9.6 Understanding environmental management accounting and traditional management accounting
As you have learned, management accounting is the process of providing relevant and timely information to managers and other internal stakeholders to support planning, decision-making and control activities within an organisation. However, traditional management accounting systems often fail to capture and report the environmental costs and impacts of business operations, which may lead to poor decisions and environmental performance. In this section, you will learn about both the drawbacks of traditional management accounting, and why it is still useful.
Activity 11 Understanding and applying environmental management accounting
Read Section 2.1 (p. 19) of the IFAC report on Environmental Management Accounting (EMA). Having read the definition, if you were asked to come up with an alternate definition of EMA, what would it be? Write your own definition with an explanation of why you think your definition is more valid.
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Burritt et al. (2001) stated there is still no precision in the terminology associated with EMA. However, it is widely accepted that EMA is a process of collecting, analysing and communicating environmental information to support organisational decision making. The definition of EMA is still evolving and has been expanded upon by multiple international organisations, including the IFAC. Nevertheless, the essence of EMA remains the same: it is a tool for organisations to make informed decisions by considering the environmental impact of their operations and activities.
The quality of your answer depends on its coherence and your ability to support and justify your view. The aim of this activity is to encourage critical thinking, independent thought, reflect on your own learning and to apply the knowledge gained in this section.
In contrast to environmental management accounting, traditional management accounting may not adequately address the environmental costs and benefits of organisational activities. This can result in a lack of information and awareness for managers to make decisions that are aligned with environmental goals. Let’s look at some of the drawbacks of tradition management accounting.
Activity 12 Drawbacks of traditional management accounting
Traditional management accounting may fail to adequately deal with environmental costs and managers may therefore not have the adequate information to manage or reduce them. Tick all options that are a relevant drawback of traditional management accounting.
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All of the above are relevant drawbacks of traditional management accounting. This list is not exhaustive. Can you think of more?
Note down a few reasons why traditional management accounting is still useful, then listen to the audio in the feedback.
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The following audio discusses why traditional management accounting is still useful.
If you are interested in learning more about environmental management accounting, you can access the Journal of Cleaner Production or Management Accounting Research journal or search for the term ‘environmental management accounting’ to take a look at a few articles published within this area.
OpenLearn - Fundamentals of cost accounting and environmental management accounting 
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