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Management accountants have a significant contribution to make towards improving the environmental performance of industry. This contribution may be just an extension of existing practice to include, for example, environmental costs in short-term decisions, environmental liabilities, performance appraisal and capital investment screening. Or the contribution may involve the application of management accounting skills, knowledge and experience in a broad and significant new area: this is the challenge to provide company information and control systems that integrate economic and environmental criteria--what can be called environmental management accounting (EMA).
This article answers three questions about environmental management accounting: what it is, why it is needed and who is doing it. Eight examples of company applications for the new profession are also given.
What is environmental management accounting?
Requirements of the profession may be listed as follows:
1 Environmental management accounting is concerned with the provision and interpretation of information which assists management in planning, controlling, decision-making and appraising performance.
2 The key feature of the information is that it must be relevant for the intended purpose.
3 The information supplied by the environmental management accountant is future-oriented and must reflect environmental and economic realities unfettered by accounting conventions.
4 The environmental management accountant must be aware of the behavioural consequences of his actions and information. Goal congruence must be encouraged.
5 Environmental management accounting systems should be designed in accordance with system principles and are improved by the judicious use of appropriate statistical and operational research techniques.
6 Uncertainty exists in all business situations and the information supplied by the environmental management accountant must reflect the uncertainties and variabilities of the situation.
To these six points may be added the general observations that environmental management accounting provides a service to management that is rooted in the internal functions of the firm but is outwardlooking where appropriate. A basic goal of the profession is to optimise the efficiency of a company's resource conversion processes.
In many aspects, EMA is a straightforward development of management accountancy. Indeed, the six requirements of EMA listed above have been adapted from an introductory text to management accountancy with only the words in italics added to effect the conversion, the unadulterated six-point requirements of management accountancy being taken from the standard text Management...