Environmental Accounting
Systems
Arturo A. Keller
Bren School of Environmental Science & Management
University of California, Santa Barbara
ESM 595F
Environmental Accounting Systems
“You can’t manage what you don’t
see - and with today’s managerial
accounting systems, managers
don’t see most environmental
costs”, from R. Todd (Greening of
Industrial Ecosystems, 1994)
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Objective of Env. Account. System
Record
& monitor flow and
disposition of all inputs
waste disposal
reprocessing
recycling
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Objective of Env. Account. System
Processing
costs involving
environmental impact
pretreatment
emissions control costs
air emissions
 water treatment
 solids reduction

packaging disposal/return costs
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“Hidden” costs
Site
remediation costs
Product-related legal expenses
Regulatory costs
PR expenses
Opportunity cost of clean
technologies not adopted
DfE, PP engineering costs
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Institutional Impediments
Traditional accounting doesn’t capture
engineering & accounting data needed for
decision making
Data collected is aggregated in “wrong”
format, losing environmental context
Line managers not responsible for most
environmental costs
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How to present the information?
Corporate
level
Facility level
Product line
By department or section
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To Whom it May Concern...
Internal
accounting
Financial reporting
Regulatory agencies
Others … ?
Bren School students doing GPs?
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Managerial Information
Detailed
cost breakdown
Joint costs
expense of tracking costs on individual
product line basis
technical difficulties of measuring productspecific material flows and emissions
negative incentive to collect detailed info
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Unprofitable products?
Internal
+ External Costs > Price
Competitive market
Market leader
Large portion of current revenue
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Don’t Look, Don’t Tell...
Confidentiality
of Sensitive Info
Costly contingent liability
Legal liability
Public perception
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Role of Mgmt Accounting Systems
Direct
managerial attention to
problem areas
Provide informational support
for managerial decisions
Promote harmonized goals
throughout the organization
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Traditional Env. Accounting
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Traditional Env. Accounting
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“Enlightened” Cost Accounting
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Bottom Line…
Need
to restructure incentive
compensation system (multiobjective)
Establish priorities
Tailor to individual firm
Adapt to changing social
climate
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