What Is Green Accounting? A Brief Overview of Environmental Accounting
A crash course on linking economy and environment
As environmental awareness continues to grow, so too have business careers that take into account the health and well-being of the planet. Environmental or “green” accounting is an expanding field that focuses 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 new ‘triple bottom line’: people, planet and prosperity/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 that employment of accountants and auditors will grow 16 percent from 2010 to 2020.1 Here’s a handy guide to the world of green accounting.
Why does "green" accounting matter?
Climate change will affect not only the quality of life on earth, but economic factors as well. For instance, according to the Climate Vulnerability Monitor report, the U.S. could lose 2 percent of its gross domestic product as a result of droughts and water shortages by 2030.2 In the Philippines, forecasts for reduced rainfall play into the decision whether to tap into the nearly $1 trillion worth of gold and nickel beneath the country’s soil. The mining process would require a large amount of water—so how much would be lost if fresh water is diverted from agriculture?3 Investors increasingly are interested in corporate disclosures of measures of greenhouse gas emissions, water and energy consumption, waste creation and recycling, and renewable energy use.4
How does environmental accounting work?
In the private sector, a green accountant may advise clients on the sustainability and environmental impact of their decisions. As resources wane, these environmental factors play an increasingly larger role in the bottom line and decision-making within a company. But how is sustainability measured across an industry? The Sustainability Accounting Standards Board, a U.S. nonprofit organization incorporated in 2011, currently is developing industry-specific sustainability accounting standards that can be used in annual reports such as 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.5 Green accountants will be needed to make sure such standards are implemented and reported.
What does the future hold?
In April the World Bank reported on the progress of five nations—Botswana, Colombia, Costa Rica, Madagascar and the Philippines—partnering to implement its Wealth Accounting and Valuation of Ecosystem Services (WAVES) project. The object of WAVES is to promote sustainable development by making sure that the value of natural resources is taken into account in the measure of, and plans for, economic growth.6 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 at some point in the not-too-distant future,” Gearty writes.7
Who should pursue a career in green accounting?
If you’re concerned with social and business responsibility, and you develop the necessary mathematical and analytical skills, green accounting could be the branch of accounting for you. “Individuals who are visionaries and believe people and organizations can and must make a difference are prime candidates for entering this field,” Gearty says. “The professionals who make a commitment to this field 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.”