Environmental Accounting: A Conceptual Study of Indian Context

As the entire world continues its rapid move towards industrialization, it has seriously threatened mankind’s ability to maintain an ecological balance. Geographical and natural forces have a significant influence on the location of industries. Industrialization is the foundation stone of the development of any country, while the unplanned industrialization and discharge of waste by industries is the cause of environmental pollution. There is growing degree of awareness and concern globally among nations about environmental degradation or pollution. Environmental resources endowed by the gift of nature and not manmade are invaluable natural resources of a country like India. Any developmental activity is directly related to natural and environmental resources. Economic development without environmental considerations brings about environmental crises and damages the quality of life of present, as well as future generation. As corporate sectors in the global market, especially in India, are becoming anxious about environmental degradation, naturally more and more emphasis will be ascribed to how environment-friendly the outcomes are. Maintaining accounts of such environmental and natural resources in the country has become more urgent. Moreover, international awareness and acceptance of the importance of environmental issues has motivated the development of a branch of accounting called “Environmental Accounting”. Environmental accounting attempts to detect and focus the resources consumed and the costs rendered by an industrial unit to the environment. For the sustainable development of mankind, a healthy environment is indispensable. Gradually, therefore, in many countries including India, environment matters are being given top most priority. Accounting and disclosure of environmental matters have been increasingly manifesting as an important dimension of corporate accounting and reporting practices. But, as conventional accounting deals with mainly non-living things, the formulation of valuation, and measurement and accounting techniques for incorporating environment-related matters in the corporate financial statement sometimes creates problems for the accountant. In the light of this situation, the conceptual analysis of the study is concerned with the rationale of environmental accounting on the economy and society as a whole, and focuses the failures of the traditional accounting system. A modest attempt has been made to throw light on the environmental awareness in developing nations like India and discuss the problems associated with the implementation of environmental accounting. The conceptual study also reflects that despite different anomalies, environmental accounting is becoming an increasing important aspect of the accounting agenda within the corporate sector in India. Lastly, a conclusion, along with recommendations, has been given to overcome the situation. Keywords—Environmental accounting, environmental degradation, environmental management, environmental resources. Dr. Pradip Kumar Das is Associate Professor & Teacher-in-Charge Commerce Unit(Morning), Jagannath Kishore College, Purulia (India) under S. K. B. University, Purulia (India) (Phone: 03252-229922, +91 9475815209; e-mail: pradip57.prl@ rediffmail.com). I.BACKGROUND ORE recently, the environmental crisis has become a global issue. The concept of sustainable development is gradually becoming popular in many countries of the world, including India, where society feels the prevalent role of ecological requirements for economical development. Accounting is no longer confined to the historical description of financial performances; rather, it is now regarded as one of the most important services of society. The ecological role of corporate sectors responsible for their business activities on the environment is becoming particularly explicit. Along with the finance and production results of business activities, their environmental and social effects are also important. Environmental or natural resources are invaluable and hence there is an urgent need to maintain accounts of such resources, and as a result, a new area of accounting under the heading “Environmental Accounting” has emerged. II.MEANING OF ENVIRONMENTAL ACCOUNTING Environmental accounting is entirely an emerging and dynamic concept. Environmental accounting is concerned with the accounting for environment encompassing a business. Environmental accounting attempts to identify and bring to the light the resources exhausted and costs rendered reciprocally to the environment by the business houses. In other words, environmental accounting attempts to make the best possible quantitative assessment of the costs and benefits to an enterprise for activities specifically directed to environmental preservation. Environment brings together all inanimate organism and forces functioning in nature including man. In the McGraw Hill Encyclopedia of Environment Science, the term Environment is defined as the “Sum total of all conditions and influences that affect the development and life of an organism,” including man. Thus, environmental accounting refers to the measurement and communication of information about the environmental responsibility performance of an organization to interested parties. It is also popularly referred to as “green accounting” or “ecoaccounting”. Environmental accounting identifies, measures and communicates environmental related information for economic decision making. In short, it records and summarizes the value of environmental goods and services in monetary terms. This branch of accounting provides organizations with the cost of their products and processes, thus leading to resourceful decisions and sustained profitability. Environmental Accounting: A Conceptual Study of Indian Context