Research Paper Education E-ISSN No : 2454-9916 | Volume : 9 | Issue : 12 | Dec 2023
GREEN ACCOUNTING: CONCEPT AND IMPORTANCE
Dr. Aruna Kumari Paliya
Assistant Professor, Goverment College Luni, Jodhpur, Rajasthan
ABSTRACT
“Go Green” is the slogan which is being chanted, not only in India but also in the whole world. From toothpaste to the fuel we use,
all are getting greener, day by day. According to Tim Jackson, “Prosperity consists in our ability to flourish as human beings --
within the ecological limits of a finite planet. The challenge for our society is to create the conditions under which this is possible.”
There has been a growing awareness about the fact that environment is not a permanent asset and humankind needs to discover
the art of living in harmony with nature. With the global warming becoming a huge threat to human survival, proper balancing of
economic development and environment protection is gradually being recognized by all concerned stakeholders and has emerged
as the need of an hour. The concept of “Economic Growth” has shifted to Sustainable Economic Growth. It has been realised
that though rapid industrialization has a positive impact on economic development, but it has also very seriously threatened the
world‘s natural environmental balance. The main objective of this paper is to study and analyze the available literature about green
accounting and to understand how it has been studied and evaluated by different professionals who have worked on it. This paper
also concentrates on understanding the concept and importance of green accounting.
KEYWORDS: Green Accounting, Environment Protection, Environmental Balance, Economic development, Sustainable
Economic Growth
INTRODUCTION market prices. These traditional parameters are flawed because
Green Accounting needs to work as a tool to measure the it does not include environmental resources that do not have
economic efficiency of environmental conservation activities a market price. Traditional parameters also may not include
and the environmental efficiency of business activities of the depletion of natural capital, and the pollution of resources
companies as a whole. Management seldom tries to make caused by environmental externalities. Thus it is widely
proper arrangement to save the environment unless it is required accepted that traditional parameters of economic growth do not
by law as there is no direct relationship between investment reflect the sustainable use of environmental resources.
and benefits. In many contexts, green accounting is taken to
mean the identification and reporting of accounting for any At the micro level, business enterprises also don’t take into
costs and benefits that arise from change to a firm’s products account depletion of natural resources or the cost beard by
and processes where the change also involves environmental environment for the success of enterprises. Though there is a
impact. tradition of recording depletion in man-made resources through
depreciation. Yet, environmental costs are not taken into
Former Union Minister Jairam Ramesh once said that it account in traditional reporting techniques. Business enterprises
is important to balance the pursuit of 8 per cent growth and universally are facing growing pressure from environmentalists,
protection of the environment, stressing on the need for government and its agencies, competitors of business firms,
public participation to put pressure on the government for the society, employees, and customers to be environmentally
same. The ex-Minister further said that “There is a perceived accountable. According to the Global Reporting Initiative (GRI)
conflict between the objective of getting new jobs, getting (2002), all information that is material to users for assessing the
new investment, pushing GDP and the objective of protecting reporting organization’s economic, environmental, and social
natural resources. With all governments, there is a conflict performance should appear in the report in a manner consistent
between these, and I am afraid that in most of the cases, the with the declared boundaries, scope, and time period.
choices when they are made are in favour boosting economic
growth and not necessarily protecting the environment.” All OBJECTIVES OF THE STUDY
the traditional parameters of economic growth have been The objective of the present paper is to review the following:
accepted to have many flaws with how they take into account 1. To know the importance of Green Accounting in India
the environment. Parameters of economic growth like Gross 2. To analyze the Concept, Need, Advantages and
Domestic Product ( GDP) Net Domestic Product (NDP), etc. limitations of Green Accounting.
accounts for environmental resources through their use as 3. To Analyze and assess of environmental costs & benefits.
factors of production as long as these factors of production have
Copyright© 2023, IERJ. This open-access article is published under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License which permits Share (copy and redistribute the material in
any medium or format) and Adapt (remix, transform, and build upon the material) under the Attribution-NonCommercial terms.
International Education & Research Journal [IERJ] 128
Research Paper E-ISSN No : 2454-9916 | Volume : 9 | Issue : 12 | December 2023
RESEARCH METHODOLOGY Environmental Accounts with Physical Resource
The paper is mainly based on secondary data and information Accounts.
available from books and published works and reports. 4. Green accounting primarily aims at assessing
environmental costs and benefits arising out of the
What Is Green Accounting? use of environmental resources or the changes in the
With the pressure mounting on the business enterprises for environment, resulting from economic growth.
balancing environment concerns and reporting cost beard by 5. Green accountings aims at facilitating accounting for
the environment the new term has emerged known as, “Green maintenance of natural wealth and make entity more
accounting” or “Environmental Accounting.”. The concept of accountable towards Mother Nature.
Green Accounting is raising a glimmer interest not only within 6. Green accounting has the goal of changing concept
the academic but also from the government, business society, of “capital formation” to “capital accumulation.”
social and environmental activist (Niemann&Tichkiewitch, which would facilitate discovery and conception of
2009). The term environmental accounting was coined in the environment, resources.
year 1980s by Professor Peter Wood. Green accounting is a 7. Green Accounting facilitates computation of
type of accounting that attempts to factor environmental costs environmentally adjusted product and income for say
into the financial results of operations. It has been argued that net domestic product. (NDP) as it considers changes
gross domestic product ignores the environment and therefore occurred in environment due to use of its resources.
policymakers need a revised model that incorporates green
accounting.1 The major purpose of green accounting is to From the above, it is clear that Green accounting aims at making
help businesses understand and manage the potential quid pro accounting more sensitive towards environment by including
quo between traditional economics goals and environmental environmental costs in traditional accounting.
goals. It also increases the important information available
for analyzing policy issues, especially when those vital pieces Types of Green Accounting
of information are often overlooked.2 Green Accounting or Green accounting can be broadly classified into the following:
Environment Accounting takes into account that depletion and A. Green Financial Accounting-It focuses on environmental
damage caused to the natural resource base of a nation while transactions that have an impact on the financial
computing national income. Green accounting is a quantitative performance of a business entity. It is mainly concerned
assessment of the cost and effectiveness of enterprises in with reporting of environmental liability costs and other
environmental protection activities. Enterprises are required to significant environment costs..
have systematic records and report and are guided to maintain a B. Green Management Accounting-Green Management
positive relationship with ecological environment to implement accounting is a form of Green accounting, which focuses
effective and efficient environmental activities. The final goal on saving money, especially environmental costs,
is to accomplish sustainable development.3 Green accounting incorporates both the environmental and economic
is a facet of accounting, which measures green growth. information by recognising the use of resources and
Green accounting requires the identification and monetary cost associated with organizations’ economic impact
measurement of the social and economic environmental costs on the environment. Management accounting helps
that impact the external environment their inclusion as internal management in reducing environmental cost and also
items in corporate accounts could mean, scarce resources are assists in both environmental and conventional decision
more efficiently allocatedand helps in measuring the sustainable making by identifying, collecting, estimating, analysing,
income level that can be secured without decreasing the and internally reporting environmental costs related
stock of natural assets. In a nutshell, it can be said that Green information..
Accounting is a managerial accounting tool which puts Price C. Green National Accounting: Green National Accounting
Tag to what was regarded as free gifts from nature. is a form of Green accounting, which is most talked
about, as it involves computation of sustainable national
Goals of green accounting: incomeby taking into account the economic damage and
Green Accounting is popular term for environmental and depletion in the natural resource base of a nation. It is a
natural resource accounting, which incorporates environmental national level accounting involves reasoning of growth
assets and their source and sink functions into national and that can be secured without having an adverse effect on
corporate accounts (Bartelmus, 2008). It is aimed at achieving the stock of natural resources of an economy however; it
the following goals: requires adjustment in the System of National Accounts
1. Green accounting aims to separate all flows and stocks (SNA) in terms of stock of natural assets. In Green
of assets related to environment so that information accounting the NDP is newly defined as Green NDP, or
regarding expenditure for the protection of the also known as EDP. Is arrived at by applying following
environment can be gathered. formula:
2. Green accounting is aims to find out defensive
expenditures that is, costs required to be incurred Green NDP OR EDP = (X-M) + С + NAp. ec + (NAnp.ec-
in order to compensate for the negative impacts of NAnp.n)
economic growth Where,EDP = Environmental domestic product.
3. Green accounting aims at joining or linking Monetary (X-M) = Exports-imports
129 International Education & Research Journal [IERJ]
Research Paper E-ISSN No : 2454-9916 | Volume : 9 | Issue : 12 | December 2023
С = Capital accumulation acts, laws and bylaws have been in a trade which are directly
Nap.ec = Net accumulation of produced economic assets. or indirectly related to the environmental protections some of
NAnp.ec = Net accumulation of non-produced economic assets these are:
NAnp.n = Net accumulation of non-produced natural assets. • Water (Prevention and Control of Pollution) Act, 1974.
• Water (Prevention and Control of Pollution) Act, 1977.
Why Green accounting is the need of the hour? • The Forest (Conservation) Act, 1980. Act, 1981.
Green accounting is very special as it offers, following benefits • The Environment (Protection) Act, 1986.
to the users of this technique:- • Constitutional provision (Article 51A).
• Green accounting is very beneficial in attaining • The Factories Act, 1948.
sustainability, both economically and socially. That • Hazardous Waste (Management & Handling) Rules,
is: meeting the needs of present generation without 1989.
compromising the needs of futuregeneration.. • Public Liability Insurance Act, 1991.
• Green accounting promotes environment conservation • Motor Vehicle Act, 1991.
which would help in reducing cost related to waste and • Indian Fisheries Act, 1987.
raw material utilities • Merchant of shipping Act, 1958.
• Green accounting promotes feel-good factor among • The National Environment Tribunal Act, 19 1995.
employees as employees would love to work for that
company that thinks beyond making money. Government of India has also made it compulsory for new
• Green accounting makes business entity more cautious projects which concern the Ministry ofEnvironment and
and sensitive towards environment which creates good Forests, both in centre and state to obtain environmental and
image among society and its need less to mention what antipollution clearance before they are actually set up our ever.
wonders good image can do for the company. It has sometimes lead to unnecessary delays in the project
• Green accounting serves as a linkage between Green and sometimes even shut down of project even before sets in.
data and an economic data related to economic growth. These steps are very little, but are in right direction. The Green
• Green accounting can help in curbing problems related accounting in India has not reached its potential heights as it has
to climate change. not been mandatory in India to maintain Green accounts. There
• Green accounting can help in developing green are no such guidelines regarding Green accounting, formed by
processes and products. professional bodies, which would bring uniformity and create
• Green accounting can help in improving environmental moral pressure on corporate entities to keep Green accounts.
performance, both at micro and macro level.
• Green accounting helps in measuring, monitoring, Limitations of Green Accounting
controlling and to some extent, reducing or stopping Green accounting is very crucial for our future generations.
environmental degradation Yet it is not possible to make it as popular as traditional or
• Green accounting helps to gather data about how conventional accounting because it has been regarded as
much money has beendevoted for reducing the impact daunting task to measure value of natural resources consumed
of environmental damage on health, machinery and that too in absence of universally acceptable model. Green
structures, and natural capital. accounting as mentioned earlier, is in infancy stage, thus
requires lot of study, to be conducted in this field to implement
Bartelmus has rightly put in his words that the particular it. As there is no uniformity in the methods/models/techniques
strength of green accounting as the measurement of of Green accounting world over, so it is not very easy to compare
environmental costs caused by economic agents of households to far more nations following different models of valuation. The
and enterprises. According to him: ‘The well-known polluter/ cost involved in training employees and maintaining accounts
user pays principles hold the responsible agents accountable is quite high that’s why companies are not very enthusiastic
for their environmental impacts’ and ‘it can assess the about it
economic and ecological efficiency of different environmental
protection measures by governmental and non-governmental CONCLUSION
organisations. To conclude, it can be said that it’s not everything. “Green.”
about Green accounting, especially in India, but with our Prime
Green Accounting in India Minister NarendraModi being awarded as “Champion of Earth”
India where nature is regarded as a mother, even as per Indian for his work on environmental and bringing sustainable growth
Constitution, Article 51A of Directive Principles “It shall be to the forte. We can hope that the above Green will go towards
the duty of every citizen of India, to protect and improve the Green accounting, and it will become part of routine accounting
natural environment including forests, lakes, rivers and wildlife practices. However, Green accounting faces various limitations
and to have compassion for living creatures. To support Article yet it is getting the recognition world over. Countries like USA,
51A of Directive Principles the government of India has been Japan, have made guidelines for the implementation of green
making programs for increasing awareness among common accounting. Green accounting is necessaryfor the survival of
people about the environmental concerns and initiatives like humankind and would make planet Earth a better place to live.
Nammigange , cleaning the banning of poly bags, etc. to make
people more responsible towards their environment. Many
International Education & Research Journal [IERJ] 130
Research Paper E-ISSN No : 2454-9916 | Volume : 9 | Issue : 12 | December 2023
REFERENCE
1. M. Bennett, P. James, Environmental-related management
accounting; current practice and future trends. Greener
Management International 1997; 17;33-51.
2. Adams Carol, Patty Mc Nicholas. Making a difference
Sustainability reporting, accountability and organizational
change. Accounting, Auditing & Accountability Journal. 2006;
20(3):382-402
3. Alok Kumar, Pramanik(2002).Environmental Accounting and
Reporting. Soujanya Books, Delhi.
4. MirelaCamelia Baba (2003) “Advantages of Implementing
Environmental Accounting within an Economic Entity”,
Transilvanya University Of Brasov, Brasov, Romania.
5. HaripriyaGundimeda.PavanSukhdev. Pushpam Kumar. Rajiv
Sinha. And SanjeevSanya (2005). TERI Press, December
6. MukeshChauhan(2005), Concept of Environmental Accounting
and Practice in India, The Chartered Accountant November 720-
726
7. Dr. V K Gupta, Dean (Administration) and Professor in Finance
& Accounting (2012) “Environmental Accounting and Reporting
- An Analysis of Indian Corporate Sector”, Indian Institute of
Management, Indore, India.
131 International Education & Research Journal [IERJ]
