Across the globe, organizations are facing intense pressure both internally and externally to manage their businesses in an environmentally and socially responsible manner. This paper discusses the importance of the adoption of environmental management accounting measures in organisations and how they can benefit in several ways ranging from the potential reduction in both cost and risk, preservation of natural resources, improved corporate reputation and in enhancing their competitive advantage.

Also, ERP systems enabled environmental management accounting can facilitate organisations in tracking their environmental data, measuring it against the set target and taking corrective actions, accordingly. This paper concludes with an emphasis on advantages through the use of ERP based environmental accounting for improved performance both, financially and ecologically

Perspectives

by Anupam Saxena & Hemant Kaushik

Abstract

Environmental Management Accounting through ERP

Keywords Environmental Sustainability, Environmental Management Accounting and ERP

Introduction “Our global climate is nearing tipping points. Changes are beginning to appear, and there is a potential for rapid changes

with effects that would be irreversible – if we do not rapidly slow fossil fuel emissions during the next few decades.” Renowned Climate Scientist, James Hansen

Critical natural resources like air, water and soil have the ability to enhance economic growth and improve the quality of life of people besides ensuring sustainability and they should be preserved at any cost by households and industry. The concept of sustainability can be equated with triple bottom line notion of performance encompassing environmental, economic and social dimensions (Porter and Kramer, 2006). The integration of business and sustainability is not new, and it is well ingrained in Indian business. The concept of parting with some percentage of wealth for the well-being of society was prevalent in good old days, and traders were considered as harbingers of overall peace and prosperity. They were further considered as assets to the society and treated with utmost respect which is well recorded in ancient Indian texts like “Mahabharata” and “Arthashastra”.

In the current context, when environment degradation poses risk to the existence of human life, business organizations, a dominant form of social organization can make meaningful contribution to the upliftment of natural resources and environment. Successful organizations by the virtue of their dominance in the global economy can exert significant influence in mitigating adverse climatic change and promoting environmental sustainability (Melville, 2010).

As business and industry leaders face the challenges of the twenty-first century, they can pursue an agenda of expanding their business entity in a more socially responsible way. This will not only help them in realizing their business goals but also them in coping up with the pressures due to the close scrutiny of their operations by various environmental groups and NGOs (See Appendix 1 for two examples in this regard).

Environmental Management Accounting (EMA) and its relevance “The purpose of business organizations is to serve human needs. Individuals and organizations grow when they devote

themselves to the others and relationships improve when there is a focus on serving others”. Stephen Covey, Internationally known authority on leadership.

With the growing demand for eco - friendly products and services by internal and external stakeholders including regulatory bodies, Organizations have to face threefold broad challenges namely challenges of globalization & changing business models, challenges of technological up-gradation and pressure of producing eco – friendly products and services

FIIB Business Review. Volume 1, Issue 2, January - March 2012