Does Corporate Environmental Accounting Make Business Sense?

Businesses do not operate in a vacuum. They are subject to legal requirements and industry practices; they require resources to manufacture products and/or render services; they operate in an environment from which they draw their resources and which may be affected by their activities; and they operate in a community from which they draw their work force and which may also be impacted by their activities. Corporate environmental accounting is one of the tools that can be used by businesses to address these challenges. For an organisation to apply environmental accounting it must make business sense. Implementing environmental accounting may require resources. Therefore, a business must weigh up the benefits and costs thereof.

This paper discusses the four elements of corporate environmental accounting, i.e. environmental management accounting, environmental financial accounting, environmental reporting and environmental financial auditing. The potential benefits that can be derived from each of these elements are discussed. Many benefits can be reaped from implementing different elements of corporate environmental accounting. Some benefits enhance internal efficiency and competitive advantage, whilst others enhance legitimisation and stakeholder relations.

This paper also argues that for the full benefits of corporate environmental accounting to be reaped the elements of environmental accounting should be integrated with each other and in the day-to-day business of an organisation. The linkages and interactions among the elements of corporate environmental accounting as well as the linkages between corporate environmental accounting and the broader business processes of the company are discussed based on a diagrammatic model.