Accounting for our environment
by Geraldine Hinter
Australian companies need to be accountable for their environmental impacts and budget to spend money to make the environment work for them.
That is the message from Professor of Accounting and Director of UniSA’s Centre for Accounting Governance and Sustainability, Roger Burritt.
"While accountants are better known for assessing financial performance, environmental accounting is focused strongly on looking at non-financial information and combining physical indicators of performance with financial accounting in order to assess eco-efficiency, eco-effectiveness and eco-equity of corporate activities," Prof Burritt said.
"In recent years companies have begun to take the environment
seriously because of such issues as global warming, water shortages
and renewable energy. This has led to an increasing demand for
people with the ability to construct information systems to help
organisations manage environmental issues,"
he said.
"For example, many organisations have no knowledge of their carbon dioxide emissions, something which will be critical if they are to engage in the selling or buying of carbon credits when a national market is established in Australia."
Prof Burritt has been conducting research in the area of environmental accounting for the last two decades to determine what type of information is of use to people making investment and operational decisions that have impacts on the environment.
He has developed a comprehensive framework for environmental accounting for managers that takes physical environmental impacts as well as monetary revenues, costs and liabilities into account in decision making, and can be applied to help organisations in a range of decision settings.
"The environmental accounting framework provides a foundation for any given decision. Using contemporary information in the system and new information previously not collected, predictions can be made about corporate environmental impacts, costs and savings in the future," Prof Burritt said.
"If, for example, we can determine the greenhouse gas emissions of an organisation, we can calculate what the costs are to an organisation to avoid them, or what the benefits will be in terms of carbon credits or enhanced reputation in the eyes of consumers, employees, regulators and other stakeholders. The costs are often far higher than anticipated, while the environmental and financial benefits can be substantial.
"The framework has been developed with the support of the United Nations’ Division for Sustainable Development based in New York and used in the work of the International Federation of Accountants in international guidance for organisations about environmental management accounting.
"Some countries such as Germany and Japan already consider building environmental costs into production from cradle to grave, and some products in Europe such as automobiles and computers address end of life impacts in their production cycles.
"In Australia we need to get more people thinking not only about the financial aspects of environmental decisions but also about corporate commitment to developing an environmental policy, a system for managing impacts of the environment on the company, and impacts of the company on the environment.
"Environmental management accounting provides a necessary foundation for such thinking as a basis for action."
While the relationship between business and the environment is Prof Burritt’s personal research interest, the Centre for Accounting Governance and Sustainability has a much broader focus that includes research in mainstream accounting as well as specific research aimed at improving accountability of organisations to society, and helping them to move towards sustainability in practical ways.
Researchers at this research centre are involved in the production of three journals with an international reach, Accounting, Auditing and Accountability Journal; Accounting Forum and the Asia Pacific Centre for Environmental Accountability Journal.