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Advanced Costing Methods

Environmental Management Accounting

10.1 Context

Organisations are becoming increasingly aware of the environmental impacts of their
actions.

EMA:

Is concerned with the accounting information needs of managers;
1 identifying and estimating the costs of environment-related activities
and seeking control of these costs.

Types of environmental cost Comment

Conventional costs, e.g. energy,  Traditional management accounting
raw material systems would have hidden these in
overheads hindering identification and
control.

 EMA identifies and separately monitors
the usage of, say, energy and material.

Contingent costs, e.g. future  In the past these were ignored by
compliance or decommissioning managers, who tended to focus on the
costs short-term.

 EMA estimates these costs, builds them
into project appraisal and seeks to
reduce them, e.g. through process re-
design.

Relationship costs, e.g. image  raditionally ignored by managers who
costs relating to production of were unaware of existence.
environmental information for the
public  EMA makes managers aware of these
costs in order to focus their attention on
managing the risk of them occurring.

Reputational costs, e.g. lost sales  As for relationship costs.
due to failure to address
environmental issues

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