International experience in environmental accounting and applicable conditions in Vietnamese corporates
Ph.D. Duong Thi Quynh Lien – lecturers, Economics Faculty, Vinh Vniversity,Việt Nam.
Abstract: Environmental accounting is a new and developing field that identifies and supplies important and necessary information on costs and earnings related to the environment, provides guidelines to the corporates and project owners in making economic desisions, encourages them to use the resources, including the natural resources, effectively created by the human, minimizes the environmental destruction, waste and pollution and change the treatment behaviors to the living environment. Environmental accounting is now being developed and popular in some countries in the world (U.S, Japan, Republic of Korea, etc) but remains new in Vietnam. This article is about the international experience in environmental accounting and applicable conditions in Vietnamese corporates.
Keywords: Environmental accounting, environment, environmental administration-accounting.
Environmental accounting is a quite new field in Vietnam but it has appeared in the developed countries since 1990s of the last century. The environmental accounting firstly appeared in US in 1972, after the United Nations Conference on haman environment held in Stockhom (Sweden) in 1972, but stressing in the national-level accounting, i.e. national accounting. However, by 1990, the corporate environmental accounting was studied. By 1992, the US Environmental Projection Agency implemented a project on environmental accounting with the task to encourage and promote the corporates to get awareness of all aspects of environmental costs, relationshiop between the environmental costs and environmental factors in making business decisions.
The corporates’ change in awareness of social responsibilities for the environmental matters puts the corporate traditional accounting in a challenge that is how and by which way it can account the environmental factors? It is not only via the role of traditional accounting in recording and reporting the financial information but also shows the role of accounting as an efficient supporting tools for the administrators in management of environmental issues in each economic unit. In such context, the appearance of environmental accounting is inevitable to meet the requirements of environmental information in corporate activities at both theoritical and practical aspects. (5)
1. Environmental accounting in some countries
Environmental accounting in several developed countries is valuable experiences for the developing countries like Vietnam. According to the experience of US corporates, the application of environmental protection measures and environmental accounting will increase the costs in general and environmental costs in particular, however, it helps the corporates to get more benefit from the environmental protection activities, e.g. earnings increase due to saving of water, power, used materials, reduce the wastes and waste treatment costs.
At present, the application of environmental acounting in this country mainly focuses in environmental costs serving for making decisions by the administrator, supplying environmental information at the request of the managers and this accounting information is shown in the Global Reporting Initiatives (GRI).
The experiences of US, Germany, Japan, Korea, etc show that the application of environmental accounting in corporates increases the environmental costs but helps them enhance the benefits from earning and environmental-friendly products, saving the costs, material, fuels, waste treatment costs, penalty costs due to causing pollution.
In Germany, the corporates apply the environmental accounting for making decisions on change of technique, management systems, green-based product strategy, environmental-friendly material uses, etc. This change results in saving costs of materials, power, water, waste treatment and increasing the productivity and operation efficiency, etc. The experiences of German corporates also show that the application of the environmental accounting mainly focuses in accounting the material flows, analysis of Input-output sheet, indenfying the annual volume of materials, power, water use, emission, waste water and solid waste.
In Asia, Japan is a country where the corporates always lead in research and application of the environmental accounting. The reality of corporates in this country shows that the application of environmental protection measures and environmental accounting will increase the corporate economic efficiency and environmental protection efficiency.
The application of environmental accounting in accounting the flows of materials, environmental costs and earnings accounting, analysis of ecological balance sheet, analysis of product life circle, indentification of annual volume of materials, power, water use, emission, waste water and solid waste, environmental costs and earnings accounting. The environmental accounting of Japan stresses in using of material ruler and value ruler during the accounting and environmental information stated in Annual Report on environment, society and finance.
Basically, applying the environmental accounting requires a comprehensive and consistent system of policies and laws and close coordination among the Governmental agencies in relation to the environmental and accounting, the environmental protection organisations, professional associations on accounting in the local and foreign countries and especially the main subject which is the corporate community.
The application of environmental accounting in corporates of the countries was initially voluntary, therefore, in the first stage, the administration agencies only issued the guidelines for the corporate to apply the environmental accounting. In fact, the corporates applying environmental accounting have increasing business output, which encourages other corporate to apply the environmental accounting. Therefore, the management agencies should issue the environmental accounting standards and regulate the environmental information stated in the report supplied to the outside corporate, at the aim to ensure the consistency in environmental management.
According to the accounting specialists, the corporates in each country, depending on their physical, technical, capacity and management level at specific stage can stress on one of or more environmental accounting contents, but substantially accounting the flows of materials; Analysing the product life circle; Accounting environmental costs and earnings; Evaluating the responsibilities in environmental management; Presenting the environmental information in the corporation reports, etc. (1,2,3, 4)
2. Learned experience applicable to the environmental accounting in Vietnamese corporates
In the current context, Vietnamese corporates may choose application of experience in environmental management accounting from US, Germany, Japan and Korea as appropriate to their operation conditions. In fact, the environmental accounting is often applied in the large-scale corporates with abundant financial budget and strict operation policies. Therefore, with Vietnamese corporates, in the initial phase, the environmental accounting should be pilot in a chain or a part of a technology before the mass application in the corporate.
Although the environmental accounting is an internal field of a corporate, its development needs great contribution of efforts in issuance and guidelines and ensuring the enforcement by the financial aids from the Governmental agencies.
The environmental accounting may be applied to the corporates of various scales. However, the environmental accounting is often applied in the large-scale corporates with abundant financial budget and strict operation policies. TIn the initial phase, the environmental accounting should be pilot in a chain or a part of a technology before the mass application in the corporate.
Scope of environmental accounting application in corporates varies but takes high rate in the firms operating in industries where the production operations have more impacts on environment.
The environmental accounting has been widely applied in the developed countries and under implementation to meet the sustainable development process. The experience learned from the environmental accounting application in some countries in the world will facilitate the Vietnamese corporates to shortern the time of pilot research and apply it effectively, thus enhancing the economic and environmental efficiency and increasing competitiveness of Vietnamese corporates in the course of regional and global economic integration. (5, 7)
3. Applicable conditions of environmental accounting in Vietnamese corporates
To gradually apply the environmental accounting , the following should be done by the Vietnam authorized bodies:
- Firstly, Constitutionalize the environmental accounting application and incorporate it as a part of accounting system, officially stated and enforced in the socio-economic information reporting system at marco-level.
- Secondly, promptly finalize the environmental statistics system, list the data that Vietnam can meet the requirements of regular updating, the missing data and the data that cannot be collected at the present time. Accordingly, develop a plan and sequence for gradually finalizing the necessary environment statistics system. In the initial stage, it is possible to apply environmental accounting to some resources, such as: marine products, petrol and gas, land which are now the important resources for the economy of our country.
- Thirdly, Change and enhance awareness level and actions by the organisations and stakeholders related to the environment in each firm and in the whole economy.
- Forthly, the Government should issue the environmental accounting standards, provide the environmental information stated in reports to the outsiders, at the aim to ensure consistency of environmental management.
- Fifthly, Change and enhance awareness level and actions by the organisations and stakeholders related to the environment in each firm and in the whole economy. ( 6, 8)
- Ministry of Economy, Trade and Industry (2002), “Environmental management accounting technique workbook”
- Ministry of the Environment (2005), “Environmental accounting guidelines”
- National Assembly (2010), Law on Environmental Protection Tax (Law No. 57/2010/QH12) dated 15 November 2010;
- Government (2011), Decree No. 67/2011/NĐ-CP dated 8/8/2011 providing details and guidelines for implementing some articles of the Law on Environmental Protection Tax
- Ass. Pro, Dr. Pham Duc Hieu, Ass. Pro, Dr. Nguyen Thi Kim Thai (2012), “Environmental accounting in corporates”, Education Publishing House
- M.A. Hoang Thi Bich Ngoc “Environmental management accounting – Experience lesson for Vietnam”, Accounting & Auditing Review
- M.A. Ha Thi Thu Nga (2014), “Environmental accounting for Vietnamese corporates”, Lao Cai Community College
- M.A. Dao Thi Giang, M.A. Dao Thi Thu Ha (2016), “Environmental accounting in corporates”, Financial Review, 1st issue, Sept 2016.