A case study on environmental management accounting practice at a South African manufacturing company
Abstract
Environmental concerns have been around for many years but the threat of rapid climate change has raised the profile of environmental sustainability issues. Laws and regulations will probably be revised due to an increase in environmental concerns by various stakeholders. This is likely to increase the business complexity for most companies in the manufacturing industry in South Africa. Environmental Management Accounting is Management Accounting with focus on environmental issues, such as physical information on the flow of energy, water, products and materials, as well as monetary information such as cost of waste, cost of environmental projects, and material cost of product outputs.
This study evaluates the practice of environmental management accounting in a manufacturing organisation in South Africa. A questionnaire was administered to a selected group of participants within the organisation. The organisations name has been omitted from the study due to legal concerns. The questionnaire focused on organisational characteristics, environmental management matters, physical and monetary environmental management accounting, and environmental cost allocation.
Significant insight was gained on the understanding of sustainable development, the development of world protocols and requirements for the past 53 years and environmental management system including the ISO 14000 family of standards. Significant insight was also gained on environmental management accounting, including both physical and monetary environmental management accounting, cost distribution and allocation, environmental laws and regulation in South Africa, as well as potential benefits and challenges of environmental management accounting.
The findings of this study indicate that the practice of environmental management accounting at this manufacturing organisation is positive. Also different levels of awareness exist between different functional roles in most organisations. The awareness of physical and monetary environmental management accounting principles revealed a small difference between the various functions that participated in the study. The study indicated that the organisation is good at recognising that environmentally related costs need to be allocated directly to a product. Allocating costs related to environmental aspects directly to a specific product allows for improved decision making