2. INTRODUCTION
Traditional indicators of economic growth have many
flaws with how they address the environment.GDP
accounts for environmental resources through their use as
factors of production as long as these factors of production
have market prices.GDP is flawed because it does not
include environmental resources that do not have a market
price.GDP also may not include the depletion of natural
capital and the pollution of resources caused by
environmental externalities.For all these reasons,traditional
indicators of economic growth do not reflect the
sustainable use of environmental resources.
3. GREEN ACCOUNTING attempts to place value on
Environmental resources that do not have a market
price.Both the Index of sustainable Economic Welfare
(ISEW)and the Eco Domestic Product (EDP) are
examples of indicators of Sustainable economic
well being.GDP is relatively young measure of
economic growth.When the GDP was developed
between the 1930 and 1960, environmental
resources that did not have the market price were still
Considered as free gifts of nature.
4. WHAT IS GREEN ACCOUNTING
Green Accounting has a short beginning in the
late 1980s and is directly linked with
environment sustainability. Its main focus is
to place value on environmental resources that
do not have a market price and incorporate these
resources into the national accounts and into
economic growth measure.
5. Failures of Traditional Growth Measures
Traditional indicators of economic growth such as GDP
have many flaws because GDP does not take the depletion
of environmental resources into account; it actually
increases when environmental resources are
depleted.Also ,if something does not have a market price, it
is not part of GDP. The treatment of defensive
expenditures within GDP is also a large problem because
GDP actually increases when capital is spent on cleaning
pollution or repairing environmental damages.
6.
7. Green Accounting:A method to measure green growth
Green accounting requires the identification and monetary
measurement of the traditional private internal costs that directly
affect the bottom line of the balance sheet. These are direct costs,
such as materials and labor, which are attributed to a product or
department and indirect costs, or overheads, such as rent,
administration, depreciation, fuel and power.
Externalities such as social and economic environmental costs that
impact the external environment must also be taken into account.
Although often ignored, their inclusion as internal items in
corporate accounts could mean that scarce resources are more
efficiently allocated.
8. Effective Balance Sheet
An effective green balance sheet would be either in the red (a loss) or
black (profit). However, this would only be after including all
internal and external cost categories, such as health problems for
workers, emissions and pollution of air, land or water, degradation of
the natural environment and depletion of finite resources. Internal
and external benefits must also be calculated and quantified using
monetary measures. These could include savings from new cleaner
technologies resulting in lower pollution and better health, new
markets and substitution of raw materials or production processes.
Green accounts are a vital part of corporate social responsibility and
can help with decision making and triple bottom line profitability.
Essentially an organization needs to compare the costs of avoiding or
preventing environmental damage against the cost of remedial
activities.
9. BENEFITS
âą Creation of different indicators of sustainable
economic well being.
âą Through Green Accounting, nations can observe
their economic growth at a sustainable level.
âą Firms can also decide how much of an
environmental resource to use and when to use it.
âą Important to the sustainability of environmental
resources that do not have a market price.
10. OPPORTUNITIES IN GREEN ACCOUNTING
Green accounting is a career choice with a big impact.
Instead of figuring out how the corporate giant of the
world can make impressive profit,a green accountant
analyzes external and internal cost,then this information
can be used by companies or government to calculate
carbon credits etc.
Green accounting goes beyond whistle
blowing and government sponsored studies. Many
private companies hire environment accounting to
evaluate the cost of cutting pollution, including adding
in benefits of tax relief for following government
regulation or tax credits utilizing government approved
equipment , more will be relief from government.
11. CRITICISMS OF GREEN ACCOUNTING
âą Existence of numerous valuation techniques and
sustainability indicators.
âą Not necessary for certain resources.
âą Correct implementation of green accounting
methods.
âą It may be great theoretically,but very poor
practically.
âą It is long term process therefore to draw
conclusion is not easy.
12. CONCLUSION
âą Regardless of the criticism,green accounting is
necessary to place value on environmental resources.
âą If traditional economic growth measures included
environmental resources that do not have a market
price as well as environmental resource depletion,green
accounting would not exist.
âą The main problem with the GDP is that it only includes
goods and services that are exchanged on the market
and many environmental resources do not have a
market price.
