The Importance Of Environmental Management

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Environmental management accounting techniques can be divided into few groups according to their focus. It basically measure and support the corporate environment cost for internal decision-making process through various techniques of costing analysis, investment appraisal or business analysis and performance management.

A. Activity-based costing (ABC)

Green competitiveness has become a critical factor to support corporates’ sustainable development nowadays. With this, a number of stakeholders have begun to focus on corporates’ environmental activities as a well performed environmental accounting could be a very valuable management communication tool. According to Cooper and Kaplan (1988), the activity-based costing (ABC) system is seen
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Besides, there is a clear statement indicated by environment professionals that the corporates’ production activities may affect the supplies of natural resources and the quality of environment (Wahyuni, 2009). These effects occur at each stage of a product’s life-cycle, from extraction to disposal. The effects can either direct (such as air emissions produced from automobile) or indirect (such as the pollution of electricity used in manufacturing process) (LeVan). Thus, life-cycle assessment is used popularly today to quantify these direct and indirect effects of a product and …show more content…
From an environmental accounting perspective, the sum of all the costs at each stage in a life-cycle assessment would yield the net environmental expenditures of a product or process. In the other words, there is a component named life-cycle costing in LCA. Refer to Bennett and James (1997), the life-cycle cost assessment (LCA) is defined as “a systematic process for evaluating the life-cycle costs of a product or service by identifying environmental consequences and assigning measures of monetary value to those consequences.” The life-cycle assessment includes identifying and quantifying energy and materials used and wastes released to the environment, assessing their environmental impact, and evaluating opportunities for improvement. It will then generate data on environmental releases and their effects which in turn enable organizations to identify pollution prevention opportunities (Vinayagamoorthi, Murugasen, Kasilingam, Venkatraman, & Gayathrimahalingam,