Green Accounting System- Objectives and Importance

Dec 24, 2018 17:32 IST
Green Accounting System- Objectives and Importance

Environmental Changes are a global problem which requires a global solution. It has potential to slow our economic growth. The Green accounting system is considered one of the important management systems to enable improvement of economic and environmental performance of a business firm.

What is Green Accounting System?

The Green accounting system is a type of accounting that attempts to factor environmental costs into the financial results of operations. It has been argued that gross domestic product ignores the environment and therefore policymakers need a revised model that incorporates green accounting. The term was first brought into common usage by economist and Professor Peter Wood in the 1980s. India’s former Environment Minister Mr. Jairam Ramesh first time stressed the need and importance to bring Green Accounting practices to the forefront of accounting in India.

What is Objectives of Green Accounting System?

The objectives of green accounting system are discussed below:

1. To identify that part of the gross domestic product that reflects the costs necessary to compensate for the negative impacts of economic growth, that is, the defensive expenditures.

2. To established the linkage of Physical Resource Accounts with Monetary Environmental Accounts

3. To assessment of Environmental Costs and Benefits

4. To accounting for the Maintenance of Tangible resources

5. To elaborate and Measurement of Indicators of Environmentally Adjusted Product and Income

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What is the importance of Green Accounting System?

Changes in the environment have a negative bearing on not just the Environment but on the economy as a whole. And, it is a well-known fact that changes in the economy have a direct bearing on the changes in any business. It is also important to note that the Gross domestic product of a country can be affected by the environmental and climatic change.

Therefore, it is the best tool for the businesses to understand and manage the potential quid pro quo between traditional economic goals and environmental goals. It also increases the important information available for analysing policy issues, especially when those vital pieces of information are often overlooked.

Hence, we can say that it is necessary for understanding of “better lose the saddle than horse”, enterprises designing their accounting system organizations without taking environmental costs into consideration should fulfil this requirement as soon as possible.

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