Financial Benefits

Improving revenue

Producing new products or services which meet the environmental needs or concerns of customers may lead to an increase in sales.

Cost reductions

Paying close attention to the use of resources can lead to a reduction in costs.

Increase in costs

Additional costs may arise from complying with legal and regulation requirements and improving the environmental image of the organization.

Costs of failure

Poor environmental management can result in significant costs e.g. the costs of cleanups and fines following environmental disaster.


Major challenge in application of environmental accounting as a management tool is identifying the relevant costs.
Costs definition determined by intended use of data (i.e. cost allocation, budgeting, product/progress design or other management decision support).

Types of environmental costs

Conventional costs: raw materials and energy costs having environmental relevance.

Potentially hidden costs: Costs captured by accounting systems but then losing their identity in general overheads.

Contingent costs: Costs to be incurred at a future date e.g. clean up costs

Image and relationship costs: costs that by their nature are intangible, for example the costs of preparing environmental reports.

Environmental cost can be significantly reduced or eliminated as a result of business decisions.

Environmental costs may provide no added value to a process, system or product (i.e. waste raw material)

Environmental costs may be obscured (not discovered) in general overhead accounts and overlooked (fail to notice) during the decision making progress.

Understanding environmental costs can lead to more accurate costing and pricing of products.

Competitive advantage with customers is possible where processes and products can be shown as environmentally preferable.

Organizations are beginning to recognize that environmental awareness and...