Theory and practice of environmental management accounting

The theory and practice of environmental management accounting (EMA) have emerged in recent decades as a response to the growth of environmental problems. EMA can be defined as the identification, collection, estimation, analysis, internal reporting, and use of materials and information relating to energy flow and environmental and other costs for both conventional and environmental decisionmaking within an organization. It is now a widely used tool in balancing the interaction between the economic, social and technological factors in the development process to achieve the conditions for sustainable environment. The rapid growth in the number of companies that are awarded ISO 14001 certificates has enhanced the development of EMA all over the world. Many governments are involved in promoting EMA. In China, the government and companies are doing their best to keep pace with the global trend of environmental protection. The main problems of EMA relate to the specification of environmental accounting information, the allocation of environmental costs, legislation issues and the lack of environmental accounting standards. Among all the available policy instruments governments could use, the paper argues that regulatory or market-sensitive instruments would be more suitable for China. It is also possible for the Chinese government to direct companies in establishing environmental reporting and environmental auditing systems.