Question

Question:
Sustainability (contemporary issues):

1. Explain Environmental Management Accounting (EMA) and measurement of physical flows (with examples)
2. Explain life cycle analysis/‘cradle to grave’ with reference to case studies
3. Benefits of EMA

Answer 1

1. Environmental Management Accounting (EMA): It is the way of accounting for environmental elements such as water, energy, materials which help in the formation of the product and this accounting helps in reducing the wastage of these resources and properly account for them. This way it also helps in proper internal control of the decisions made by the managers.

Managers sometimes mislead or misrepresent the enviromental elements attached to their products and can cause a tremendous effect to the environment. So the Environmental Management Accounting helps to reduce the negative impact of the products on the environment and also helping them in their most effective way of production.

Measurement of Physical Flows: Three types of physical flows are established i.e

i. Inputs which are taken from the environment into the economy. (Eg. Water - Water accounts are made to this)

ii. Goods and Services that comes as by-products from the production process.(Eg. Any by-product)

iii. Finally the Residuals which comes out after the production process which are to be emitted outside the economy.(Eg. Any waste gas or say any kind of liquid or solid materials formed as residual or say waste substance)

2. life cycle analysis/‘cradle to grave’: The name itself possess the meaning as 'Cradle' means the period of acquiring raw materials to 'Grave' means till the disposition of it(as waste) and managing the life cycle of it(product) and notifying the affects of it to the enviroment and taking care or reducing the affects of it to the environment. This entire analysis from its cradle to grave it called Life cycle analysis.

Case study: Every case study is related to the following points:

1. To determine a goal and then it's scope.

2. Inventory analysis

3. Impact assessment.

4. The interpretation of the product.

5. Dispatching or management of waste of it.

For example, Bloomberg manufactured keyboard and monitors which used the previous reports of those products environmental impact and started designing their new ways of solving them. This time they used Cradle-to-Grave analysis rather than the old ones which was used in 2010 and 2011 and started to grasp each and every step in their process of manufacturing. This resulted in reducing their energy consumption to 44% of CO₂e reduction which was set as a standard since then. So this kind of things act as plus points of using Cradle-to-Grave analysis

3. Benefits of EMA:

i. It helps to analyze the enviromental performance of the organization.

ii. It helps in optimal use of resources and gets the best out of it.

iii. It helps in analyzing the steps of reducing the energy consumption, efficient use of raw materials etc.

iv. It helps in paving a greener corporate culture.

v. It helps to quantify corporate expenditure for better performance and also for benchmarking them.