The Role of Environmental Management Accounting as a Tool to Calculate Environmental Costs and Identify their Impact on a Company’s Environmental Performance

Authors

  • Mishelle Doorasamy Durban university of technology 7 Ritson Road Durban 4000
  • HariLall Garbharran

Keywords:

Environmental management accounting (EMA), sustainable targets, profitability, efficiency, environmental performance, conventional costing systems (CCS)

Abstract

The aim of this study was to investigate the impact of using Environmental Management Accounting (EMA) as an environmental management tool instead of convention costing systems (CCS) to manage environmental costs by identifying potential cost, savings, hence improving both environmental and financial performance through enhanced accounting.  EMA is an important management tool for businesses to adopt whilst responding to environmental challenges. However managers are still reluctant to change from conventional costing systems to an EMA system.

EMA traces environmental costs directly to the processes and products that are responsible for those costs, thereby highlighting problem areas that need to be prioritized when considering the adoption of cleaner production. Conventional costing systems reflected incorrect values as environmental costs resulting in poor decision making by managers. Hence, many companies were unable to reach their sustainability targets. This ultimately impacted on company profitability. This paper is based on a case study of a paper manufacturing company in a developing country. The scope of this research focused only on the steam generation process.

The results of the study show that the environmental costs indicated in the company’s financial documentation were incorrect as environmental costs were previously reflected as production costs. Significant losses due to technological inefficiency and possible savings were brought to the attention of management.

Author Biography

Mishelle Doorasamy, Durban university of technology 7 Ritson Road Durban 4000

Department of Financial Accounting

Lecturer

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Published

2015-02-15

How to Cite

Doorasamy, M., & Garbharran, H. (2015). The Role of Environmental Management Accounting as a Tool to Calculate Environmental Costs and Identify their Impact on a Company’s Environmental Performance. Asian Journal of Business and Management, 3(1). Retrieved from https://ajouronline.com/index.php/AJBM/article/view/2180