For most of the world, the idea of green accounting or environmental accounting is a realm of fiscal management that only governments and mega-corporations can afford to worry about. Although there are rising concerns about environmental issues from businesses of all sizes, and a growing demand for sustainability management both from customers and suppliers, most small businesses assume that the costs will outweigh any benefits, and that there contribution overall to environmental issues would be quite small.

But that isn’t entirely true. Small businesses are vital to the growth and stability of the global economy accounting for the majority of private sector gross domestic product (GDP), are an integral part of the supply chain. As well as being massive contributors to employment creation. It’s obvious that they would have social and environmental impacts, luckily, even small-businesses can benefit from a “triple bottom line” approach.

This approach takes into consideration the impact your business has not just with your consumers, clients or investors, it also takes into consideration effects for the local community and environment. This is where green accounting comes into play.

Put simply, green accounting calculates the environmental costs of the business activity. Traditionally, environmental costs have been calculated into overheads, preventing them from being connected to the process or product that generates them. Green or environmental accounting identifies environmental costs individually. This allows them to trace their origins, which means management can more easily identify ways to reduce them.

Environmental costs can also incorporate other elements, like the societal cost, or cultural cost, of a product or project.

Speaking generally, there are three tiers of green accounting, managerial, financial and national. Managerial accounting is mostly internal, and intended to help a company made decisions about their own business. Financial accounting on the other hand is intended for external reporting of environmental costs to investors and the public. Finally, national accounting takes into consideration a country’s natural resources, and the costs involved in using them, for example, the cost of using timber would take into consideration a country’s national timber supply, it’s availability, and the ‘green costs’ that is the environmental, social or cultural repercussions.

Employing environmental accounting strategies can help to generate profitability by providing opportunities to trim costs through lowering waste, enhance employee morale, increase engagement with stakeholders, and reduce turnover. Small businesses can create environmental value not only through cutting their waste and lowering their carbon footprint. Initiatives such as volunteering staff time, or donating goods and raising funds for local charities. By taking the triple bottom line approach, and adopting green accounting practices, businesses can position themselves as ethical and make valuable contributions to their communities, while generating profit.

In the end, the initial cost of incorporating environmental accounting practices and methods into a small business can be offset by things like positive brand association, cost savings and reduced risks. This is even true when creating an ecommerce business or online store. By choosing an ethical and sustainable approach small businesses can create not only economic benefits, but also provide support to the community, and the environment.

This article was written by the NUS community. If you would like to contribute your article, please get in touch.