In recent times, climate change, destruction of the natural environment and other ecological issues have raised questions about the Earth's sustainability. This, in turn, has put great emphasis on corporate social responsibility (CSR), and has sparked a movement for sustainable growth--the pursuit of harmony between corporate profits and 'other' issues such as environmental responsibility, transparent management and social contributions.
It has also become clear that neither a country nor a corporation can sustain steady growth without supplementing its efforts with methods to conserve and protect the environment; this is evidenced by the increasingly competitive efforts by developed countries to stake claims in green load markets such as carbon dioxide emissions, reusable energy, etc. These phenomena make it unmistakably clear that the role of environmental considerations and management will only increase in the future.
Traditional accounting methods lump environmental costs under other costs for raw materials, which spreads the costs over various departments and products, making it difficult to nail down exactly what the incurred costs are. The traditional methods also contain other limitations; as an example, all costs pertaining to air, water and earth pollution are not reflected in production costs.
As investors and interest groups begin stressing the importance of environmental preservation, costs to reduce pollution and environmental destruction will increase, making it difficult to simply lump the said costs under various other costs; this means that without considering the environmental costs, management and accounting cannot make optimal decisions. Additionally, international agreements and governmental controls on environmental conservation will significantly impact corporations' ability to export and produce products, as well as costs for raw materials. These happenings may either restrict certain corporate practices or increase raw material costs to the point that they can no longer be written off.
These developments have raised the importance of environmental management and accounting. Environmental management and accounting focuses on managing and tracking internal costs related to environmental considerations and regulations, and collects, organizes and supplies such data to management so that optimal business decisions may be made. Mainly, it seeks to divulge hidden or wrongly distributed environmental costs and place them back where they should be, providing decision-makers with more accurate data, which would in turn lead to more sustainable growth.
This report looks through the literature to observe the current methods of environmental accounting and measurement of environmental costs. It also seeks to explain the justifications for implementing environmental accounting, and contains survey data which analyzes the awareness and reality of environmental accounting amongst Korean corporations.
Specifically, on Chapter Ⅳ there included are analyses of FCA/TCAs, UNDSD‘s and Forum for the Future's Cost Accounting, Japanese LIME, MFCA and Emergy Cost Accounting systems in order to determine exactly how to measure environmental costs.
The conclusion of the report is that the necessity of integrated methods for measurement of environmental impacts, and environmental management and accounting which suits the local corporate culture is desperately required, and that sustainability reports and environmental reports currently filed by corporations should not simply be PR material for governments and investors, but should be the product of a practical environmental management practice.
If environmental consequences of corporate practices are excluded from corporate accounting, decisions which are harmful to the environment may be carried out indiscriminately, reducing corporate environmental awareness and possibly encouraging environmentally destructive behavior, leading to unsustainable growth. It is of paramount significance to make corporations aware of the fact that environmentally friendly management will, in the long run, ultimately benefit the corporation and will create new, previously unavailable markets related to the environment, providing fuel for further development. In order for such things to happen, a change towards "greener" corporate management and accounting practices is necessary.
Al Gore, in his 1996 report "Ecology and the Human Spirit: Earth in the Balance," stated that environmental preservation is not a shackle that saps the profits of a corporation, but is an impetus for the creation of new markets and increased profits. For Gore's statement to be true, sustained research and effort into researching the optimal balance of corporate profit and environmental preservation ("green growth") is necessary. These efforts cannot be made without support from not just corporations and academia, but governments as well.