Environmental management accounting to reduce costs

Set environmental targets to increase profits

Guide

Environmental management accounts should provide an analysis of environmental impacts, with detailed analysis of financial costs and physical quantities allocated across the business' processes, products and services.

You can use this information to produce an action plan including:

  • targets for reducing waste, improving energy efficiency, cutting water use and improving the reuse or recycling of materials and equipment
  • an estimate of potential cost savings and payback period, with data to enable managers to measure progress against the targets, tracking success and identifying where further attention is needed
  • assessments of the actual cost savings and payment periods of capital investment projects when they have been completed
  • periodic progress reports for senior management by including additional data in monthly management accounts

In addition to financial targets, environmental targets should also be included expressed in terms of improved efficiency.

It will not always be possible to make immediate improvements. However, it should be possible to define specific projects for which environmental and cost reductions can be achieved.

Communication plays an important role in maximising the benefits of environmental improvements, eg through the use of emails or newsletters for staff, suppliers and customers. In addition, all employees should be encouraged to participate fully, so that the business benefits from their enthusiasm and knowledge. See our guide on making the case for environmental improvements.