Corporate Environmental Accounting and Management (CEAM) Shiek Alam

Background Environment means everything which surrounds us. A- native American proverb states that, “only when the last tree is cut, only when the last river is polluted, only when the last fish is caught only when they will realize that we cannot eat money”. Environmental protection has become a key issue all over the world these days. Growing hazardous industrialization is a major culprit. Swift industrialization is an essential for overall economic growth, but it is also damaging the environmental forcefully, like Water pollution, air pollution, solid and toxic waste pollution and other environmental pollution. Every company has a overriding responsibility to make the fullest possible use of its resources both human and material. The issue of environmental responsibility and the sustainable industrial development has given birth to new branch which is environmental accounting & management. The first environmental accountings were constructed by Norway in the 1970s.

What is CEAM  A flexible tool to provide information not necessarily provided in traditional managerial systems  identification, collection, estimation, analysis, internal reporting  materials and energy flow information, environmental cost information, and other cost information  It is also both conventional and environmental decision-making within an organization

Why CEAM  It is conventional practices for informing environmental management decisions  inaccurate allocation of overhead costs back to processes, products, activities  insufficient tracking of wasted materials and energy  lack of data on future and less tangible costs in the accounting and management records  It can be significantly reduced or eliminated as a result of business decisions.  It may provide no added value to a process, system or product  It may be obscured in general overhead accounts and overlooked during the decision making process.  Understanding environmental costs can lead to more accurate costing and pricing of products

Objective of CEAM  CEAM would aid the discharge of the organization’s accountability and increase its environmental transparency  It helps negotiation of the concept of environment and determines the company’s relationship with the society  Because of the ethical investment movement, ethical investors require the companies to be environmentally friendly  For consumerism movement it encourages the consumers to purchase the environmentally friendly products, i.e., green products.  Record & monitor flow and disposition of all inputs  waste disposal  reprocessing  Recycling  Processing costs involving environmental impact  air emissions  water treatment  solids reduction

Environmental Costs & Management Major challenge in application of environmental accounting as a management tool is identifying relevant costs.  Conventional: material, supplies, structure and capital costs need to be examined for environmental impact on decisions.  Potentially Hidden:  Regulatory (fees, licenses, reporting, training, remediation)  Upfront and back end (site prep, engineering, installation, closure and disposal)  Voluntary (training, audits, monitoring and reporting)

CEAM as Sustainable Investment CEAM helps companies recognize and achieve the multiple benefits of Sustainable Investments  Reduced costs  increased profit margins  lower product prices  increased market share  Reduced liability  improved company image  increased market share  increased access to financing and customers contracts

Proposed Sustainable Projects CEAM can illustrate the potential profitability of projects that utilizes preventive management strategies by doing a better job of profitability assessment:  Comprehensive inclusion of relevant and significant costs and savings  Improved cost estimation and allocation  Longer analysis time horizons  Multiple profitability indicators

Environmental Accounting & Management Approaches Physical approach & Monetary Approach  Firstly, the Physical Approach was suggested by the United Nations where a complete guides to be prepared indicating the available resources within a country classified according to its state and uses (for instance, agriculture, desert land etc).  Then, the monetary approach appear due to the fact that the Physical approach does not fulfill the requirements of the Environmental accounting & management.

GAAP based solution for some environmental accounting & management related issue

CEAM Improved Capital Budgeting  Better identification, allocation, and analysis of environmental costs improves the process by which the profitability of potential investment projects are assessed.  Such investments include any capital project that has the major objective of controlling, reducing or preventing pollution.

CEAM uses CEAM can provide the data needed for many environmental management initiatives  Cleaner Production/Pollution Prevention/Green Productivity  Design for Environment  Environmentally Preferable Purchasing  Environmental Supply Chain Management  Extended Producer Responsibility  Corporate Environmental Reporting

Benefits of CEAM to Industry  The ability to more accurately track and manage the use and flows of energy and materials, including pollution/waste volumes, types, and fate  The ability to more accurately identify, estimate, allocate, and manage/reduce costs, particularly environmental types of costs  More accurate and comprehensive information for the measurement and reporting of environmental performance, thus improving company image with stakeholders such as customers, local communities, employees, government, and finance providers

Benefits to Government of CEAM Implementation by Industry  The more that industry is able to justify environmental programs on the basis of financial self-interest, the lower the financial, political, and other burdens of environmental protection on government.  Implementation of CEAM will effect of existing government policies/regulations by revealing to companies the true environmental costs and benefits resulting from those policies/regulations  Government can use industry CEAM data to estimate and report financial and environmental performance metrics for government stakeholders such as regulated industries or the industry partners in voluntary programs.  Industry CEAM data can be used to inform government program/policy design.  Industry CEAM data can be used for regional or national-level accounting purposes.

CEAM in North America and Europe Examples of initiatives in North America and Europe that promote CEAM as a tool for many environmental programs  US EPA’s Environmental Accounting Project  Environmental Canada-Quebec Regional Office’s Private Sector P2 Initiative  Graz (Austria) Department of Environmental Protection’s EcoProfit Initiative  UK Environment Agency’s CEAM for Financial Accountants Project

CEAM in Asia Examples of CEAM and CEAM related projects and activities in Asia  Philippine Training Course on CEAM supported the US-Asia Environmental Partnership (USAEP)  Environmental Accounting Guideline published by the Ministry of Environment in Japan  UNEP’s CP Finance’s Profiting from CP Course in Vietnam  Taiwan Environmental Management Association’s CEAM Training Project  Thailand Environment Institute’s Workshop on CEAM

Do you know a true cost of a product that you consuming

In a word  "Let every individual and institution now think and act as a responsible trustee of Earth, seeking choices in ecology, economics and ethics that will provide a sustainable future, eliminate pollution, poverty and violence, awaken the wonder of life and foster peaceful progress in the human adventure” --- John McConnell (founder of International Earth Day)  “You can’t manage what you don’t see - and with today’s managerial environmental accounting systems, managers don’t see most environmental costs” ---R. Todd (Greening of Industrial Ecosystems)

Is CEAM good for a Company or Government or our future Generation?

Referance    BDO Environmental Management Accounting Case Study: Methodist Ladies College. Perth, Australia: Environment Australia, ICAA, and EPA Victoria.  Block, D On-Site Grinding and Recycling of Home Construction Debris.  In The Green Bottom Line. Bennet, M. and James, P. Sheffield, UK: Greenleaf Publishing