This ppt gives the info. about cost elements relating to Environment.

1. Environmental
Cost Accounting

2. Environmental Perspective
• Five core objectives for the environmental
perspectives:
– Minimize the use of raw or virgin materials
– Minimize the use of hazardous materials
– Minimize energy requirements for production
and use of the product
– Minimize the release of solid, liquid, and
gaseous residues
– Maximize opportunities to recycle

3. Environmental costs
• These are costs connected with the
actual or potential deterioration of
natural assets due to economic
activities.
• Environmental Costs can include costs to
– clean up or remediate contaminated sites,
– environmental fines,
– penalties and taxes,
– purchase of pollution prevention technologies
and
– waste management costs

4. Environmental
Accounting Disciplines
• Global Environmental Accounting (GEA)
• National Environmental Accounting (NEA)
• Corporate Environmental Accounting
(CEA)

5. Corporate
Environmental Accounting
• Further it can be sub-divided into:
– Environmental Management Accounting
– Environmental Financial Accounting
– Environmental Audit
• It is about making environment related
costs more transparent within corporate
accounting systems and reports.

6. Environmental accounting
• Environmental accounting, also called social
accounting, is a type of accounting that attempts to
measure both the social and environmental
impacts of business decisions.
• Environmental Accounting (EA) can be considered
either a subset or superset of accounting proper.
• It aims to incorporate both economic and
environmental information.
• It can operate at the company level or at the level
of the national economy

7. Environmental Cost (EC) Accounting
'A company's attitude to the
environment is likely to be seen as
a benchmark of its commitment to
innovation and good
management. Companies setting
the pace on environmental issues
will be seen as the leaders of the
corporate sector' (Lickiss, 1991).

8. Environmental Cost Accounting
The generation analysis and use
of monetarised environmentally
related information in order to
improve corporate environmental
and economic performance.

9. Classification of ECs
• These are classified in four categories:
– prevention costs
– detection costs
– Internal failure costs and
– external failure costs

10. Prevention Activities
• Evaluating and selecting suppliers
• Evaluating and selecting pollution control equipment
• Designing processes
• Designing products
• Carrying out environmental studies
• Auditing environmental risks
• Developing environmental management systems
• Recycling products
• Obtaining ISO 14001 certification

11. Detection Activities
• Auditing environmental activities
• Inspecting products and processes
• Developing environmental performance measures
• Testing for contamination
• Verifying supplier environmental performance
• Measuring contamination levels

12. Internal Failure Activities
• Operating pollution control equipment
• Treating and disposing of toxic waste
• Maintaining pollution equipment
• Licensing facilities for producing
contaminants
• Recycle scrap

13. External Failure Activities
• Cleaning up a polluted lake
• Cleaning up oil spills
• Cleaning up contaminated soil
• Settling personal injury claims (environmentally
related)Restoring land to natural state
• Losing sales due to poor environmental reputation
• Using materials and energy inefficiently
• Receiving medical care due to polluted air (S)
• Losing employment because of contamination (S)

14. Why are environmental costs important
to the management accountant?
• Identifying environmental costs associated
with individual products, services or
processes helps with correct product or
service pricing.
• Saving energy generally leads to cost
savings.
• Poor environmental behaviour can result
in fines, increased liability to
environmental taxes and damage to the
business’s reputation.

15. Environmental Footprints
• It is the impact that a business’s
activities have upon the
environment including its
resource environment and
pollution emissions.

16. Key External Environmental Impacts
• Depletion of natural resources
• Noise and aesthetic impacts
• Residual air and water emissions
• Long-term waste disposal
• Uncompensated health effects
• Change in the local quality of life (ex.
impact of tourism)

17. Energy Consumption
Vehicles Regular maintenance
Energy Bills Monitoring and understanding energy bills
can help businesses to work out how to
save costs
Heating Increasing the temperature by one degree
can increase costs by 8%.
Lighting Should be switched off in rooms and
corridors that are not being used.
Windows When heating or air conditioning is on,
windows should be kept shut to save
energy.
Other
equipment
Photocopiers and Printers should not kept
near cooling systems

18. Types of costs
• Direct or indirect
environmental costs
• Contingent or intangible
environmental costs

19. Direct or indirect
environmental costs
• Waste management
• Environmental certification and
labeling
• Legal costs and fines
• Permit fees
• Record keeping and reporting
• Environmental training

20. Contingent or intangible
environmental costs
• Uncertain future remediation
or compensation costs
• Risk by future regulatory
changes
• Product quality
• Employee health and safety
• Public/customer satisfaction

21. How to estimate
Sustainable Profits?
• Set boundaries (must be controllable in
some way)
• Establish Targets (As per Royal commission
on Environmental Pollution, reduce carbon dioxide
emissions by 60% by 2050)
• Identify Impacts
• Valuation (impacts of environmental damages)