Environmental Management Accounting Procedures and Principles

Environmental Management Accounting
Procedures and Principles
• Image enhancement;
• Better relations with authorities, reduced regulatory compliance costs;
• Better creditworthiness with banks, reduced insurance rates, good ratings by investment
brokers and agencies;
• Better public stockholder and community relations;
• Increased job motivation and satisfaction, less absenteism and worker illness.
8.3. Calculation sheet for environmental investments and projects
The calculation sheet for investments and projects can be used to calculate two alternatives
and comparing them, or to estimate resulting cost savings directly. An annual assessment of
total environmental expenditures should have been performed beforehand, in order to provide
a comparison basis. Depending on the project or investment, only some columns and rows
may be filled, but the likelihood of forgetting significant cost factors is decreased. Allocation to
the different environmental media will probably not be necessary, so the columns have been
modified to time series.
Once the total environmental costs of two alternatives have been assessed for one year, they
can be extended into time series for capital budgeting. Estimates of monetary inputs and
outputs for the first three years should be more detailed. For years 4 to 10 rough annual
estimates would be sufficient.
The determination of total annual environmental expenditure for the last business year is a
prerequisite for calculating options. If the total annual environmental costs have not been
assessed, the savings potential cannot be calculated. After the determination of the total
annual environmental costs, the calculation can be done for specific cost centres or production
processes. Calculating different options is then relatively straightforward.
When comparing investment options, it is advisable first to assess the cost of the old
equipment with the proposed scheme and then calculate the costs of the new equipment.
The so-called soft factors or less tangibles, which are rough estimates, can be added, if
necessary.
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