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Joint Media Release
Minister for the Environment and Heritage
Dr David Kemp
&
Victorian Minister for the Environment
John Thwaites

19 February 2003

Accounting for a Better Bottom Line and a Better Environment


The Minister for the Environment and Heritage, Dr David Kemp, and the Victorian Minister for the Environment, John Thwaites, today welcomed a revolutionary new report that found businesses can boost their bottom line and deliver considerable savings by adopting more 'environmentally-friendly' accounting practices.

"This is according to an Institute of Chartered Accountants in Australia (ICAA) report released today - Environmental Management Accounting: An introduction and case studies for Australia - which shows businesses can improve profitability by managing internal accounting procedures differently, taking into account environmental costs," Federal Minister for the Environment and Heritage, Dr David Kemp, said.

"It is also the first report of its kind to be released in Australia that provides a comprehensive review of environmental management accounting procedures used by industry and businesses."

Backed with $160,000 in Federal and State funding, the ICAA embarked on an Environmental Management Accounting (EMA) project which focussed on four case studies across a range of business sectors.

"ICAA - in partnership with Environment Australia and Victoria EPA - conducted the case studies over six months involving a school (Methodist Ladies College, Perth), plastics manufacturing company (Cormack Manufacturing Pty Ltd, Sydney), provision of office services (a service division of AMP, Australia wide) and wool processing (GH Michell & Sons Pty Ltd, Adelaide)," Victorian Minister for Environment, John Thwaites, said.

"The report found there were many similarities across these case studies or improvements that could be made to accounting systems.

"It also found businesses are keen to adopt better environmental practices, but are unsure how to achieve the benefits without it impacting negatively on their books."

Dr Kemp said the report demonstrated the need for businesses and industry to seriously consider reforming their internal accounting systems so that environmental costs are articulated correctly.

"At the moment many environment related costs are hidden," Dr Kemp said. "For example, in many cases waste costs were found hidden within other accounts. At AMP, these were often part of the rental charge paid by the company and it was therefore difficult to monitor and manage them.

"At MLC, waste costs were buried within 'administrative and general overheads', which also made them hard to find."

With GH Michell & Sons Pty Ltd, it was found that all types of wool were being allocated the same processing costs until further investigation confirmed 'dirtier' wools consumed more resources in processing. As a result the 'cleaner wools' were subsidising the 'dirtier wools', which are more expensive to process.

Cormack Manufacturing CEO, Matthew Cormack, said the new cost and revenue information generated by the EMA project helped management identify a number of opportunities to save costs and improve its environmental performance.

"What this report found was that environmental management accounting is a good starting point for developing a more effective and transparent internal accounting system for environmental costs. This gives the company accountant a valuable tool that can be used to deliver good environmental outcomes and considerable savings," Dr Kemp said.

"Environmental management accounting contributes to good management and without it suboptimal business decisions will be made. Green can be good for business, whether you're big or small," Mr Thwaites added.

ICAA president, Mr David Smith, said it makes good financial sense to adopt cleaner production processes and become more efficient in using resources.

"But unless these opportunities are identified in the accounting system it's hard to build the business case for change," he said.

The case studies were undertaken by KPMG (AMP), Professor Craig Deegan of RMIT (The Michell Group), BDO Consultants (Methodist Ladies College, Perth) and PricewaterhouseCoopers (Cormack Manufacturing).

The EMA project will be found on the ICAA web site at www.icaa.org.au/tbl or on Environment Australia's web site at www.ea.gov.au/industry/finance/accounting.html

Media Contacts:
Dr Peter Poggioli (Dr Kemp) 02 6277 7640 or 0412 970 063
Ilsa Colson (Mr Thwaites) 03 9651 0957 or 0418 368 639

Commonwealth of Australia