Nowadays, the green awareness of the public is increasing from time to time. People tends to put more effort to protect the environment compared to those days. Organizations could achieve sustainability by meeting the current needs without destroying the environment. This leads to the implementation of environmental accounting. The environmental accounting can further classified into environmental financial accounting (EFA) and environmental management accounting (EMA).
In 1998, the International Federation of Accountants (IFAC) originally defined environmental management accounting as: “The management of environmental and economic performance, through the development and implementation of appropriate environment-related accounting systems and practices. While this may include reporting and auditing in some companies, environmental management accounting typically involves lifecycle costing, full
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A close review of the management accounts should reveal the costs of waste disposal, costs of materials and utilities. Nevertheless, the main problem is, identifying those problems could be a lengthy process, especially in a huge organisation, which mean that if the environmental costs are hidden behind those figures, it will be difficult for the management to get opportunities to reduce the environmental costs. For example, a pharmaceutical company may be deciding whether to continue with the production of one of its drugs. In order to incorporate environmental aspects into its decision, it needs to know exactly how many products are input into the process compared to its outputs; how much waste is created during the process. The only way to reduce the environmental cost is to identify these costs and allocating them to the product, by doing this will help the organisation able to make well-informed business