Green Accounting – The Next Big Step for Accountants

Update: This article was last updated on 19th March 2020 to reflect the accuracy and up-to-date information on the page.

With the advancement of technology, various software and their hosting methods have evolved over the years. Although the technology has optimized the performance of CPAs and streamlined the accounting process, it has impacted the environment in an unfriendly way.

Hence, to mitigate the harmful impact of technology on the environment, more and more emphasis is being laid on the environment surrounding us. Organizations have now started recognizing its importance and formulating steps to promote green and environmental-friendly causes.

Green Accounting is one such term that maps the environmental factors to the business’ plans so that the environment is not ignored in any way.

What is Green Accounting?

Green accounting or environmental accounting demonstrates an organization’s commitment towards the key aspects of our surroundings such as the planet, people, and profitability.

Environmental accounting practices are mainly implemented by companies to include the environmental costs in the financial strategy.

It incorporates the environmental assets and resources into the corporate accounts. It measures the social, environmental and economic impact of business. With the implementation of Green Accounting, the corporate sector becomes aware of the environmental parameters and inculcate the costs in their budget.

Types of Green Accounting

Below are three different types of Green Accounting:

1. Environmental Management Accounting (EMA)

This type of green accounting incorporates both the environmental and economic information by identifying the resource usage and the expenses involved in a company’s economic impact on the environment.

EMA defines the approach that a business is expected to follow in order to analyze the environmental factors and manage the workflow of the organization accordingly.

2. Environmental Financial Accounting (EFA)

As the name suggests, this type of accounting deals with the financial aspects of the business with respect to the environment. This type of accounting is concerned with accounting for environmental transactions which have an impact or are going to impact the financial performance of an organization. The financial analysts responsible for Environmental Financial Accounting analyze the financial risks as well as profits with respect to the environmental factors specific to the business.

3. Environmental National Accounting

This type of accounting involves national level accounting with a focus on green costs and natural resources. With Environmental National Accounting, the environmental aspects related to a nation is integrated with the National Accounts (NA).

The infographic below demonstrates the organizations’ commitment to people, planet, and profitability through Green accounting.

How To Implement Green Accounting?

Be it accounting or any other business, everyone is responsible for making business decisions that may help to improve environmental conditions.

Here are some ways to implement green accounting in your office:

1) Educate Employees – Train accountants to use eco-friendly methods to work in the office. Assign them training courses, provide them incentives for working green, and make energy management fun with interactive activities.

2) Minimize Paper – Try to reduce the use of paper in the office premises. Creating a completely paperless accounting process may not be practical, but the use of paper can be reduced to some extent. Track the number of papers per employee, make printing less convenient, and request a paperless statement from the banks.

3) Implement Green Techniques – Use techniques in the accounting system to implement a greener solution. Create monthly green challenges, opt for eco-friendly office products, embrace renewable energy, maximize natural light, reuse and recycle.

4) Increase Mobilization – Encourage accountants to lower commute emissions by biking, walking, carpooling, or working from home. Adopt cloud accounting to reduce the number of people traveling to the office and reduce the company’s carbon footprint.

5) Decrease Energy Consumption – Reduce the energy consumption of the office, which will not only help to save the environment but also help to reduce energy bills. Use energy-saving bulbs, implement light sensors, turn down AC, and upgrade your appliances.

Have more such ways to implement green accounting? Share your views with us in the comment section.