1-Define carbon management accounting and identify and explain four different ways within which companies can approach carbon management? Carbon management accounting is one of the fundamental parts of sustainability accounting that provides managers, especially those in carbon intensive companies, with information regarding carbon emission issues. It has profound effects upon short-term and long-term company decisions. Many companies have resorted to introducing carbon management accounting following persistent pressure from the ongoing ecological crisis (Bebbington and Larrinaga-Gonz´alez 2008). There are four main approaches to carbon management used by companies across the globe: Measuring carbon emissions: In the contemporary society, customers are increasingly concerned about the amount of carbon emitted by the companies of their choice.
According to Stern (2006), measuring carbon emissions means identifying sources of emissions, collecting activity data for each source and converting it to emission levels. The second approach commonly used by companies is the reduction of carbon emissions. In a nut shell, this means cutting down on the emissions of one or more of the six main greenhouse gases. To achieve a reduction of emissions, a company needs to set reduction targets, establish action plans for specific reduction initiatives, identify company hotpots and consider carbon offsets as part of its overall carbon management strategy.
Management systems: As part of carbon management, companies establish procedures, frameworks and policies that are aimed at ensuring credible and effective carbon management. Management systems include allocation of resources and responsibilities, developing procedures and systems to ensure data quality, monitoring progress in carbon emission, verification and public disclosure and reporting. Extending carbon management down the supply chain: This basically means working closely with suppliers and even sub-contractors to manage their carbon emissions.
In this regard, it is imperative that they engage with the right suppliers, communicate with them effectively and follow then up using incentives, ongoing support and providing feedback to enhance performance (BCG 2009). 2-Identify and explain the following characteristics of both Monetary Carbon Accounting and Physical Carbon Accounting: (a) past oriented routinely generated short term and long term information; and (b) future oriented routinely generated short term and long term information? Past oriented routinely generated short-term information: This involves carbon cost accounting. For instance, determining the costs and revenue from carbon emission certificates purchased and sold weekly in the market.
Past oriented routinely generated long-term information: This involves carbon capital expenditure. An example is the capital expenditure used to install and maintain carbon reduction technology within a company. Future oriented routinely generated short-term information: It is basically monetary carbon operational budgeting, for example, expected monetary savings accrued from carbon reduction initiatives. Future oriented routinely generated long-term information: It is essentially carbon-long-term financial planning. This could be forecasting benefits that can be obtained from permanent reduction of carbon footprint within the company (Unerman et al 2007).
Physical carbon accountingPast oriented routinely generated short-term information: This is termed as the carbon flow accounting. It involves the collection of daily information regarding the emission of carbon in the production process. Past oriented routinely generated long-term information: This is basically carbon capital impact accounting which can be exemplified by calculations of carbon footprints following carbon reduction initiatives over a given period of time.