After we understood how business connects to the environment, we'll discover how it erases its harm to the climate. This obstacle opens doors to many people interested in finance and Mother Nature. But how? A member of ACCA gives a brief introduction to environmental management accounting, called EMA. Who is ACCA? Are they eco-friendly? What is the role of environmental management accountants? I am going to share my knowledge and what I learned through this community's website. As well as my experience with the ACCA Middle East Student Financial Competition.

Who is ACCA?

ACCA is a global and large community, called the Association of Chartered Certified Accountants. Founded on 30 November 1904, this learning platform is recognized worldwide for its quality guidance in the student's financial education. ACCA-X provides teachings through Learn Signal, which prepares you for the ACCA exams with expert tutoring, of course with a payment! They provide free lessons through edX courses, 7 are available so far. These are the ABCs of accounting, for instance, Financial Accounting(FA), Management Accounting(MA), Business and Technology(BT), Introduction to Bookkeeping, Introduction to Management Accounting, Intermediate Bookkeeping, Intermediate Management Accounting. It is worth noting that ACCA's edX courses include a paid certificate. This is where I studied the Introduction to Bookkeeping for the ACCA Middle East Student Financial Competition. Declared at the beginning of February, this competition invited teens aged between 13 and 16 years old in the MENA region to study Finance for 6weeks. The course was divided into 5 sections with 6 exams preparing you for the course's terminal exam on 21 March, which I couldn't approach because I, regrettably, gave up after section 3. A month later, the competition organizers announced the winners, the champion is Christopher O'Mahony who comes from Dubai. ACCA will continue to encourage the Middle East to choose the Finance world. ACCA chooses the business world but do they care about the real world? YES! In fact, ACCA thinks ahead and intends to provide a sustainable development.

Environmental Management Accounting

The Association of Chartered Certified Accountants loves Mother Nature and is trying to achieve the 17 Sustainable Development Goals. That's when Environmental Accounting plays its role, which has some subsets: Environmental Financial Accounting(EFA), Environmental Cost Accounting(ECA), Environmental Nation Accounting(ENA), and most importantly Environmental Management Accounting(EMA).

Before the 00s, the International Federation of Accountants (IFAC) defined this major: "The management of environmental and economic performance, through the development and implementation of appropriate environment-related accounting systems and practices. While this may include reporting and auditing in some companies, environmental management accounting typically involves lifecycle costing, full cost accounting, benefits assessment, and strategic planning for environmental management." Until today, there's no clear definition of EMA, some remain unaccepted. 

Let's analyze the 3 keywords of this eco-friendly job:

The environment in EMA: 

The environment as a whole is a place we live in, and all its surroundings. The main goal of this career is to have a healthy habitat. Hence, to put an ending to all the man-made environmental hazards, which determines the 4 environmental costs, that are to be dealt with in this report.

Accounting in EMA:

Accounting aims to record transactions and documentation in an accounting system. The transaction is an activity that results in the exchange of money for an

asset. Environmental Accounting is only a specific part of Accounting, where environmental costs are analyzed.

Management in EMA:

It is the field where environmental costs are managed. To explain this process, which is the main part of this report, we'll identify below, environmental costs and their categories and how they are controlled.

Environmental costs

  1.Identification

In short, environmental costs are the price a business pays to repair its harm, small or big, to the planet we live in. Therefore, the costs vary for each organization, that's why we must control them in a way that benefits our climate and the business.

  2.Categories

i.Environmental prevention costs

The cost of actions taken to avoid the making of waste. 

ii.Environmental detection costs

The cost of official actions taken to confirm if the organization is preventing waste.

iii.Environmental internal failure costs 

As the source says: "Costs incurred from performing activities that have produced contaminants and waste that have not been discharged into the environment."

iv.Environmental external failure costs

The cost of actions taken after they have caused damage to the environment.

  3.Controlling environmental costs

Each industry, depending on its size, controls its environmental costs differently. Let's assume that these are the principal environmental costs of any business: waste and effluent disposal, water consumption, energy, transport and travel, consumables & raw materials. An environmental management accountant proposes solutions to reduce the enterprise's production of waste. Let's take transport and travel as an example; to go to work, most people choose to go in a non-electric car, thus the employees of the same responsibility are causing traffic, fuel waste, and even making it more costly to them to go to their profession. So, the accountant in this specific field proposes the use of public transport, of an electric car, to go to work with another employee, etc. In that way, the business might make it possible to afford safer and faster transport to its workers.

  4.Accounting environmental costs

The UNDSD provided these methods, as a way to account environmental costs.

Input/outflow analysis

Input: After buying the materials to start producing, the accountant records the quantity produced.

Output: After recording the quantity produced, the accountant records the difference between the initial quantity and the produced quantity, which is the quantity of the material bought left, after producing it.

This method aims to balance the output and the input of the making of a product, also referred to as "what comes in, comes out."

Flow cost accounting

With this method, materials are recognized under some categories, material, system, delivery & disposal. The effects of each one are then investigated, to determine if the business should or should not use them. Of course, while taking into consideration the environmental consequences.

Activity-based costing

The member explains: "ABC allocates internal costs to cost centres and cost drivers on the basis of the activities that give rise to the costs. In an environmental accounting context, it distinguishes between environment-related costs, which can be attributed to joint cost centres, and environment‑driven costs, which tend to be hidden on general overheads."

I'll try to tell the ABC the way I understood it...

ABC intends to separate between two environmental-related costs, one visible in the business' reports room and a second one that is not visible there, that is not recorded.

Lifecycle costing

The act of environmentally recording the costs of a product from its making until its ending.

  5.Importance of managing environmental costs

Now it is more essential than ever to manage the environmental costs of industries. Society, as a whole, has been more and more conscious about the climate challenge we are facing, thus winning society's attention and trust is a great move to improve the business. Further, every business is suffering to cope with the costs of converting the harm it has made to itself and Mother Earth. Ultimately, companies are being taxed huge penalties for their violations of environmental regulations. To handle all of these is a tough but possible process. If the costs are marked correctly then it will be possible to run these costs, always to help the market and the climate.

To sum it up, ACCA is one of the most renowned financial company, that is on the path to attaining the Sustainable Development goals. Hence, this global organization cares about the Financial world and the real world, too. They have expanded their online teaching, through unpaid introductory courses and paid exams recognized by the business. Environmental Management Accounting is one of the four subsets of Environmental Accounting - which is a tough task to do, but necessary and urgently needed among many companies.

Thank you for reading through!

Find out more at:

ACCA: Winners Announcement

Accounting Studies with edX

Accounting Studies with LearnSignal

The work used is sited below:

ACCA: Environmental management accounting