Accounting and the Environment:
An Integrated Course in Accounting

Professors D. Jacque Grinnell and
Herbert G. Hunt III
University of Vermont
School of Business Administration

Synopsis

The fact that environmental issues affect all of the traditional accounting sub-disciplines and is a topic of great interest to today's students make environmental accounting an ideal focus of study for an integrative course in accounting. The fundamental objective of such a course offered at the University of Vermont's School of Business Administration is to enhance understanding of how accounting information is, or can be, used to support corporate environmental strategy and to assess the firm's environmental performance. In pursuit of this overall objective, the accounting sub-disciplines are studied in terms of their relationship to environmental issues, and for the purpose of gaining understanding of how accounting concepts and techniques can be used to address and help solve a variety of environmental problems. In terms of subject material, we use a three-tier approach starting with an examination of the macro and global dimensions of environmental degradation and the role of governments in addressing environmental issues. The second tier involves a review of the role and responsibilities of business in addressing environmental issues. The third tier, which constitutes the bulk of the course, examines the role of accounting as it relates to environmental issues.

The third tier begins with a general overview of accounting issues related to the environment. We then investigate the key aspects of various accounting sub-disciplines, including their role in supporting management decision making, measuring environmental performance, and providing management incentives. Specifically, we examine in detail the implications of environmental factors for management accounting, product costing, capital expenditure analysis, performance measurement, external reporting, measurement and disclosure of environmental liabilities and contingencies, income taxes and international issues. In addition, evidence related to the economic consequences of disclosure of environmental information is examined through a review of market studies. We also devote time to the topic of pollution allowances (tradable permits) because of the important accounting and compelling ethical issues that they raise. Although we do not focus specifically on auditing and management information systems, both of these important sub-disciplines are addressed in an integrated manner throughout the course as appropriate.

The course that we have described is easily adaptable for a number of different uses and audiences. It can be used in a general-purpose business curriculum as an elective for both graduate and undergraduate students as it is at our institution. Moreover, by adjusting the reading list, increasing or decreasing the written assignments, adjusting the rigor of technical assignments, or otherwise changing the pedagogy, this course could be adapted for use at a variety of levels for accounting majors, other business students or non-business students. The fact that we have developed an extensive and up-to-date reading list should prove helpful to other instructors in designing their own course (course syllabus and up-to-date reading list can be accessed at our web site http://bsad.emba.uvm.edu).

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