What Is Green Accounting? A Brief Overview of Environmental Accounting
A crash course on linking the economy and the environment
As environmental awareness continues to grow, so too have careers that account for the health and well-being of the planet. Environmental or “green” accounting is an expanding field focused on factors like resource management and environmental impact, in addition to a company’s revenue and expenses.
“Green accounting demonstrates organizations’ commitment to the most important aspects of the ‘triple bottom line’: people, planet and profitability,” says Tim Gearty, national director and editor-in-chief, Becker Professional Education CPA Exam Review. Although the U.S. Bureau of Labor Statistics doesn’t forecast the growth of environmental accountancy specifically, the agency predicts employment of accountants and auditors will grow 13% from 2012 to 2022. Here’s a handy guide to the world of green accounting:
Why does green accounting matter?
Climate change will affect the quality of life on earth as well as economic factors. According to the Climate Vulnerability Monitor report, the U.S. could lose 2% of its gross domestic product as a result of droughts and water shortages by 2030. Investors are increasingly interested in corporate disclosures of greenhouse gas emissions, water and energy consumption, waste creation and recycling, and renewable energy use.
How does environmental accounting work?
In the private sector, green accountants may advise clients on the sustainability and environmental impact of their decisions. As resources wane, environmental factors play an increasingly larger role in the bottom line.
The Sustainability Accounting Standards Board, a U.S. nonprofit organization incorporated in 2011, is currently developing industry-specific accounting standards for sustainability that can be used in annual reports. One example is a Form 10-K, a detailed summary of a company’s business, risks and results that most publicly traded companies must file with the U.S. Securities and Exchange Commission (SEC). “Without standards, the investment community cannot make meaningful ’apples-to-apples’ comparisons of performance among companies and over time,” the SASB reports. Green accountants are needed to make sure such standards are implemented and reported.
What does the future hold?
In 2013, the World Bank reported on the progress of five nations—Botswana, Colombia, Costa Rica, Madagascar and the Philippines—implementing its Wealth Accounting and Valuation of Ecosystem Services (WAVES) project. The goal of WAVES is to promote sustainable development by making sure the value of natural resources is taken into account in the measure of, and plans for, economic growth. Although sustainability reporting is voluntary under SEC guidelines, that could change. “If history is any indicator, what is voluntary today may very well become mandated in the not-too-distant future,” Gearty writes.
Who should pursue a career in green accounting?
If you find social and business responsibility interesting, and mathematical and analytical skills are some of your strengths, green accounting could be a career to consider. “Individuals who are visionaries and believe people and organizations can and must make a difference are prime candidates for this field,” Gearty says. “The professionals who make this commitment will realize that they, and the work they are doing, will have a positive impact on the human condition and environment for decades to come.”