Research Outline

On

A Study of Environmental Accounting and

Reporting An Empirical Analysis

Submitted
by
Rekha K M
Lecturer
New Horizon College,
Kasturi Nagar, Bangalore

Under the guidance

of
Dr. V. Mahesh
Asst. Professor & Chairman
Department of Post-Graduate Studies and Research and Commerce
Karnataka State Open University
Mysuru-06

Submitted to Karnataka State Open University, Mysuru

For Registration For Ph.D Programme in Commerce

August – 2020
Introduction
Due to an increasing deployment of natural resources, improvement in
environmental performance has become a major goal for our economies over the past
decades. In this quest, the need for reliable information systems for measuring and
valuing the environmental impacts from our current production and consumption
patterns has proved actue.

Environmental accounting is an important tool for understanding the role

played by the business enterprises in the economy. It provides data that contains the
contribution of natural recourse to economic well being as well as the costs imposed
by environmental pollution and resource degradation.

In fact, the business entities largely depend upon the community and natural
environment for their overall success and growth. An enterprise is a corporate citizen.
Hence, they are equivalently responsible towards the society and the environment, by
its economic performance. As far as Indian corporate sector is concerned, it is sad but
true that it has not been performing as a good citizen. There are many laws that have
been enacted and amended from time to make the corporate sector to fulfill its social
responsibility for better development of Indian environment and economy.Therefore,
recent year have witnessed rising concern for environmental degradation which
witnessed rising concern for environmental degradation which is taking place due to
increasing industrial activities. It may be noted here that the environmental
degradation and pollution spoil human health reduce economic productivity and lead
to loss of amenities.

Environmental accounting being an umbrella term encompasses all aspects of

the corporate land scope -legal, financial, technological and scientific. Conventional
accounting system takes into consideration only non -living things and their relevant
transaction, but environmental accounting being a "Language of societal concern"
successfully attempts to identify measure and communicate the resource consumed
and costs imposed on the environment by the business corporations with distinctive
emphases environmental preservation.
Environmental Accounting in the context of National Income Accounting refers to
natural resource accounting, which can entail statistics about a nations or regions
consumption, extent, quality and value of natural resource, both renewable and non-
renewable.

Environmental Accounting in the context of Financial Accounting usually refers

to the preparation of financial reports for external audiences using Generally Accepted
Accounting Principal.

Environmental accounting as an aspect of Management Accounting saves

business manages in making capital investment decision, costing, determinations,
process/ product design decision performance evaluation and a host of other forward
-looking business decision.

It can be defined as the identification, collection, estimation and analysis of

environmental cost information for superior decision -making within the firm.

It can also be defined as the generation analysis and use of financial and non-
financial information in order to optimize corporate, environmental and economic
performance, achieving sustainable business the ultimate objective of environmental
accounting is to clearly indicate the environment cost.

Environmental Reporting
It deals with the discloser of environmentally related information by an
organization. This can include (but is not limited to) contingent environmental
liabilities/risks,assets revaluation and capital projections as they relate to the
environment, cost analysis in key areas ( such as energy, waste and environmental
protection), investment appraisal to include environmental and climate change factors
ecological impacts etc.

The disclosure of environmental information can be viewed as part of an

organizations responsibilities to its stakeholders and/ or response to stakeholders
expectations. Environmental reporting at both national and corporate level, is a
voluntary activity and organizations make use of a diverse range of reporting media.
 There include annual reports, stand-alone, sustainability reports, integration
reports special purpose reports, websites, and social media to communicate
environmental information to the wider community.

Review of Earlier works

Ahmad, 2020 the board objective of the research article is to evaluate the practices in
the selected companies critically. However, the specific objectives of this study were
first to identify the need for environmental accounting and reporting practices.
Secondly to evaluate the awareness of the selected accountants as to the
environmental accounting and reporting practices in the sample organization during
the Year 2010. Third to identify the problem comprised in EAR practices in the
sample organization. Fourth to suggest some measure as to overcome the difficulties
thereby improving EAR practices in the sample. The study is mostly based on
Bangladesh only. Altogether 40 corporate annual reports have obtained by contacting
the company sources. All the selected companies are the listed companies of Dhaka
shake stock exchange. The primary data was also considered to assess the awareness
of the respondents as to the EAR practices. A total number of 40 Chief accountants,
taking one from each selected companies were interviewed by direct method with the
help of structured questionnaires. This study examine that Bangladesh is making
efforts to experiment with this new area of corporate reporting. Those doing
environmental discloses are noteworthy and deserve appreciation, but it has observed
that in most cases the quantity and quality of disclosures were less satisfactory and
inadequate companies should show fines and penalties paid by the company,
environmental liabilities of the company, environmental provisions, and
environmental costs capitalized in the notes to the accounts in their annual reports the
research and studies have to be encouraged in the field of EAR.

Goswami 2014 this research paper attempts to address the development of corporate
level environmental accounting and the problems associates with that. The study had
undertaken after considering the Environmental Accounting and Reporting adopted by
sample corporation in India. Some of the objectives of the study are first to identify
the recent development of the corporate environmental accounting and reporting.
Second to spotlight the corporate accounting and reporting practices in this regards.
The third is to find out the major obstacles to the sound development of that practice.
Sample selected were 12 companies from the list of top 50 companies of National
stock exchange. Data has been collected from annual reports consulted for the
financial year 2012-13. The author concluded that however, environment reporting
had developed in the forms of corporate reporting practice in India, it is found to be a
lack of comparability and verifiability, the fundamental characteristics of accounting
information. Hence, it is expected that in the upcoming future the government and
other accounting regulatory bodies may play a more active role in the development of
environmental accounting and reporting by making it reliable and relevant to users.

Malarvizhi and yadav, 2008 this research article sets out to examine the overall
trends in corporate environmental internet reporting practices. This research paper
aims to gain an insight into the corporate environmental internet reporting practices of
selected firms. The survey was conducted by going though the official websites
(annexure -1) of 24 top Indian companies (listed on the stock exchange of countries).
These top companies had selected as per economic times ranking, January 2007
survey. Authors have grouped these companies included in the sample into two
different groups that are manufacturing (Pharmaceutical, Automobiles and Chemicals,
Oil and energy and Construction) and non -manufacturing (Banking, IT and
Communication) sectors, The objectives of the research articles is to understand the
sector wise practices of corporate environmentally reporting. So this study can provide
an important input to the various environmentally sensitive interest groups in
understanding the evidence of corporate EAR practices. The data collection and
analysis sheet were framed to collect data on significant environmental indicator
areas, as acknowledged by the world business council for sustainable development
and by the global reporting initiative. The author concludes through analysis that a
major challenge to reporting community at large in India is to improve comparability
among environmental reports. The author further observe that the incorporation of
environmental costs, benefits and concern into main stream financial reports in India
on developing stage at present.
Pramanik, Alak Kumar 2007 in this research paper the theoretical foundation of
EAR is discussed with special reference to India. It lay more emphasis on
environmental accounting and awareness for EAR as this is supported to the need of
today. The data was collected by secondary source for theoretical frame work. The
outcome of this paper was in India level of environmental related disclosures in the
corporate annual reports, both financial and non financial is not an encouraging level.
Neither the company law nor the accounting standards / guidelines issued by the
institute of Chartered accountant of India prescribes disclosing norms for the
environment related matter in the corporate financial statement. On the whole, the
status of voluntary environmental disclosure in the annual reports of Indian company
is not good. It can be rather termed as poor. Secondary it may be due to the lack of
awareness and/ or commitment on the part of the company management about the :ial
responsibility of the company. Thirdly the poor environmental performance of the
company may also bound them to non disclosure or less disclosure. Finally, the poor
enforcement of the environmental protection acts is also partly responsible for freeing
the companies from disclosure of such information.

Joshi, Krishnan and Lave 2001 this research article examines the extent to which
accounting system separately identify all the costs of environment regulation. Author
mate the relation between the " visible" costs of regulatory compliance ( costs that
firms accounting system correctly classify as environmental) and "hidden"
environmental cost embedded in other accounts. This study has utilized plant level
data from 55 steel mills to estimate hidden costs, and track up with structured
interviews of corporate level mangers and plant level accountants. Empirical evidence
display there i growth in the visible cost of environmental regulation is connected with
an increases in total cost, which has hidden in other accounts. The discoveries
recommend that inappropriate identification and accumulation of the costs of
environmental compliance be likely to distort costs is companies subject to
environmental regulation.
Japee, 2012 This study was intended to find out the primary environmental reporting
practices. The principal hypothesis has tested here is that companies in India do not
give elaborate reporting on environmental issues. The 100 Indian listed companies
selected from various sectors to analyze which industry is more aware towards
environmental issues and disclosing environmental matter in their annual report. This
study analytical framework has done with the help of multivariate analysis. Certain
norms and parameters are set for environmental disclosure by the author the analysis
indicated that there were wide variations in the format and content of corporate
environmental disclosures. Though all the companies gave in detail statutorily
required information on energy conversation, voluntary reporting was not the order of
the day. The majority of the sample companies gave only positive information in
annual reports. To conclude, environmental reporting in India is still at infancy stage.
Formal corporate environmental reporting is not directly regulated in India and
because of this reason ; companies in India enjoy the significant freedom to chose
which issues and aspects of the environment want to disclose to the public. Second
part one of the objective of the study was to examine the need for a specific regulatory
framework (including accounting guidelines, principles, and standards) for the EAR in
India. For this purpose, two questionnaires were designed keeping in mind guidelines
issued by professional accounting bodies the first questionnaire was utilized to obtain
opinions of character accountants then 200 CAs were selected from a directory
prepared by the Institute of Chartered Accountant of India. From them 150 responses
were received, of which 100 useful ones had used in the final analysis. The qualified
accountants and the senior executives in large manufacturing companies felt that
environment is a big challenge for business these days. The CAs, in general, was of
the opinion that companies should establish EMS to meet these challenges.
Establishment of a functional EMS helps in maintaining clean and green environment
not around the factories controlling pollution emission and thereby meeting legal
standards in this area.
Kumar, 2012 the objective of this thesis is to (i) examine the needs and
importantance of environmental accounting and reporting practices in India.(ii) Study
aid analyze the different existing concepts, theories, models and legal framework of
environmental accounting and reporting practices followed in India and abroad; (iii)
Assess the nature and status of corporate environmental accounting and reporting
practices of the selected companies in India. (iv) Develop the Environmental
Disclosure Index (EDI) of selected Indian companies on the foundation of the
accounting and reporting. Performance of sample companies, (v) Analyze whether
there is any significant correlation between the size of the selected company and
environmental disclosure index (EDI); (vi) Suggest the appropriate measures for
improving the existing environmental accounting and reporting practices in India. as
per government of India in its gazette notification has identified 29 categories of
projects where environmental clearance required from central government as per EIA
(Environment Impact Assessment) notification in 1993. Among those 29 categories
ten major polluting industries a total of 100 sample companies taking ten companies
from each of selected polluting India industries which have listed in Bombay Stock
Exchange (BSE) and National Stock Exchange (NSE) have been considered in this
study. tools used are mean, standard deviation, range, frequency distribution,
correlation analysis. It has observed that the environmental accounting and reporting
performance of India companies are advancing very slowly with poor environmental
disclosures practice. This study has also revealed that almost all the sample companies
under investigation have disclosed quantitative information in directions report
concerning to conservation of energy to comply with the provision of section 217 (1)
(e) of the companies act, 1956, as amended in 1988. The non - ferrous metal industry
under study has shown impressive performance regarding environmental management
followed by bulk drag and Pharmaceutical, Cement and Chemical Fertilizer industries.
The abysmal performance has observed in the case of most polluting industries like
tyre, plastic and steel regarding environmental management.

Tiwari, 2013 the work of thesis covers the several aspects of Environmental
Accounting and Reporting in India public and private firms since liberalization the
present work concern itself with the comparative analysis of private and public sector
India firms and goes to examine it from numerous angles. Also the focus is on
environmental auditing and environmental regulation. The objectives of the study are
first the significant challenges faced by business for environment protection and
management. Second the significance of environment accounting in public and private
sector Indian firms. Third the significant cost of environmental accounting and
reporting in Indian private and public sector firms. Fourth nature of disclosure of
environmental accounting and reporting in India public and private sector firms. fifth
the periodicity of reporting. sixth the essentially of environmental auditing for
superior environmental accounting and reporting in India private and public sector
firms. The methodology that has adopted in this chapter is comparative analysis and
chi-square(x2) test for hypothesis testing. a positive relation between the ownership
and significance idationship between environmental accounting in private and public
sector India firms has established. The analysis discovered that public firms as
compared to private firms are slightly more in favor of environmental accounting and
reporting. A significant relation between the cost of environmental accounting
reporting and ownership has also found. There is significant positive difference of
opinion about the cost of environmental accounting and reporting in India public and
private sector firms. public sector companies indicated comparatively a higher cost of
environmental accounting and reporting. There is no significant positive dissimilarity
among attitude of private and public sector Indian firms concerning towards essences
of disclosure toward environmental accounting and reporting. A uniformity regarding
environmental auditing for better environmental accounting reporting in Indian public
and private companies have observed.

Sujit Kumar, 2000 this thesis speaks about environmental accounting: The Emerging
Agenda for Corporate Accounting and Reporting. The primary objective of this
research study are the nature of sustainability in the context of business entities, the
role of accounting visa-verse, the sustainable development the area where current
accounting practice has to change; the study seeks to suggest a tentative framework
for environmental accounting and reporting that seems relevant to the corporate
entities. Research methodologies used by the author are some personal interviews with
the corporate managers and accountant. Also reviewed relevant environment acts and
rules, surveyed published books and articles, the author has examined several
corporate annual reports of India and abroad. Where study highlight that eco-balance
approach which involves detailed input-output analysis through the system boundaries
of the organization seems to offer some promise in confronting the issue of
sustainability at the organization level. Where very few companies are on the leading
in introducing these physical environmental accounting techniques with increasing
degree of sophistication, beyond their tradition financial accounting mechanism a vast
majority of the company are prone to use simple descriptive information about the
environment. It has also observed in the research that companies either lack
knowledge of this technique" or there is a lack of volition on the part of the companies
to implement this innovative means.

V.S. Jaganathan the objective of the thesis is to (i) to examine the status of corporate
environmental reporting practices by the corporate sector in India (ii) to study the
factors determining the level of discloses of environmental information in the annual
reports of Indian companies (iii) To study the views of chartered accountant regarding
various issued involved in EAR. (iv) To study the relative importance of various items
of environmental accounting and reporting. The methodology that has adopted in this
analysis are four forms of regration analysis, linear, power, semi log(x) and semi
log(y) were use to study the degree of relationship between corporate characteristics
and status environmental discloses. For collection of the data one questionnaire was
designed keeping in of chartered accountant view. The Major findings with respect to
objective are the status of voluntary environmental disclosures in the annual report of
selected Indian companies was found to be very poor and there is a need for EAR in
the view of CAs.
Research Gap
Form the earlier literature review; it is evidence that in the last decade pressure
from environmentalists, social groups and scientists forced the corporate world to
realize threat they had and a role to be played by them to save the Mother Nature
Earth. The role of business in society is shifting dramatically. Corporate social
responsibility and corporate environmental responsibility slowly become significant
decision areas of corporate management. Hence there is a need to study and identify
the factors influencing the level of Environmental accounting and reporting. Similarly
to what extent of legal compliance of business firm carrying out towards
environmental accounting and disclosure practices also required to be studied. Various
frameworks of environmental accounting management and reporting emerged in past
few decades at different corners of the world. Even after that till today corporate
environmental performances are in a comprehensive form has not been dealt with
severely by several countries and corporate.

Hence there is need to study the role of government towards sustainable

environmental development.

We must look behind by painfully “rewind the wheel” to see and learning
lessons about how industrials are degrading our precious resource. Moreover, take
measures also looking forward to moving to a stage that uses eco-efficient
technologies and which is also able to manage the entire lifecycle of the products and
process thereby reducing the threat to human health and environmental problems,
while directing economic and social development towards more sustainable way. This
aspect allows to put forward how vital is to analysis if any positive measures taken by
industries to prevent environment from harmful causes to the environment. That also
put forward the need to study and understand how the role of environmental
accounting and ethics has played in building a corporate image. Similarly, newly
introduced Company Act 2013 (Corporate Social Responsibility) policy rules 2014
also need to study with particular references to analysis the pre and post effect on
corporate environmental accounting and ethical practices carry out by environmental
accounting. Considering this some of the research gap in the mind an attempt has been
made to frame the research objectives with this above-identified research questions.

Importance of the Study

Accounting for environment has become increasingly relevant to enterprise
because issue of the availability of natural resource and pollution of the environment
has become the subject of economics; social and political debate throughout the
world. Steps are being taken at the national and international level to protect the
environment and to reduce, prevent and mitigate the effect of pollution. As a result
there is a trend for the enterprise to disclose the community large data related to
environment policies, environmental management programmes and the impact of
related environment performance on their financial performance. The quantitative
management of environmental conservation activities is an effective way of achieving
and maintaining sound business management. In other words, in carrying out
environmental conservation activities, a company or other organizations can
accurately identify and measure investments and costs related to environmental
conservation activities, and can prepare and analyze this data. By having better insight
into the potential benefit of these investments and costs the companies can not only
improve the efficiency of its activities, but environmental accounting also plays a very
important role in supporting rational decision making.

Need for the Study

The concepts of environmental accounting as they apply to internal
management decisions are the focus of this document Accurate timely information is
the critical underpinning of business decision making and environment accounting
practices provides means of exposing information obscured by conventional
management accounting practices. In this context. Environmental accounting concepts
can be applied at all levels of an organization to help make sound business decision.
Scope of the study
Estimating cost for ecological impact is rarely easy , but it is possible. In many cases a
replacement cost can be determine for both natures services and natural companies.
The scope of environmental accounting is very wide. It includes corporate level,
national level and international level. The following aspects are included in
Environmental Accounting.
1. Internal Point of View : Investment made by the corporate sector for
minimization of losses to environment. It includes investment made into the
environment saving equipment. This type of accounting is easy as money
measurement is possible.
2. External Point of View: All types of losses are caused indirectly due to
business operation/activities. They include ,among others, the following.
a. Degradation and destruction like soil erosion, loss of bio-diversity, air
pollution, water pollution, voice pollution ,problem of solid waste,
coastal and marine pollution.
b. Depletion of non-renewable natural resources i.e., loss emerged due to
over exploitation of non-renewable natural resources like minerals,
water, gas, etc.
c. Deforestation, etc.
From the above, it is clear that there is a great deal of scope to
environmental accounting research within the context of developing
countries. Some of the contemporary social and environmental issues
such as climate change and green -hose gas emissions affecting the
global community are also believed to be key issues of research to the
scholars in the developed and developing countries.

However, the proposed study plans to analyze from the point of view of corporate
level environmental accounting practices laying emphasis on both the internal and
external point of view. Further, it is intended to evaluate the corporate activities that
results in environmental costs and benefits, which helps in decision making . for this
purpose ,it is proposed to select 25 companies in the country giving weight age to
different sectors ,ownership, etc,. In addition ,relevant data are proposed to be
collected for a period of five years to identify the changes in the procedure.

Statement of Research Problem

There is no solidarity as to the constituents of environmental benefits and costs and
their measurement. These pose a challenge in the form of quantification of
environmental benefits and costs. Henceforth, there is a need to evaluate the procedure
followed by the selected companies as to how they quantify the environmental
benefits and costs and report the same to the stakeholders.

Companies are mostly focusing only on internal environmental effect. E.g., hazardous
problems faced by the workers/employees and product and production system & not
focusing on external environmental effects faced by the society at large which have
based on after effects of the production process.

Objective of the Study :

The primary objective of the proposed study is to evaluate the effect and benefits of
environmental accounting and reporting in annual reports. This primary objective is
supported by the following
1) To examine recent development of corporate environmental accounting and
reporting in India
2) To Investigate the Factors Influencing Level of Corporate Environmental
accounting and reporting in India.
3) To Study and Evaluate the Extent of Legal Compliance of Business Firm on
Environmental Accounting and Disclosure Practices
4) To Examine and Evaluate Role of Environmental Accounting and Ethics in
Building Corporate Image.
5) To evaluate the benefits of adopting environmental accounting and reporting in
the organization.
Methodology
Methodology is a critical aspect of the research, where data has gathered from various
sources, and then reviewed and analyzed to draw some-sort of finding and conclusion.
The methodology comprises of publication research, interviews, surveys and other
research techniques. It also includes the theoretical groundwork for understanding
which methods, set of methods or best practices can apply to the specific case.

Sample Size :
Universe indicates the whole group of units which is the focus of the study. The
universe includes individuals, groups of people, organizations, and even objects.
Sample size identification is the action of picking the number of observations or
replicates to comprise in a statistical sample. The sample size is a significant feature
of any empirical study.

Sampling after giving due weight age to different variables such as size, nature of
production activity etc, the propose study intend to select 25 units based on top
ranking companies listed in National Stock Exchange.

We selected the top ranking companies because it a common belief that higher the
ranking better are the reporting practices. The annual report were considered for five
years only to know the to identify the changes in the procedure.

To study the perception of managers and accountants around 25 managers and 25

accountants will be surveyed with the well structured questionnaire covering
environmental accounting and reporting issues.

Tools
Regression analysis, linear, power will be used to study the degree of relationship
between corporate characteristics and the status of environmental disclosure.
For the analysis of views of management accountants and managers the statistical
techniques such as percentages, weighted average and factor analysis will be used.
DATA COLLECTION
The data are facts and other relevant materials past and present serving as a base for
study and analysis. The data served as bases or raw material for analysis, without an
examination of factual data no specific inferences that can carry out on the problem.
Data become the bases for analysis, inferences and testing the hypothesis formulated
in the study. The date also provides the facts and figures required for constructing
measurement, scales, and tables. Data has collected from both the sources, primary
sources and secondary sources.

Primary Data
Primary data is one where the information is collected directly from first-hand by the
researcher for a specific research purpose, and the data source is an original data
source.

Secondary Data
Secondary data is research data that has previously been gathered by someone other
than the user and can be accessed by researchers. The required secondary information
for the study has collected through different books, journals, newspaper, magazines,
annual report and official websites of companies & government and other internet
sources.

Chapter Scheme
1) Introduction and Research Design]
2) Profile and Selected Companies
3) Environmental Accounting and Reporting practices : Conceptual Frame Work
4) Environmental Accounting and Reporting practices : An Empirical Evidence
5) Summary of Major Findings, Suggestion and Conclusion.

Limitation
This study is subject to certain limitations due to the nature of the topic. There
are no general accepted accounting standards, regulations, rules etc., against which the
performance of organization can be compared and evaluated. Further cost and benefits
relevant to the environment are not easily measurable. EAR is a long term process and
therefore to draw a conclusion to the help of it is not easy.
Reference
1) Alok Kumar pramanik and Nikhil Chandra Shil and Bhagaban Das ( 2007),
Environmental accounting and reporting with special reference to India.
2) Global Journal of Management and business research vol-12(no 14), 119-127.
3) Goswami M (2014) Corporate environmental accounting: the issues, its
practice and challenges- A study on Indian corporate accounting practices.
Journal of Business and Management. 16(5), 36-42
4) International Journal of Economic and Business review : Vol-5,7th July 2017
5) Josi, S Krishnan Kumar R and Lave .L (2001) Estimating the hidden cost of
environmental regulation. The accounting review vol:76(no 2) 171-198
6) Malarvizhi p and Yadav S (2008) corporate environmental reporting on the
Internet" An Insight in to Indian practices, "environmental strategy" in the 11th
annual convention of the strategic management forum ( PP 1-14) Kanpur
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Kuvempu University, Shivamogga
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empirical study of selected business enterprises in Goa University.
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corporate accounting and repeating, West Bengal : University of Burdwan
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reporting in Indian Public and Private sector companies Since Liberalization
11) V. S Jaganathan - A study of environmental accounting and reporting -an
empirical analysis: Pondicherry University

(Rekha K M) (Dr. V. Mahesh)

Research Scholar Research supervisor