Environmental Accounting as a Tool for Environmental Management System

This paper reviews about the relationship of environmental accounting and environmental management system in order to determine the sustainability of organization. In past, the traditional approach of operations management has been used to evaluate an organization’s performance based on cost, quality and profit without giving due consideration in preserving the environment. It also identified the lack of awareness and interest by organization about environmental preservation distinguish the context for environmental management needs in developing and newly industrialized countries compared to western countries. However, the growing awareness and pressure by community, customer, and stakeholders has forced the organization to accept the introduction of environmental protection measures into their organization. The integration of environmental accounting into EMS will be served as a self-regulatory compliance to legal and regulation requirement, to reduce cost from customer audits, better market impression, increase efficiency of resources and the ability to adopt changing circumstances would contribute to the improvement of quality performance and organization’s performance as a whole. Some of the possible benefit from environmental audit also discussed. In this paper, also discusses number of pollution prevention strategies. It concludes with an emphasis on the use of environmental accounting for continuous improvement in environmental corporate policies and programs by taking into account the regulatory, technical developments, scientific developments, and it must be fully integrated into EMS along with other functional area. @JASEM There is a worldwide debate on the issue of environmental management, stemming from a flow of evidence about ecological degradation caused by economic development (Taylor, et al., 2001). Now, due to cost pressures, customer awareness, supply chain relations and activities of environmental campaigners encourage the companies to go for environmental initiatives (Perry & Sheng, 1999). The society particularly from developed countries highly concern about the impacts on the quality of their life due to the pollution of air, land and water. However, the same concern is rather slow in developing countries including Malaysia. To prevent future violations of environmental conservation, regulatory bodies have enacted many laws pertaining to environmental protection including Malaysia but the effectiveness of these regulations is yet to be seen. External pressures such as legislation and public concern, as well as market opportunities arising from environmental concerns, have compelled firms to integrate environmental issues into their strategic planning process literature by describing organization participation in a wide range of environmental activities in a number of industry sectors (Banerjee, 2001). Pun et al., 2002, characterized the assessment of organizational effectiveness through seven critical questions: • What is the purpose of assessing organizational effectiveness? • What level of analysis is being used? • From whose perspective is effectiveness assessed? • What is the assessment focus on the main domain of activity? • What time frame is being employed? • What types of data are being used in assessment? • What is the reference against which effectiveness is being judged? The answer to these questions can provide insightful means to evaluate the applicability of the proposed five stages framework for environmental management system [EMS] (Figure 1). Research Problems: In the context of environmental disclosure in companies annual report, it has been noticed and reported that there are: • Lack of awareness and understanding on the nature and extent of the adoption of environmental management system practices and the relationship between the adoption of these practices and organization’s environmental accounting function. • Lack of understanding and commitment of companies for the needs in the environmental disclosure Environmental Accounting as a Tool ... SEETHARAMAN, A; MOHAMED ISMAIL; SARAVANAN, A S 138 The objectives of the research are: • To determine and asses the effect of environmental accounting on the improvement of environmental and overall organization’s performance • To determine the extent of environmental disclosure as a part of social responsibility • To determine the effectiveness of environmental cost accounting system for environmental audits and performance improvements