Industrialization, urbanisation, and globalisation, all of which are essential to the contemporary industrialised economy, have come at a high cost in terms of environmental degradation. Over the years, the influence on the environment due to the adoption of these practices has been understood and accepted by many. However, it is also very apparent that these practices are necessary in order to raise the living standards of citizens in any nation whether developed or developing or underdeveloped. Due to increased public knowledge of environmental hazards, customers are now more openly supporting environmentally beneficial actions in the present era. The notion of environmental accounting is one of the most crucial aspects to consider in order to assure that businesses, governments, and society as a whole are taking proactive actions to protect the environment and incorporate it into their business models. This article delves into the notion of environmental accounting, its core approach, concepts, and present situation in India.
Top1. Introduction
Environmental accounting was developed first in a number of European nations. Norway was one of the first countries to develop environmental accounting practices. Environmental accounting is the discipline of accounting that analyses and reports a country's economic impact on the environment or the cost of an organization's activities to the environment. Environmental accounting is the act of identifying, quantifying, and assigning environmental information costs, as well as incorporating these costs into management decisions and disseminating information to organizational stakeholders. Environmental accounting is a branch of accounting that analyses, measures, and communicates the costs of a company's environmental economic consequences.
As a result of increased environmental awareness and a crusade for long-term economic and social development, businesses throughout the world have become more conscious of the importance of environmental stewardship. In recent years, this has captivated the interest of the public at large, business organisations, and global institutions even more. In the 1990s, it became a prominent subject being addressed by nations and corporations all over the world, with varying levels of attention emanating from both within and outside of the business community. (Okoye et al., 2004)
The need for environmental accounting is founded on the principle that it will not only assist shareholders in making economic judgments regarding a firm's sustainability capabilities, but will also improve the firm's performance, strengthen its competitiveness, and promote protracted success and a good reputation, which is even a main issue for current and prospective investors. (Anazonwu et al., 2018)
For a better understanding of how nature affects the economy, green accounting is a valuable resource. It is possible to have diverse aims and opinions when it comes to environmental accounting. For example, the conservation of natural assets and the change in well-being as a result of environmental effects are simply two examples of what environmental accounting is all about (Serafy, S., 1997). Accordingly, environmental accounting may be described as a way to communicate an organization's social and environmental repercussions to relevant groups in society as well as society as a whole (Deegan, 2002).
The Kyoto Protocol is the best-known and most widely implemented instance of environmental accounting in the world. As part of the Kyoto Protocol, developed and industrialized nations signed a legally binding accord to eliminate six greenhouse emissions that are viewed as contributing to global warming. It is an example of global environmental accounting in action, as exemplified by the Kyoto Protocol. The Kyoto Protocol analyses changes in carbon emissions by referring to measurements defined by the United Nations. As a result of these collaborations, national governments bear responsibility for establishing and implementing legislation that facilitates compliance with greenhouse gas emission regulations, such as those for automobiles. (Arowoshegbe et al., 2016)
Enterprises that are subject to Kyoto Protocol inspection have embraced the active adoption of environmental accounting, not just to establish systems and implement decision-making that assures that companies remain solvent during a cycle of changes in manufacturing and air quality monitoring, which nearly invariably result in an increase in production costs. Sustainable environmental accounting systems were used by countries that decided to participate proactively in the Protocol.
Numerous significant firms, including Formosa, the British Petroleum Company, and Volkswagen's largest automotive producers, have gone belly up as a result of EA information disclosure fraud (Nguyen, 2019). It is a cautionary tale for companies to raise their level of environmental protection awareness. In recent years, there has been a growing concern regarding organizations' responsibility to report environmental data. Companies are expected to share information about EA in their reports in order to improve their performance and reputation. The firm is under pressure to improve reporting accountability as a result of investor and consumer requests, as well as European Union (EU) requirements (Spasic & Stojanovic, 2013).