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Do Environmental Management Information Software Increase Accounting Efficiency

In: Computers and Technology

Submitted By Leila
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Accounting is not the same as it used to be. Advancements in information technology have transformed the accounting process and the ways in which accountants undertake their roles. Bookkeeping, calculations and data storage that were previously maintained on paper are now all processed on computers through the use of accounting information systems. It is a known fact that accounting is influenced by external factors such as the economy, laws and society and it must persist to remain current with all the factors that affect the accounting process to maintain its effectiveness.

Society has had a great influence over the accounting process, so much so, that a notion stating some information regarding the internal workings of a company should be made available to the public, forced the mandatory disclosure of a company’s financial information to its stakeholders as well as the public.

Society has also influenced accounting in a more indirect manner.
This can be illustrated by how the societal push towards a more environmentally aware culture forced new regulations and standards such as ISO 14001 (International Organization For Standards, 2010) to be established to reflect this perceptional change, which in turn indirectly created compulsory costs for a company pertaining to the promotion of environmental sustainability.

Companies are now obligated to offset their pollution levels and any harmful bearings their corporate activities cause to the environment, as well as allocating some of their resources towards environmentally conscious activities such as recycling and waste management systems. Additionally, they must produce environmental reports disclosing all this information, creating further costs (Langfield-Smith et al. 2009).

All these factors subsequently resulted in the development of Environmental Management Information Software/Systems, which are ‘systems put in place by organizations to manage their environmental performance’ (Langfield-Smith et al. 2009, p.858).
Essentially they provide a more competent and coordinated means of overseeing all environmentally related costs and procedures, as opposed to doing it manually which can be timely, costly and inaccurate.

Accounting efficiency is contingent on the inclusion of all relevant costs and information that is useful to aid decision making.

The identification of these environmentally related costs enables the possibility of measures being taken to reduce and manage them. Without Environmental Management Information Software/Systems, important information may be omitted or overlooked, undermining the efficiency and effectiveness of accounting information (reports) provided.

The impact that environmental concerns have on the way businesses are conducted is unavoidable. Companies must now acknowledge these factors in compliance with regulations and standards as expenditures and measures that allow the continual functioning of their organizations. As it is the accountants role; both management and financial, to analyze and record all relevant costs and liabilities to a business, they must also take environmental costs and procedures into account and accurately include them in their provision of financial reports.

In effect of this, because environmental impacts are so extensive, and can create even the minutest of cost which still must be acknowledged as overheads, standard Accounting Information Systems alone will not suffice as a means to efficiently manage the broad aspects of environmental accounting, thus necessitating the development of Environmental Management Information Systems.

The accounting process cannot be effective without the inclusion of all relevant information regarding the financial inflows and outflows of an organization; furthermore, they cannot be efficient without adequate systems in place to ensure the information is being properly recorded and managed.

The incorporation of Environmental Management Information Software/Systems provide many benefits, companies that are sufficiently integrated with Environmental Management Information Software/Systems can alleviate the tediousness and effort required to produce mandatory environmental reports, as it serves as a measure that automates some of the processes involved in data organization, which otherwise would be more timely and less efficient if done manually.

Along with this, as previously stated, a more comprehensive inclusion and regulation of company cash flows allows for more accurate reporting and better decision making, again further promoting efficiency in the accounting process.

Disadvantages that arise may pertain to the cost of internalizing Environmental Management Information Software/Systems within an organization, and costs to train employees to correctly use them. However it is evident that the long-term benefits that can be attained with their integration outweigh the disadvantages, especially when the short and long-term detrimental effects of not having Environmental Management Information Software/Systems in place will cause to a company.

The increase in accounting efficiency that can be obtained through the use of Environmental Management Information Software/Systems can be exemplified through the case of G H Michell & Sons (Deegen, cited in Langfield-Smith et al. 2009, p.869).

This company worked in the field of wool and leather processing. On close inspection several costs that negatively affected the environment were identified along with costly processes and high expenditures creating a limitation in their productivity levels. This resulted in the company reforming their costing systems to better reflect their activities, and with the inclusion of environmental issues, they were able to reduce unnecessary costs and processes, to ultimately improve their efficiency.

Improvement in accounting efficiency through use of Environmental Management Information Software/Systems has been established firstly through the determination that environmental processes and costs are directly intertwined with the financial aspects of accounting.

This was further demonstrated by the evaluation of the benefits that are obtained as a result of integrating Environmental Management Information Software/Systems into an organization, as opposed to not.

These benefits included the mandatory inclusion of relevant environmental costs into the accounting process, the availability of a system that manages and maintains all data pertaining to environmental processes and costs, and allows for the production of accurate environmental reporting

The apparent disadvantages that were identified were poor organization and/or omission of relevant data that can occur in the absence of Environmental Management Information Software/Systems, undermining the principle of relevance and ultimately hindering the ability of the accounting in an efficient process. In the future, Environmental Management Information Software/Systems can be reformed and improved to create a broader system which incorporates both the financial, management and environmental aspects of accounting into one. This implication would create the benefit of having the availability of a comprehensive pool of information from one source which has the ability to produce outputs and reports that will aid in decision making and the improvement of productivity for both the accounting process and companies.

References

A.J.D Lambert, M.H Jansen, M.A.M Splinter, 2000, ‘Environmental Information Systems Based On Enterprise Resource Planning’, MCB University Press, vol. 11, no. 2, pp. 105-112

Considine, Razeed, Lee, Speer & Collier, 2008, Accounting Information Systems: Understanding Business Processes, 2nd edition, John Wiley & Sons, Milton, Qld.

Deanna H. Matthews, 2003, ‘Environmental Management Systems for Internal Corporate Environmental Benchmarking’, Benchmarking: An International Journal, vol. 10, no. 2, pp. 95-106.

Eugenio, Lourenco & Morais, 2010, ‘Recent Developments in Social and Environmental Accounting Research’, Social Responsibility Journal, vol. 6, no. 2, pp. 286-305.

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