Environmental Management Accounting: A Business Perspective on the Policies, Analyses, and Benefits of Its Implementation

Environmental Management Accounting: A Business Perspective on the Policies, Analyses, and Benefits of Its Implementation

Sorinel Căpușneanu (Titu Maiorescu University, Romania), Dan Ioan Topor (1 Decembrie 1918 University, Romania), Dana Maria (Oprea) Constantin (University of Bucharest, Romania), Alexandru Lucian Manole (Artifex University, Romania) and Mihaela Stefan Hint (1 Decembrie 1918 University, Romania)
Copyright: © 2020 |Pages: 25
DOI: 10.4018/978-1-7998-0178-8.ch002


This chapter provides a business perspective on the policies and benefits provided by implementing environmental managerial accounting in various areas of activity. The main objectives of this chapter are to present the evolution of the EMA and its policies, business analyses carried out by specialists, including the benefits of implementing the EMA. All of these objectives are transposed into a case study based on the ABC method performed at an energy company. The implementation steps specific to the ABC method are presented by establishing the list of main activities, cost drivers, allocation of indirect costs, and determining unit costs. The theoretical aspects presented the basic national and international studies in the literature. The case study is based on data obtained from the energy company. The chapter ends with the authors' conclusions on the benefits of implementing EMA/ABC. This chapter contributes to the expansion of the theoretical and empirical framework of EMA and the methods used to implement it within various business companies.
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The adoption by companies of cleaner or pollution prevention processes was due to: (1) internal pressures needed to use cleaner technologies, thus avoiding the costs of waste management, occupying a superior position on the national or international market; and (2) incentives to achieve corporate environmental performance that are being reviewed by investors, financial advisors, regulators and other stakeholders. In this respect, companies examine how external managerial reporting meets national and external social requirements and concerns. Environmental Management Accounting (EMA) is an essential tool in establishing an effective environmental management system. Considered a fundamental managerial tool, the EMA helps evaluate environmental efficiency alongside eco-labeling or life cycle analysis. Wide implementation and deployment of the EMA would have a major positive impact on companies in certain industries in terms of attitude towards environmental protection. If companies realized that waste treatment and disposal is less expensive than waste production, then companies would commit themselves to reducing costs by minimizing waste. This would motivate companies to strive to continuously improve their efficiency and profit levels and not just to comply with environmental regulations. This chapter aims at discussing the various conceptual approaches of the EMA, the evolution and policies to promote it on national and international level. Also, EMA implementation factors and EMA tools used for cost analysis and performance management will be analyzed. In addition to these issues, the advantages and disadvantages of EMA implementation will be addressed and analyzed through a case study of an energy company using the ABC method.

The main objectives of this chapter are: (1) the presentation of EMA's evolution and promotion policies, (2) the analysis of EMA implementation factors and environmental reporting; (3) the presentation of EMA tools for cost analysis, investment appraisal and performance management; (4) analyzing the benefits and barriers of EMA implementation; and (5) presenting a case study on the implementation of EMA to an electric industry company using the ABC method.

Key Terms in this Chapter

Activity-Based Costing (ABC): An accounting method that identifies the costs of (indirect) activities and then allocates these costs to the products. Allocation of product costs to products is done through cost drivers.

Environmental Management System (EMS): A set of processes and practices that allow an organization to reduce its impact on the environment and increase its operational efficiency.

Material Flow Cost Accounting (MFCA): A tool used by manufacturing companies to improve the efficiency of their materials in order to save energy and costs by avoiding material losses (waste).

Environemntal Management Accounting (EMA): It consists in identifying, collecting, analyzing, and using physical information (energy, water, and materials, including waste and energy, flows, and rates) and monetary information (environmental costs, earnings, and savings) for internal decision making.

Electric and Electronics Equipments (EEE): In order to place electrical and electronic equipment (EEE) on the market, manufacturers are required to register with the National Manufacturer's National Registry of National Environmental Protection Agency, receiving a registration number to be communicated to them by all commercial networks through which they are sold EEE.

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