Green accounting

Green accounting is a type of accounting that attempts to factor environmental costs into the financial results of operations. It has been argued that gross domestic product ignores the environment and therefore policymakers need a revised model that incorporates green accounting. The major purpose of green accounting is to help businesses understand and manage the potential quid pro quo between traditional economics goals and environmental goals. It also increases the important information available for analyzing policy issues, especially when those vital pieces of information are often overlooked. Green accounting is said to only ensure weak sustainability, which should be considered as a step toward ultimately a strong sustainability.NDP = Net Exports + Final Consumption (C) + Net Investment (I)EDP = Net Exports + C + NAp. ec + (NAnp.ec - NAnp.n) Green accounting is a type of accounting that attempts to factor environmental costs into the financial results of operations. It has been argued that gross domestic product ignores the environment and therefore policymakers need a revised model that incorporates green accounting. The major purpose of green accounting is to help businesses understand and manage the potential quid pro quo between traditional economics goals and environmental goals. It also increases the important information available for analyzing policy issues, especially when those vital pieces of information are often overlooked. Green accounting is said to only ensure weak sustainability, which should be considered as a step toward ultimately a strong sustainability. It is a controversial practice however, since depletion may be already factored into accounting for the extraction industries and the accounting for externalities may be arbitrary. It is obvious therefore that a standard practice would need to be established in order for it to gain both credibility and use. Depletion is not the whole of environmental accounting however, with pollution being but one factor of business that is almost never accounted for specifically. Julian Lincoln Simon, a professor of business administration at the University of Maryland and a Senior Fellow at the Cato Institute, argued that use of natural resources results in greater wealth, as evidenced by the falling prices over time of virtually all nonrenewable resources. The term was first brought into common usage by economist and professor Peter Wood in the 1980s. Environmental responsibility is a potent issue among businesses in this modern age. It has become necessary for corporation to formulate methods of promoting green causes for the present and the future. Green accounting helps promote a sustainable future for businesses as it brings green public procurement and green research and development into the big picture. Penalties for polluters and incentives (such as tax breaks, polluting permits, etc.) are also a crucial part of this type of accounting. The System of National Accounts (SNA) defines Net Domestic Product (NDP) as: This is also a typical formula found in articles and texts about accounting. Green Accounting, however, uses the System of Environmental Economic Accounting (SEEA), which focuses on the depletion of scarce natural resources and measures the costs of environmental degradation along with its prevention. Thus, the NDP is newly defined as Green NDP, or also known as EDP. The green accounting formula is: