Environmental accounting benefits for chemical manufacturing companies

¶ … business environment, organizations are required to adhere to the environmental regulations in order to comply with the federal and state laws. One of the strategies that an organization can employ to be environmental friendly is to integrate an environmental accounting in the conventional accounting system. An environmental accounting is a subset of accounting that incorporates the environmental information to determine the costs reduction that an organization can enjoy by integrating the environmental accounting in the organizational traditional accounting system.

Objective of this paper is to discuss the benefits that our organization can derive from practicing an environmental accounting system.

Benefits of Eliminate Unnecessary Cost

Several unnecessary costs cam make an organization to increase the cost of operations. The unnecessary costs include environmental fines, costs to remediate or clean up the contaminated facilities, and waste management costs. Since our organization is a chemical manufacturing company, we are bound to incur these costs; however, it is very critical to eliminate these costs to reduce our costs of operations. Several benefits our organization can derive from eliminating unnecessary costs:

First, our company will lower the costs of operations by eliminating the unnecessary costs and eliminating these costs will assist in increasing our revenue thereby assisting our company to enhance competitive market advantages.

Moreover, we will be able to attract more customers by eliminating the unnecessary costs. By lowering our costs, we will be able to offer our product at lower prices thereby attracting more customers. More importantly, we will be able to attract highly qualified and skilled professionals into our company since increasing number of professionals prefer working with companies that are environmental friendly. Thus, we will boost our productivity if we are able to attract higher number of skilled professionals to our company.

Our company will be able to improve environmental performance because our operations will be environmental friendly, which will make us reducing environment pollution such as carbon emission, and climate change that can lead to a provocation of disease.

Another benefit is that we will be able to support EMS (environmental management system) that will assist our company to adopt environmental friendly manufacturing process and the process will make our company to achieve competitive market advantages.

The hidden costs are the costs that are not directly indentified in the accounting systems. The hidden costs include costs to comply with the environmental regulations, costs of cleaning up the contaminated facilities, and waste management costs. Thus, we will be able to eliminate all the hidden costs by adopting an environmental production process.

3. Environmental Marketing Claim

To make an environmental marketing claim, a company should implement an environmental production process that will assist in securing one of the popular green certifications. Popular green certifications include:

USDA Organic

Green-e-renewable energy

Green Seal

Ecologo

SMART certification

Energy Star -- energy efficiency.

Moreover, a company wishing to diffuse a green initiative in its marketing campaign should diffuse a green message through advertising to make customer aware that the company is environmental friendly. The company should also use a green packaging that will present the green certification. A company that intends to implement environmental marketing should also integrate the environmental friendly product in its product life cycle. The company should use environment friendly raw material for the production process and should use a machine that emits lower emission. The company should also use vehicles that emit lower emission for its production of goods and services.

4. Regulatory Cost and Hidden Cost

The regulatory costs are the costs that a company incurs in order to comply with the environment regulations. For example, regulatory costs include cost of searching for the raw materials that produce little emission, cost of searching for suppliers that have a green certification. All these costs are hidden costs because they are not listed in the company accounting records.

5. Method to reduce Waste in the Production Process

Major option that our company can employ to reduce waste is to use the reusable materials. Moreover, our company should reduce the amount of materials used to produce the chemical products. We should also consider recycling our product into another product thereby reducing the amount of materials used for the production process. We should adopt using energy that emits low emission in order to reduce the amount of waste. We should also reduce waste production.

6. Method to Prevent or Reduce Environmental Liabilities

One of the best methods to comply with the environmental liabilities is to comply

"with laws and regulations that apply to the manufacture, use, disposal, and release of chemical substances and to other activities that adversely affect the environment." (Environmental Protection Agency, 2014 p 5).

Moreover, our company should reduce the amount of waste disposed into the community. More importantly, we should device a green strategy to dispose our waste. Our waste disposal technique should be in line with the environmental regulations in order not to secure fines from breaking the environmental laws that will lead to environmental liabilities.

7) Pollution Prevention and Reason to be considered

Pollution prevention is the strategy of eliminating or reducing the waste using less-toxic materials, and reuse materials rather disposing them in a waste stream. In other words, the pollution prevention is the production practice that will eliminate or reduce the pollutant through the efficiency use of energy, raw materials, water as well as other resources.

Our company should consider adopting pollution prevention because it will assist our company to eliminate or reduce the compliance and operational costs. Moreover, we will be able to eliminate or reduce the cleaning costs and long-term liabilities. The pollution prevention will also improve the health of our workers, which will enhance the overall company productivity because healthy workers are productive workers. More importantly, our company will be able to comply with the federal, state, local regulations by preventing an environmental pollution.

8. Conditions Good time to use Activity-based Costing

A company that can benefit from the activity-based costing is the company that has a significant amount of overhead costs during the production process that pertains to the diversification of activities. However, a company that produces an identical product with little overhead costs does not require the application of activity-based costing. Thus, the good time to use the activity-based costing is when a company is producing different or dissimilar products.

9).Improvements to make to the Environmental Accounting system

Environmental accounting provides a framework of collecting and organizing information on the expenditure on the environmental protection. The environmental accounting can be categorized as natural resource and asset accounts, material physical flow and pollution accounts,

hybrid and monetary accounts, and Environmentally adjusted aggregates account.

One of the methods to improve the environmental accounting system is to promote information that will assist organizations to prepare the environmental accounting system. At present, many organizations do not understand the information required to enhance the environmental impact. Thus, the government needs to educate organizations about the specific resources that will improve environmental sustainability and method of preparing the accounting system for the benefit of the company and the society.

10)

EPA decision to buy 100% annual Electricity use

The paper supports that the method is good decision because the policy will encourage organizations and individual to be sustainable in the use of electricity. It is essential to realize that electricity is one of the pollution agents that emit carbon dioxide into the atmosphere. Using this strategy, organizations will increasingly use the electrical materials that produce little energy, which will enhance an environmental sustainability.

Conclusion

The paper presents the strategy that our chemical manufacturing company should employ to implement an environmental accounting system. The report suggests that we should use the materials that dispose little environmental pollution in order to eliminate or reduce our environmental liabilities that will increase our cost of operations.

Reference

European Environmental Agency (1997). Life Cycle Assessment. A guide to approaches, experiences and information sources. Environmental Issues Series 6

Environmental Protection Agency. (2014). Valuing Potential Environmental Liabilities for Managerial Decision Making. USA.