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Sustainability And The Role Of Management Accounting

1286 words - 6 pages


Traci Buxton French
Salem International University

ABSTRACT: A majority of CEO’s at large international companies consider sustainability efforts to be a high priority development item on corporate agendas, yet less than 30% of companies actively seek new capital investment opportunities in this area (McKinsey, 2010, para. 1). These same executives feel that value from sustainability initiatives is gained through “earned goodwill, improved reputation, cost savings and growth opportunities” (McKinsey, 2010, para. 3). The disconnect between perceived value of sustainability ...view middle of the document...

Success in sustainability programs is measured by the “triple-bottom line”, which measures profits generated by the company along with the effect of the corporation on people and the planet (Braun and Tietz, 2013, p. 886). Most corporations are moving towards programs that are embedding sustainability within existing programs rather than tacking on additional and separate programs to existing systems. Braun and Tietz (2013) elaborate on the advantage of embedded sustainability systems within business functions over “isolated and temporary solutions” (p. 886). Among these advantages include cost reductions, regulatory compliance improvement, stakeholder engagement and improved competitive strategy (Braun and Tietz, 2013, p. 886). Examples of cost reductions include lowered waste reduction storage and removal costs secondary to decreased waste production, decreased waste water disposal costs and lowered utility bills due to reduced water consumption and lowered fuel and utility expenses secondary to alternative energy usage. Reduced packaging of manufactured goods would lower costs by decreasing the use of packing materials, lowering fuel and labor costs, and decrease labor costs associated with handling and disposing of these materials.
Regulatory compliance involves the information needed to remain in accord with local, federal and international laws and regulations regarding environmental protection and worker safety. This data is gathered, tracked and analyzed in specialized accounting systems called environmental management accounting (EMA). According to Clancy (2012), EMA “provides structures and processes that embed environmental efficiency into corporate culture and mitigate risk” (para. 6). EMA systems are used for “identification, collection, and analysis of physical and monetary information for internal decision making” (Braun and Tietz, 2013, p. 890). Physical information in EMA accounting is defined as “quantitative information that reveals the actual environmental impact of company operations. This data includes the “carbon footprint, which comprises the total carbon dioxide emissions and other greenhouse emissions of a company and water footprint, which includes the entire water volume associated with the processes and products of a business” (Braun and Tietz, 2013, p. 893). Maximum benefit is gained from data generation and analysis when “measurement needs are tied to a particular business value in terms of brand marketing or the company’s ability to manage expenses” (Clancy, 2012, para. 12). She further states, “ EMA systems are very beneficial at evaluating processes within the life cycle assessment (LCA) of a product, which includes the environmental impact of the product from sourcing through value chain activities through product use, then ultimately to product disposal (Braun and Tietz, 2013, p.893). LCA is used to justify new capital investment projects, evaluate the ROI of a particular product from a consumer...

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