Management of Environmental Costs in an Organization

Financial Performance
Management

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Meaning of environmental costs.................................................................................................3
Using costs and benefits in environmental management accounting .........................................4
Techniques used in managing environmental costs....................................................................4
Importance of Management of environmental costs in an organisation.....................................5
Identification and recording Environmental costs......................................................................5
Controlling environmental costs.................................................................................................6
Accounting of environmental costs.............................................................................................6
Management accounting is important for decision-making........................................................6
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Environmental cost is cost occurs due to production of the goods and services with actual and
potential damage to natural resources due to economic activities by the organizations (Lee, Hu,
2018). This report is based on the environmental management accounting cost and the affect of
the environment by the organization. This shows the techniques which identify and manage the
environmental cost with identify and record and how to control this environmental cost which
less affect the environment. Also, importance of the decision-making process and how
management accountant gain the right information with the planning tools to solve the financial
problem faced by the organization and also shows the relevance of the budget control by the
organization, the importance of KPI to improve the financial performance of the organization
and how financial suitability can be gained by the organization.
MAIN BODY
Meaning of environmental costs
Environmental costing can be defined as the costs associated with the harming and hurting nature
in the accomplishment of the business activities. In other words it refers to the various waste
produced by the company in the form of energy consumption, carbon emissions, pollution like
waste product comes out of the production process. It must be identified, measured, analysed and
reported by the management accountant in order to minimise the negative impact on the
environmental factors. The environmental costs can be classified into two types:
Internal costs: Costs associated with disposal of waste, installing systems which can minimise
the penalties, taking back used product from customers for recycling the same, fines and charges
imposed by regulatory authority and costs of obtaining permission before project initialised
(Latan and et. al., 2018). These costs have the direct impact on the income of the company.
External costs: Costs which is being borne by the society due to the generation of these costs by
the company in the course of carrying out its economic activities. Cost of carbon emission's
impact on the society, excessive use of natural resource like energy and water, harming forests
and wildlife and cost of harmful impact on society's health are all external or indirect
environmental costs.