Management Accounting

Jati Timber Group (JTG) runs a national chain of timber suppliers, selling to both trade and DIY (Do-It-Yourself) customers, and a large-scale manufacturing business specializing in wooden construction items from roof trusses to window frames.

The company has been in the business for over 20 years. In the last few years, it has noted a marked increase in the number of customer queries about JTGs environmental policies, not just from the retail DIY market but also from large corporate construction clients. The board of JTG is aware that it is not just a response to high-profile campaigns targeting the logging of rainforests but part of a greater level of environmental awareness and the general trend towards greener consumption.

JTG has always considered itself an environmentally responsible company. It purchases all its timber from legal sources and is committed to using wood from well-managed and sustainable forests. However, the non-executive directors on the board have suggested a system of environmental management accounting (EMA) be introduced in order to improve their environmental credentials. The executive team is dubious about the EMA benefits and believes they are already fulfilling their environmental responsibilities.

Question

Describe the purpose of environmental management accounting (EMA) and explain how using it would benefit JTG. Your answer should include a discussion of the aspects of business costs considered by EMA and the accounting techniques used in its application. You should ensure that your answer is relevant to and within the context of JTG.