Environmental Accounting - An Essential Tool for Long Run Survival

Economic development will be sustainable only if it is pursued in a manner which protects the environment, and that there is a need to pay greater attention to the management of water, forest and land resources. Rising pressures on the environment and increasing environmental consciousness have generated the need to account for the various interactions between all sectors of the economy and the environment. Environmental accounting is the ability to provide accurate information in the financial statements regarding the estimated social cost occasioned by the production externalities on the environment and how much deliberate intervention cost had been incurred to bridge the gap between the marginal social cost and the marginal private cost by a firm. Environmental reporting has been seen as a way of increasing accountability of organizations regarding environmental issues. Environmental accounting is an inclusive field of accounting. It provides reports for both internal use, generating environmental information to help make management decisions on pricing, controlling overhead and capital budgeting, and external use, disclosing environmental information of interest to the public and to the financial community. There are several advantages environmental accounting brings to business, notably, the complete costs, including environmental remediation and long term environmental consequences and externalities can be quantified and addressed. Companies and other organizations are required to have accountability to stakeholders, such as consumers, business partners, investors, employees, local residents, and administration, when utilizing environmental resources, i.e. public goods, for their business activities. This paper tries to explore the concept of environmental accounting in Indian scenario.