Environmental Accounting/ Carbon footprint accounting
Environmental accounting is a broader term and is aimed to introduce a methodology to account for full environmental costs, integrate them into budgeting, proactive decision making and comply with future mandates of sustainability reporting. It is seen by corporate and environmental advocates as a necessary complement to improved environmental decision making which will in turn help corporate identify and implement financially desirable environmental innovation. Provides an incentive for companies to improve data management about their eco-efficiency and accountability for environmental impacts and thus have an edge over competition.
Carbon footprint is the amount of greenhouse gases produced in our day-to-day lives through burning fossil fuels for electricity, heating and transportation, etc.” Carbon footprint accounting measures these greenhouse gas emissions in terms of carbon dioxide equivalent (CO₂e).
At HEXALON, we assist our client to implement carbon accounting by first of all improving information flow. Environmental accounting is more than just accounting for environmental benefits and costs. It is accounting for any costs and benefits that arise from changes to a firm’s products or processes, where the change also involves change in environmental aspects. It is any information with explicit or implicit financial content that is used as an input to a firm’s decision making.
Information is better if it corrects a pre-existing inaccuracy. Information is better if it reduces uncertainty surrounding some future cost or benefit. Information is better if it is more detailed.
How can Environmental Accounting save money for businesses?
Business transactions today must include consideration of environmental issues. Complex law can impose significant environmental liabilities on purchasers, sellers and lenders involved in a financial transaction, whether or not they caused the environmental impacts or own the assets. Environmental liabilities associated with merger, acquisitions, and similar business transactions can present substantial risk and environmental accounting is an excellent risk management tool and improving company image at the same time.
For those reasons, it is essential to use Environmental Due Diligence as a tool for determining environmental liabilities when financial transactions are being negotiated. This not only provides greater management assurance over the transaction, but also enhances the organization’s credibility in the eyes of the skeptical shareholders.