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  • Dean Graham

What do you know about Green Accounting?

Updated: May 18, 2023


Sustainable accounting, also known as environmental or green accounting, is a branch of accounting that focuses on integrating environmental and social considerations into financial reporting. It recognises the importance of economic, environmental, and social factors in business operations and decision-making.

The primary goal of sustainable accounting is to provide comprehensive information about the financial, environmental, and social performance of an organization. It goes beyond traditional financial accounting by including non-financial indicators and metrics that assess the impact of business activities on the environment and society.

Sustainable accounting encompasses various principles and practices, including:

  1. Environmental Cost Accounting: This involves identifying, measuring, and reporting the costs associated with environmental activities, such as pollution control, waste management, and resource conservation. It helps organizations understand the financial implications of their environmental impact.

  2. Environmental Performance Measurement: Sustainable accounting involves assessing and reporting the environmental performance of an organization. This includes measuring and monitoring indicators such as greenhouse gas emissions, energy consumption, water usage, and waste generation. By tracking these metrics, businesses can identify areas for improvement and set targets to reduce their environmental impact.

  3. Social Impact Assessment: Sustainable accounting recognises the social dimension of business activities. It involves evaluating and reporting the social impacts of an organization, such as its contribution to local communities, employee welfare, diversity and inclusion practices, and human rights. By considering these factors, businesses can assess their social responsibility and promote positive social outcomes.

  4. Triple Bottom Line Reporting: Sustainable accounting expands the traditional concept of the "bottom line" by incorporating three dimensions of performance: economic, environmental, and social. This approach is often referred to as the triple bottom line. It aims to provide a holistic view of an organization's overall sustainability performance by considering its financial profitability, environmental stewardship, and social responsibility.

By adopting sustainable accounting practices, organizations can enhance their decision-making processes, improve resource efficiency, reduce environmental risks, and build trust with stakeholders. It allows businesses to better understand their impact on the planet and society and promotes long-term sustainability in both financial and non-financial terms.

We're starting to see the green shoots of sustainable accounting here in the UK with some of the larger software houses investing in their green credentials. A great example is the recent aquisition by Sage plc of Spherics - a U.K based carbon accounting platform for SME's to understand and reduce their environmental impact.

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