Environmental Accounting Systems

Arturo A. Keller
Bren School of Environmental Science & Management University of California, Santa Barbara

ESM 595F

Environmental Accounting Systems

You cant manage what you dont see - and with todays managerial accounting systems, managers dont see most environmental costs, from R. Todd (Greening of Industrial Ecosystems, 1994)
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Objective of Env. Account. System

Record

& monitor flow and disposition of all inputs

waste disposal reprocessing recycling

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Objective of Env. Account. System

Processing

costs involving environmental impact

pretreatment emissions control costs
air emissions water treatment solids reduction

packaging disposal/return costs

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Hidden costs
Site

remediation costs Product-related legal expenses Regulatory costs PR expenses Opportunity cost of clean technologies not adopted DfE, PP engineering costs
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Institutional Impediments
Traditional accounting doesnt capture engineering & accounting data needed for decision making Data collected is aggregated in wrong format, losing environmental context Line managers not responsible for most environmental costs

Bren School of Environmental Science & Management

How to present the information?

Corporate

level Facility level Product line By department or section

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To Whom it May Concern...

Internal

accounting Financial reporting Regulatory agencies Others ?

Bren School students doing GPs?
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Managerial Information
Detailed

cost breakdown

Joint costs expense of tracking costs on individual product line basis technical difficulties of measuring productspecific material flows and emissions negative incentive to collect detailed info
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Unprofitable products?
Internal

+ External Costs > Price Competitive market Market leader Large portion of current revenue
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Dont Look, Dont Tell...

Confidentiality

of Sensitive Info Costly contingent liability Legal liability Public perception

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Role of Mgmt Accounting Systems

Direct

managerial attention to problem areas Provide informational support for managerial decisions Promote harmonized goals throughout the organization
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Traditional Env. Accounting

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Traditional Env. Accounting

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Enlightened Cost Accounting

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Bottom Line
Need

to restructure incentive compensation system (multiobjective) Establish priorities Tailor to individual firm Adapt to changing social climate
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