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In: Accounting

Environmental Management Accounting and measurement of physical flows with examples

Environmental Management Accounting and measurement of physical flows with examples

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Expert Solution

Environmental Management Accounting(EMA):

Environmental Management Accounting is an aspect of accounting that focuses on internal decision making especially for environmental management activities. It is a management accounting tool. It refers to the identification, collection, analysis and use of two types of information. The first is physical information like water, energy, materials and other resources used. The second is monetary information like related costs etc.

EMA was developed since most of the businesses have environmental impact. Almost all environmental impacts also have business costs, such as consuming raw materials, using utilities such as water and energy, and generating waste. This tool helps in identifying the activities that have highest environmental cost and impact, which should be restricted if the impact on environment is adverse. It helps the managers to set goals and strategies to manage these activities.

Measurement of physical flows with examples:

Under this an organization track all physical inputs and outputs and ensure that no significant amounts of energy, water or other materials are unaccounted for. These are also the environmental performance indicators:

  • Material Inputs: Materials Inputs are any energy, water or other materials that enter an organization. Few examples are Raw and Auxiliary Materials, Merchandise, Packaging Materials, Water etc.
  • Product Outputs: These are the Products and includes byproducts which result from the business process. Example Sugar, molasses for a Sugar manufacturing industry.
  • Non-Product Outputs (Waste and Emissions) : It is the waste products that result from manufacturing. The important factor here to note is how these are treated and the impact on the environment. Some examples are Solid Waste, Air Emissions, Hazardous waste etc.

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