Update: This article was last updated on 8th Jan 2019 to reflect the accuracy and up-to-date information on the page.
With the advancement of technology, various software and their hosting methods have evolved over the years. Although the technology has optimized the performance of CPAs and streamlined the accounting process, it has impacted the environment in an unfriendly way.
Hence, to mitigate the harmful impact of technology on the environment, more and more emphasis is being laid on the environment surrounding us. Organizations have now started recognizing its importance and formulating steps to promote green and environmental-friendly causes.
Green Accounting is one such term that maps the environmental factors to the business’ plans so that the environment is not ignored in any way.
What is Green Accounting?
Green accounting or environmental accounting demonstrates an organization’s commitment towards the key aspects of our surroundings such as the planet, people, and profitability.
Environmental accounting practices are mainly implemented by companies to include the environmental costs in the financial strategy.
It incorporates the environmental assets and resources into the corporate accounts. It measures the social, environmental and economic impact of business. With the implementation of Green Accounting, the corporate sector becomes aware of the environmental parameters and inculcate the costs in their budget.
Types of Green Accounting
Below are three different types of Green Accounting:
1. Environmental Management Accounting (EMA)
This type of green accounting incorporates both the environmental and economic information by identifying the resource usage and the expenses involved in a company’s economic impact on the environment.
EMA defines the approach that a business is expected to follow in order to analyze the environmental factors and manage the workflow of the organization accordingly.
2. Environmental Financial Accounting (EFA)
As the name suggests, this type of accounting deals with the financial aspects of the business with respect to the environment. This type of accounting is concerned with accounting for environmental transactions which have an impact or are going to impact the financial performance of an organization. The financial analysts responsible for Environmental Financial Accounting analyze the financial risks as well as profits with respect to the environmental factors specific to the business.
3. Environmental National Accounting
This type of accounting involves national level accounting with a focus on green costs and natural resources. With Environmental National Accounting, the environmental aspects related to a nation is integrated with the National Accounts (NA).
The infographic below demonstrates the organizations’ commitment to people, planet, and profitability through Green accounting.
How does it work?
In the private sector, green accountants are responsible for guiding the businesses depending on the effect that various decisions in an organization may cause to the environment.
Here are some of the objectives of environmental accounting:
1. To connect physical resources financially with environmental accounts
2. To evaluate environmental benefits and costs
3. To categorize and separate environmental costs
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