Environmental Management Accounting (EMA), Management Accounting including Environmental Management - a literature review

Abstract: Problem: A strategic issue is to consider future threats and changes that can generate new or higher costs for the company. A strategic operational issue could be to consider if there are costs today that the company are not aware of the size of, because costs are hidden in overhead accounts or in accounts not expected and not accounted for in a structured way. If costs are made visible they can be managed with cost savings and other benefits resulting. Regarding environmental costs, future internalisation of costs for external effects is expected through increasing governmental and consumer pressure. Costs associated with environment as for example costs for electricity, like the electricity bill when recorded and periodized, are also likely to accumulate in overhead accounts. What research exists today that includes environmental management or environmental accounting within management accounting or financial accounting that could support decision making in companies towards better environmental performance? How could this eventual knowledge support decision making in companies towards better environmental performance today? Purpose: The purpose of this thesis is to search for results from eventual research that include environmental management or environmental accounting within management accounting or financial accounting that could support decision making in companies towards better environmental performance. Research results found, according to the purpose, will be reviewed. Approach/Method: Review of articles in academic journals. Findings: A UN promoted Environmental Management Accounting (EMA) methodology was found that uses an environmental cost assessment scheme that gathers environmental costs in a structured way for decision making. The method reveals that existing, regulated, corporate environmental costs today could be twice as high as the environmental costs companies disclose in their annual reports. This gives potentials for large cost savings for, and strategy reconsiderations in, companies. The largest cost category often turns out to be, according to the EMA method: Material purchase value of non product output. Conclusion: Environmental Management Accounting, EMA, can likely support decision making in companies towards better environmental performance today, through structured cost assessment that support effective decision making, better environmental performance, more effective and future-proofed product mixes, strategies and investments. Further Research: What characterise good environmental business performance? What characterise sustainable business performance? How large can a sustainable resource, material and energy, flow be for a business operation?