7.2 Sustainability and Environmental Accounting

• What does sustainability in accounting consider when making financial decisions?

  Environmental, social, economic impacts
• Sustainability aims to meet current needs without compromising future generations
• Protecting natural resources and ecosystems is a key environmental goal of sustainability.
• Why is sustainability important for a company's reputation?

  Enhances stakeholder trust
• Environmental accounting quantifies and reports environmental costs and benefits
• What is the central goal of sustainability in accounting?

  Meet current needs without compromise
• Environmental accounting focuses on reporting environmental costs and impacts.
• Social accounting in sustainability focuses on reporting social impacts, such as labor practices
• What might a company report to demonstrate its commitment to sustainability?

  Carbon footprint reduction efforts
• Match the sustainability aspect with its description:

  Environmental ↔️ Reporting environmental costs and impacts

  Social ↔️ Reporting social impacts

  Economic ↔️ Reporting financial performance
• Components of environmental accounting

  1️⃣ Cost accounting

  2️⃣ Performance measurement

  3️⃣ Reporting
• Environmental cost accounting tracks environmental costs, such as waste disposal
• Environmental Accounting is the process of identifying, quantifying, and communicating the costs and benefits of a company's environmental performance
• Match the components of environmental accounting with their descriptions:

  Cost Accounting ↔️ Tracks environmental costs

  Performance Measurement ↔️ Monitors environmental indicators

  Reporting ↔️ Communicates environmental impacts
• Cost accounting in environmental accounting helps identify areas for cost reduction and resource efficiency.
• Performance measurement in environmental accounting monitors indicators such as energy consumption and carbon emissions
• Environmental reporting enhances transparency and accountability by communicating environmental impacts to stakeholders.
• Order the environmental accounting methods from simplest to most comprehensive:

  1️⃣ Activity-Based Costing (ABC)

  2️⃣ Material Flow Analysis (MFA)

  3️⃣ Life Cycle Costing (LCC)

  4️⃣ Full Cost Accounting (FCA)
• Life Cycle Costing (LCC) assesses costs over a product's entire lifecycle
• Activity-Based Costing (ABC) identifies environmental costs for each activity in a process.
• Match the environmental accounting methods with their outputs:

  LCC ↔️ Total lifecycle cost

  ABC ↔️ Cost per activity

  FCA ↔️ True cost of products

  MFA ↔️ Material balance
• Material Flow Analysis (MFA) tracks the flow of materials to improve resource efficiency.
• Sustainability in accounting considers the environmental and social impact of a company's operations
• Compliance with environmental regulations is a key benefit of integrating sustainability into accounting practices.
• Match the pillars of sustainability with their descriptions:

  Environmental ↔️ Reduces environmental impact

  Social ↔️ Enhances community well-being

  Economic ↔️ Promotes financial stability
• Efficiency in accounting reduces waste and optimizes resource use
• What is the primary benefit of integrating sustainability into accounting practices?

  Enhanced reputation
• Integrating sustainability into accounting improves brand image and stakeholder trust
• Compliance with legal and regulatory requirements is a benefit of sustainability in accounting.
• How does integrating sustainability into accounting practices reduce costs?

  Optimizes resource use
• Sustainability in accounting attracts investors interested in sustainable companies
• Steps for integrating sustainability into accounting practices

  1️⃣ Incorporate sustainability into decision-making

  2️⃣ Track environmental and social impacts

  3️⃣ Use sustainability reporting frameworks

  4️⃣ Disclose sustainability performance
• Sustainability reporting frameworks ensure transparency and comparability in sustainability disclosures.
• Which sustainability reporting framework covers economic, environmental, and social impacts?

  Global Reporting Initiative (GRI)
• The Sustainability Accounting Standards Board (SASB) focuses on financially material sustainability issues
• Match the sustainability reporting framework with its key feature:

  GRI ↔️ Comprehensive reporting framework

  SASB ↔️ Industry-specific standards

  TCFD ↔️ Climate-related financial disclosures
• What might a company using the GRI framework report on to demonstrate sustainability?

  Carbon footprint
• Sustainability reporting frameworks are optional for companies to use.

  False
• The Global Reporting Initiative (GRI) is a comprehensive framework for sustainability reporting
• The Sustainability Accounting Standards Board (SASB) focuses on industry-specific sustainability standards.