2 The emergence of environmental accounting management 3 The purpose of environmental information management 4 The framework of environmental accounting. As a result, the relationship between environmental costs and environmental information management costs has changed.
Poorly co-ordinated collection of environmental data
A fourth explanation for the current mostly rudimentary management of environmental information may be the high fixed costs of establishing information management systems. Typically, when environmental information management begins, various employees throughout the company will make small adjustments to existing systems.
Questions
Environmental information as purpose-oriented knowledge
- Signals, data and information
Only data related to a desired goal and highly likely to improve decision quality (i.e., goal-directed knowledge) are valuable. In practice, however, the management (i.e. the creation and analysis) of targeted knowledge faces many problems, as explained below. In order to clarify the topic for discussion in this text, the basic and widely shared pragmatic viewpoint of Wittmann Chambers (1966), who viewed information processing as the purposeful and abstract collection, arrangement, aggregation and transformation of singular signs (p.162 ), and Schneider (1981) is assumed: that is, information is purposeful data.
More specifically, to be purposeful and beneficial, gathering information must create value. Thus, the collection, analysis and communication of data is only beneficial if the purpose is to create specific values: that is, to achieve desired states and goals (Keeney 1996). The critical test of any accounting system is whether it produces desirable, purposeful behavior on the part of the people who receive the information provided. Based on these fundamental, often neglected, aspects of decision-making, this book discusses the purpose-oriented accounting and management of environmental information.
Necessary objective
Therefore, this book focuses on the third level of theory development, namely the characteristics and types of quantitative data and data management systems that are tailored to specific management purposes. Only the orientation of data towards a specific purpose creates information and thus a specific value for the recipients (see also Keeney, 1996). From this pragmatically charged focus, on the deliberate acquisition and processing of information, a chosen course of action emerges as various alternatives are eliminated, 'but at all points the evaluations of actions in terms of the actor's purposes determine the outcome of the process . ' (Kamers 1966: 54).
Sustainable development
The definitions of sustainable growth and sustainable development are not entirely consistent with the biological approach based on the capacity of the Earth or specific ecosystems to sustain life (see, for example, Allenby and Fullerton 1992; Daly 1992). Sustainable growth and sustainable development describe processes that help the movement towards the desired situation of sustainability and a sustainable society. The terms sustainable development and sustainable society include socio-political aspects, whereas sustainability is derived from a natural science concept.
According to the World Business Council on Sustainable Development (WBCSD), sustainable development involves the simultaneous pursuit of economic prosperity, environmental quality and social equity (Elkington 1999:18). Sustainable development is gradually being integrated into government policies that form the background for business activities. The United Nations has its Commission on Sustainable Development (UNCSD) and the United States President's Council on Sustainable Development (PCSD1996).
Corporate eco-efficiency
If inputs and outputs are measured in financial terms, efficiency is commonly referred to as profitability or financial efficiency. Typical measures of profitability include contribution margin, return on sales, economic value added and return on equity on assets employed. Product ecological efficiency is a measure of the relationship between the delivery of a product unit and the environmental impact created over all or part of the product's life cycle. Business leaders tend to illustrate environmental improvements by communicating their overall product efficiency or a portion of it (eg, the number of cars produced per unit of energy consumed).
The efficiency of an ecological function is therefore defined as the ratio between the provision of the function and the associated added impact on the environment. Environmental interest groups often prefer to measure a product's environmental record in terms of its overall operational efficiency (eg the efficiency of a car's ecological function in transporting a person a certain distance compared to the efficiency of a bicycle, public transport, etc.). Both measures of ecological efficiency are useful, but their relevance depends on the purpose of the investigation. Both eco-efficiency ratios can be applied to different levels of aggregation, such as product unit, strategic business unit, or total company sales.
The relation between sustainable development and eco-efficiency
The same argument applies to "strong" economically sustainable development, which must be above the horizontal line through point 0. Weak sustainability allows development above the line of ecological efficiency. In summary, if we consider only two dimensions of sustainable development (environmental and economic performance without social performance), the development of eco-efficiency can distinguish between, for example, a strong sustainable improvement of eco-efficiency (arrow A) and a weak sustainable improvement of eco-efficiency (arrows B and C). Focusing on a strong sustainable improvement of corporate eco-performance can be seen as a mutually beneficial 'no-regret strategy' for corporate environmental protection, because the actions taken result in improved economic and environmental performance. Weak improvements in ecological performance mean either an improvement in economic performance that is confused with lower environmental performance, or an improvement in environmental performance that is confused with lower economic performance.
Enhancing corporate sustainability and eco-efficiency as the purpose of environmental accounting
The value of environmental information management can be measured by any increase in eco-efficiency, and managers can be held accountable for their results by comparing actual and expected eco-efficiency for any period.
Further goals of environmental accounting
Information requirements to operationalise corporate sustainability and eco-efficiency
Environmental data management will only improve eco-efficiency if it provides additional knowledge about the causes of environmental problems. Therefore, operationalization is only possible if information is related to the main activities that influence the eco-efficiency of companies. Finally, eco-efficiency-oriented information must be adapted to the interests of its addressees, as new information systems impose costs on both providers and users of information. This means that data collection, analysis and communication must be focused to best meet the demands of key stakeholders.
A consequence of this requirement is that it must be possible to choose different levels for aggregating eco-efficiency-oriented information (box 3.2). Since environmental information only becomes relevant in a company if the expected costs of its creation are lower than the potential benefits, the costs of managing eco-efficiency-oriented knowledge must be kept as low as possible. Define the two main environmental goals proposed for the management of companies: sustainable development and eco-efficiency.
The structural framework
- Two categories of environmental accounting
- Environmentally differentiated conventional accounting
- Ecological accounting
- Towards the integration of economic and environmental information
The dark gray shaded areas in the conventional accounting category of Table 4.1 are the environmentally differentiated conventional accounting systems. As part of conventional accounting, they measure the environmentally induced impacts on the company in Table 4.1 The framework of environmental accounting: accounting systems and measures Stakeholders. examples) Management Shareholders Tax Agency Creditors Ecological rating agencies Environmental Protection Agency, etc. As pointed out above, various internal and external stakeholders are interested in environmental issues. To be useful, conventional accounting must therefore incorporate the financial impact of environmental issues and must also be expanded to include a category of ecological accounting systems (shaded in light gray in Table 4.1).
Internal ecological accounting systems are designed to collect information, expressed in physical units, about ecological systems for internal use by management. Ecological accounting systems are relatively new and have only recently become important information tools for many stakeholders. Since environmentally differentiated conventional accounting systems and ecological accounting systems process information triggered by environmental issues, they - when taken together - constitute a company's environmental accounting system.
Stakeholders influencing the agenda of environmental accounting
Possible reasons for the development of environmental accounting include the need to measure the financial impacts caused by the environment or the ecological damage caused and the need to provide a means of developing closer relations between organizations and society, transferring the power of knowledge to society and increasing transparency. of organizations. However, it is important to note that information from environmental accounting by itself is insufficient for environmental management and it must be included in the wider context of environmental management. Only this ensures that the information collected in the environmental accounting system is used efficiently, effectively and purposefully to improve the company's environmental performance.
What is the difference between management accounting and the other two types of conventional accounting—financial accounting and other accounting systems. What is the difference between internal ecological accounting and the other two types of ecological accounting—external ecological accounting and other ecological accounting. Provide one example of a question addressed by each of the three 'environmentally differentiated conventional accounting' systems.
However, data on the economic effects of environmental issues have so far been often very poorly collected by firms (see e.g. Bennett and James 1996; Williams and Phillips 1994), although from a financial perspective, environmentally induced economic effects for management (see e.g. AAFEU 1994; Ditz et al. 1995; Fichter et al. 1997). This raises the question of why management did not place greater emphasis on the economic aspects of environmental issues. The calculation of opportunity costs of neglected environmental protection is carried out later, using the example in section 6.5.3. To support decision-making about environmental protection, financial impacts must be explicitly included as separate items in management and financial accounting.
After concrete examples, Chapter 6, on environmental management accounting, concludes with a discussion of the balanced scorecard as a newer management information tool that is strongly linked to strategic management decision-making and future business development (Section 6.6). First, we present a discussion of the role of the main stakeholders that influence financial accounting (Section 7.1). Accounting standards are one of the most important outcomes of interest group lobbying; a brief review of the underlying assumptions and conventions behind international standards for financial accounting and reporting is therefore given.
