Environmental Accounting

What’s it all about?

The need for organisations to take environmental impacts into consideration for business, legal and ethical reasons.

How can a company monitor it’s environmental impacts (and therefore do something about them)?


Natural Capital

“Natural Capital can be defined as the world’s stocks of natural assets which include geology, soil, air, water and all living things.

It is from this Natural Capital that humans derive a wide range of services, often called ecosystem services, which make human life possible.

The most obvious ecosystem services include the food we eat, the water we drink and the plant materials we use for fuel, building materials and medicines. There are also many less visible ecosystem services such as the climate regulation and natural flood defences provided by forests, the billions of tonnes of carbon stored by peatlands, or the pollination of crops by insects. Even less visible are cultural ecosystem services such as the inspiration we take from wildlife and the natural environment.”


“The ACCA have released a paper which reveals the important role that members of the accountancy profession can play in developing common approaches to natural capital accounting and embedding these within business decision making.”

Fauna and Flora International, Update January 2016, Number 28

Download the PDF file .

Further Reading

It’s not all just about being fluffy…..

There is an assumption sometimes that companies should adopt environmentally friendly approaches for moral reasons. I happen to think this very strongly. However, there are also usually also very strong business reasons for doing so.


External Costs – the costs that society ‘pays’ when a business activity is undertaken that the company doesn’t have to pay. For example the pollution/climate change impacts of using fossil fuel. As a way of encouraging companies to reduce their societal impacts, taxes can be applied that reflect the impact on society.

Here is a presentation on calculating the level of tax that wwould be required to shift road transport of goods etc. to rail.


Valuing the environment.

The core problem we have is that there is a value on the environment damaged, but not on it kept well.

Simply put, you can say how much the houses are worth if you build on a wood, but not easily what the wood is intrinsically worth.

This is a good summary of the issues.


The impact of reducing marginal costs.

“While the costs of renewable technologies in some higher priced markets can be well above that of coal- or gas-fired plants, the report details how utility-scale solar PV and especially onshore wind power are comparable and often lower in countries featuring plentiful resources and appropriate market and regulatory frameworks. ”

As set up costs drop renewables become better value economically (they re automatically better value environmentally!) the marginal cost of a unit of electricity is zero – once you have got the equipment, wind ansd sunshine doesn’t cost you anything. Coal and gas do cost.


Possible Written Questions.

(No indication of marks – the more marks a question gets, the more you are expected to write – detail that is, not just words!) If you can’t answer these, you need to do some more reading. I do ‘find’ questions elsewhere, so these aren’t all questions I have used myself.