Achieving Sustainability with Green Accounting Practices

Achieving Sustainability with Green Accounting Practices

Even as the economy slows downward, more businesses are adopting green accounting software products. But many companies are gazing at environmental accounting or green accounting tools, not the color of money accounting, not the color of money, that many companies are gazing at.

With a new administration in Washington and concern about global climate change heating up, green accounting is shaping up as the financial and accounting technique of the year. Now that carbon accounting and sustainability reporting are shaping up as a potentially more costly obligation, many businesses are wondering how the need for green accounting technology will impact their budgets and daily operations.

Here's a look at the critical issues of green accounting.

What is Green Accounting?

The term "green accounting" hasn't yet been fully defined. Most agree, however, that for a business to reduce its carbon footprint, it first must be able to measure it. Then, once the size of the carbon footprint is known, a company must be able to accurately report on accounting data to regulators, taxation officials, carbon credit trading organizations, and other relevant parties.

The general idea of green accounting is to factor environmental costs into the financial costs of a business. 

What is the Objective of Green Accounting?

Green accounting practices are meant to encourage businesses to understand the relationship between the exchange of their goods and the exchange with the environment. Green accounting also makes it possible to collect enough data to influence actual policies and create a social impact. Green accounting practices can help companies understand where they stand in terms of contributing to global pollution and make the necessary changes required to combat the issues at hand and reverse the damage that is already done. 

What is the Future of Green Accounting?

The rising demand by lawmakers and regulators for businesses to address the potential threats posed by climate change and other environmental issues is the primary force behind green accounting. The recent transition of power in Washington is also likely to speed the move to new green-oriented laws and regulations because of the rising concerns over global warming and the lack of accountability for industries in the past. 

Who Will be Affected by Green Accounting?

Energy-reliant manufacturers and power-generating utilities will feel the most pressure to embrace green accounting. Still, companies in nearly all business sectors can expect to embrace green accounting at some level within the next few years. Retailers, for example, may need green accounting software to calculate carbon ratings for each product on their shelves. A wide number of businesses may need to use carbon accounting programs to calculate small business taxes based on the amount of energy consumed.

What Technologies are Involved in Green Accounting?

Green accounting encompasses several different technology areas. Look for both accounting and ERP (enterprise resource planning) software vendors to begin adding more green-oriented features to their products. Among the programs, currently available or headed to the market, are carbon unit measurement and management tools and programs designed to enable companies to trade carbon credits. Yet another type of green accounting software aims to help businesses cut through the "green tape" created by climate change regulations.

How Much Will Green Accounting Cost My Business?

The financial impact will vary depending on your company's size and line of business. The costs could be minimal for small firms with a relatively modest CO2 impact.

Many finance and cloud computing accounting software vendors may incorporate green accounting features into upgraded product versions. On the other hand, companies that are heavy users or producers of energy or that must manage large amounts of CO2 emissions will likely have to spend significant sums on specialized software and collection instrumentation that will track, organize and report vast quantities of carbon data, perhaps at several different sites.

What are the Advantages of Green Accounting?

Disclosure of How Natural Resources are Utilized

green accounting can help create transparency between businesses and their customers by showing how natural resources are being utilized by a company. Green, cloud accounting advantages will show the costs incurred by using natural resources and the income earned from doing so. This will allow consumers to be more conscious about supporting businesses that are conscious of their environmental impact.

Pollution Control

With companies reporting exactly how they manage their resources; environmental pollution controls can be exercised effectively using green accounting. 

Product Circulation Estimation

With green accounting practices, companies and consumers can gain better knowledge about the life cycle of products in the environment as well as product circulation within that lifespan. This would also allow companies to adhere better to environmental rules and regulations to create sustainable goods. And with green accounting knowledge, consumers can also demand sustainability measures from companies to decelerate pollution statistics. 

The Limitations of Green Accounting

Imperfect Valuation Techniques

It isn’t always easy to value goods and their environmental impact without deducing and interrogating them. Shadow prices can act as partial valuations but the true cost of a product to the environment can only be determined over time.

Evolving Social Values

With consumer interests and preferences changing constantly, it is hard to assume that green accounting can always lead to success. Gone are the days of minimalist consumerism of the earlier decades and maximalism has since crept back into people’s lives. Hence, it is difficult to gauge the impact of social changes on ever-evolving humans.

Lack of Reliable Data

It is difficult to assume that companies will be fully transparent with their consumers in the name of green accounting. Shady business practices are nothing new and we shouldn’t assume that all data companies share with the public is completely reliable. 

Want to get your business prepared for this new trend? The first step is to learn all you can about green accounting. The United Nations Environment Program's Green Accounting Virtual Resource Center is a good starting point. Compare the best accounting software options available to find the right system for your business.