Environmental Management Accounting Analysis
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, ABC system creates more useful and meaningful information by tracking costs to products and activities on the basis of the underlying ‘drivers’ that cause costs to be created in the first place (Tsai, Lin, & Chou, 2010). In result, product prices can be set more accurately and the amount of costs lost in overheads is hence reduced. Furthermore, by referring to Bennett and James (1998), environmental costs will be highlighted by ABC systems naturally where environment is a significant cost driver. They also claimed the ABC system able to uncover the major part of environmental expenditures as mentioned above which are commonly recognised as overhead. Moreover, by integrating environmental costs into the ABC system can allow corporates to identify those products and plants which are driving their environmental expenditures more accurately (Brooks, L., Davidson, J., Palamides, & H., …show more content…
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
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