Most businesses are concerned with their effect on the environment. Many businesses portray themselves as being friendly to the environment or carbon neutral. Lever Brothers, for example, developed a ‘Small & Mighty’ detergent range that has half the packaging, uses half the water and needs half the lorries to deliver it. BSkyB claimed to be a carbon neutral company in 2006. Reporting on environmental performance is even recognized in the UK Companies Act 2006, which increased the narrative reporting requirements of UK companies.

Thus, with legal and practical recognition it would seem environmental issues are integral to business strategy.

Management accounting plays an important role in ensuring companies take environmental factors into account when making decisions. According to Gray and Bebbington (2001, p. 9), a management accountant’s job changes somewhat:

1 planning will include new costs and capital expenditures – for example clean-up or recycling costs;

2 investment appraisal will incorporate environmental costs and benefits;

3 decisions on costs and benefits of environmental improvements will be undertaken;

4 environmental performance reporting will be required;

5 five cost analysis and efficiency improvement programmes will consider environmental issues.

At an operational level, management are ideally placed to play a role in a number of areas, including: accounting for and controlling energy costs; reducing packaging and waste material and product life-cycle analysis.

Additionally, many governments now issue carbon credits to companies based on national carbon emission targets. Such credits are not free and companies are under pressure to reduce carbon emissions to reduce costs. Here again, management accountants can help analyze business processes to determine operational and cost efficient methods of operating.

Questions 

1 Do you think environmental costs and benefits can be accurately determined?

2 Do issues such as the environment help management accountants to become more strategically important members of an organization?