
2. categorisation of costs - it is useful to categorise between
   - conventional costs - Energy, materials, labour. environmental costs is usually hidden within conventional costs
   - contingent costs - costs not yet incurred but can be significant. e.g. restoration or regulatory costs.
   - Image and reputational costs - cos of PR or lost sale due to poor practices
3. Set targets for environmental costs KPI - Once we understand the costs, we can set targets and deliver some aims.
4. Budget setting
   Following from above, setting an annual budget is useful for control purposes.
5. Pricing - The price should include an allowance for environmental costs

Question 2

Accounting techniques in EMA

Answer 2

ABC
If the accountant can identify environmentally harmful drivers and the related costs, then these can be used to produce ABB and targets for environmental costs.
Having a cost per driver for harmful activity.

Flow cost accounting
waste is not costed
This involves stripping the amount that relates to waste so orgs can take better decisions.

Lifecycle costing.
Traditional management accounting only covers growth, peak, decline
LCC includes Research and Decline period
Lifecycle costing suggests all phases should be controlled

Benefits
1. The full costs of a product identified earlier
2. Better control of research and decline phases
3. if decline period in particular includes environmental costs, then these can be recovered in price easily provided they are estimated

Question 3

what is sustainability

Answer 3

Tripple bottom line
Performance should be considered and measured widely
1. Profit - economic, profit, jobs
2. Planet - plastic waste, natural resources, land, flooding, natural beauty.
3. People - stakeholders

what is the impact on Performance and PMS

PMS
does budgeting approach cover sustainability
how can it be measured using KPI’s or has it met KPI targets
are staff rewarded for achieving sustainability targets.