Environmental Accounting Internal Audit

Process Street's Environmental Accounting template is a guide, supporting your small business accounting processes to attain and retain a sustainable focus.

Introduction:

Record Details

Identify environmental costs:

Consult the business ledger and supplier invoices

Consult department managers and senior employees

Set up face-to-face meetings

Employ activity-based costing

Allocating incorrect estimations

Summarize activity-based costing results

Approval:

Reduce environmental costs:

Analyze costs associated with waste production and disposal

Analyze costs associated with water consumption

Analyze costs associated with energy consumption

Analyze costs associated with transport

Analyze costs associated with consumables and raw materials

Consider other processes that have associated environmental costs

Summarize additional target activities to reduce or eliminate environmental costs

Summarize activities identified as targets to reduce and/or eliminate environmental costs

Approval:

Email summary report

Produce an action plan:

Set targets

Approval:

Estimate cost savings and payback period

Enforce periodic progress reports

Communicate action plan:

Produce a flow chart

Email targets

Assessment of targets:

Assess periodic reports

Email assessment report

Re-examine targets

Email target failure assessment

Determine if targets have been achieved

Approval:

Assess benefits:

Assess financial and environmental benefits

Approval:

Email cost savings to relevant stakeholders

Related checklists:

Sources:

Introduction:

Process Street - Environmental Accounting

''Economic growth and environmental protection are not at odds. They're opposite sides of the same coin if you're looking at longer-term prosperity.'' - Henry Paulson

Process Steet’s Environmental Accounting Internal Audit provides an easy-to-understand guide bringing forth an efficient and specialized performance analysis for a given small business. To reiterate, this performance analysis is ‘specialized’ as it abides by the practice of environmental management accounting.

This means Process Steet’s Environmental Accounting Internal Audit solely considers environmental costs, such as the cost of energy, water, materials, waste and effluent disposal, in addition to indirect costs, such as environmental impacts on public image.

The Environmental Accounting Internal Audit aim is to identify costs, potential savings, to set targets and to monitor performance for a given small business specifically with an environmental focus.

Process Steet’s Environmental Accounting Internal Audit has condensed the environmental accounting as a procedure into the following tasks:

Identify Environmental Costs
Reduce Environmental Costs
Produce An Action Plan
Communicate Action Plan
Assessment Of Targets
Assess Benefits

Accounting as a practice was developed in the eighteenth century. The accounting profession has kept pace with the changing times, adapting to technological advances and advances in its study. Present-day accounting is more efficient and more precise, relative to its eighteenth-century version.

But today we face another change. Climate change and the loss of natural habitats and resources present a major risk to the global economy. For example, since 1980, extreme weather events have cost the U.S. $16 trillion.

As these changes to our natural world become increasingly acknowledged, actions to ameliorate this potential global crisis are far-reaching, impacting the niche discipline of accountancy.

Tax regime changes, changes in carbon trading and stricter regulations impact businesses at a financial level.

Accounting as a practice needs to take note, adapt and deliver the required long-term value. Accounting needs to adopt appropriate management of risk with sustainability as a fundamental key goal.

Process Steet’s Environmental Accounting Internal Audit has been designed to incorporate accountancy skills to help businesses deal with today’s unstable and changing environment.

For example, skills such as 'monitoring and reducing costs', 'helping to formulate and implement strategy', are applied in this internal audit.

Process Steet’s Environmental Accounting template manages environmental risks, saving you money, and supporting your small business to be sustainable.

In this template, you will be presented with specialized questions given as a form field. Different form fields are used, such as subtasks, dropdown menus, short answers, long answers, and weblinks.

You can populate each form field with your own specific data. This data is compiled to produce a report where appropriate.

In addition, our stop task feature has been used to enforce task order when needed. Our conditional logic task has been used as required to guide you through the correct process path specific for your entered data.

Record Details

In this Environmental Accounting Internal Audit, you will be presented with the following form fields, which you are required to populate with your own specific data. More information is provided for each form field via linkage to our help pages:

To begin the Environmental Accounting Internal Audit, enter the required details into the form fields below.

This is a stop task, which means you cannot progress in this environmental accounting internal audit until the required form fields are complete.

Your name

Your business name (if applicable)

Address line 1 (street address)

Address line 2 (apartment, suite, unit)

ZIP code

City

Country

Environmental Accounting Internal Audit start date

Environmental Accounting Internal Audit due date

Name of relevant stakeholder (if required)

Environmental Accounting Internal Audit review details

At certain points in this Environmental Accounting Internal Audit, results will need to be reviewed and approved by the relevant personnel within your team.

Take the time to fill in the details of the relevant personnel for audit review and subsequent approval below.

Internal audit reviewer's name (full)

Identify environmental costs:

Consult the business ledger and supplier invoices

The first stage of Process Steet’s Environmental Accounting template consists of identifying environmental costs, both direct and indirect.

You are presented with Process Steet’s subtask form field. You can check off each task once it has been completed using this form field.

You are then presented with our website form field. Using this form field you can link online documents, such as a Google spreadsheet. You can use this website form field to record environmental costs identified.

In this case, you can link online documentation summarising information obtained from consulting the business ledger and supplier invoices (if required).

The dropdown form field presents a conditional step in this process. By selection 'Yes' or 'No' from the form field, you will be directed to the relevant stage in the process.

Make sure to identify the true value of environmental costs. Do not treat environmental costs as general overhead, as so commonly occurs. Instead, allocate each cost to individual products so as to not to distort the overhead.

You can do this using activity-based costing, which is covered in our 'Employ activity-based costing' task. To ensure that you are guided through the pathway that includes this task, choose 'Yes' from the dropdown form-field above.

This is a stop task, which means you cannot progress in this environmental accounting internal audit until the required form fields are complete.

1

Consult the business ledger to identify environmental costs for each process.
2

Consult supplier invoices to identify environmental costs for each process.

Is assistance needed to assign overhead environmental costs to individual products?

The largest environmental costs are likely to include:

1

Waste and effluent disposal
2

Water consumption
3

Energy
4

Transport
5

Consumables and raw materials

Consult department managers and senior employees

Check off each subtask once it has been completed.

You can then link online documentation summarising information obtained from meeting department managers and senior employees (if required).

This is a stop task, which means you cannot progress in this environmental accounting internal audit until the required form fields are complete.

For each individual process, speak to the relevant department managers and senior employees.

1

Identify the environmental costs of each process.
2

Break down the environmental costs for each process across different activities.
3

Identify 'cost drivers' associated with each activity.

Department managers can provide more information in addition to information obtained from the business general ledger and supplier invoices. For example, department managers will know how long a given process takes. Time is a cost that must be included in environmental management accounts.

Causes or ''drivers'' of a cost associated with a specific activity are known as 'cost drivers'. For example, a cost driver could be the number of hours a machine has to run for a given activity to come to completion.

Set up face-to-face meetings

Check off each subtask once it has been completed.

You can then link online documentation summarising information obtained from meeting department managers (if required).

This is a stop task, which means you cannot progress in this environmental accounting internal audit until the required form fields are complete.

1

Set up face-to-face meetings with department managers to obtain details on the full cost of each activity, for example, identify costs associated with the precise amount of materials used.
2

Identify additional 'cost drivers' associated with each activity.

Employ activity-based costing

The activity-based costing system is not useful for companies with only one or two processes, which have little variation.

The below method to activity-based costing that has been interrupted from Managerial Accounting, Using Activity-Based Costing to Allocate Overhead Costs.

Step 1: Identify costly activities

Environmental costs have already been identified in the previous tasks.

Cost of environmental processes has been identified in the task 'consulting the business ledger and supplier invoices'

If links to online documentation summarising the environmental process costs identified were provided, these links are presented below:

Environmental process costs have been broken down across different activities in tasks 'talking to senior employees and managers' and 'face-to-face meetings with department managers'.

If links to online documentation summarising the activity costs identified were provided, these links are presented below:

Step 2: Assign overhead costs to the activities identified in step 1

Overhead costs should have already been considered in tasks: 'consulting the business ledger and supplier invoices'; 'talking to senior employees and managers' and 'face-to-face meetings with department managers'.

The cost of resources for each product or activity needs to be allocated to that product or activity. Costs are assigned only to the products and activities that demanded that specific costly action.

1

Ensure that overhead charges for each activity are assigned to the relevant activity (i.e. a cost pool is produced for each activity).
2

Estimate the annual overhead costs for each activity.

Step 3: Identify the cost driver for each activity

Cost drivers should have already been considered in tasks: 'talking to senior employees and managers' and 'face-to-face meetings with department managers'.

1

Ensure that cost drivers for each activity are assigned to the relevant activity (i.e. a cost pool is produced for each activity).
2

Estimate the annual cost driver activities, for example, the number of hours of a given activity per year.

Step 4: Calculate the predetermined overhead rate for each activity

Process Street - Calculating the predetermined overhead rate

You can then link online documentation summarising the calculated predetermined overhead rate (if required).

1

Divide the estimated annual overhead costs (from step 2) by the estimated annual cost driver (from step 3).

Indirect manufacturing costs are assigned to the goods that they produce via the predetermined overhead rate. The predetermined overhead rate is given as a cost per cost driver unit of measurement.

Step 5: Allocate overhead costs to products

After a year of operation, actual cost driver activities can be determined from recorded data obtained in the operating year. So for example, the number of hours for a given activity might have been less in the year than previously estimated. You need to consider the actual cost drivers in step 5.

You can then link online documentation summarising the calculated applied overheads (if required).

1

Multiply the predetermined overhead rate for each activity by the actual annual cost driver activity. This gives the applied overhead.
2

Compare applied overhead with actual overhead costs.
3

Determine whether applied overhead costs are under-applied or over-applied.
4

Allocate incorrect estimations into either 'Work In Process', 'Finished Goods' and 'Cost of Good Sold'

Is assistance needed to allocate incorrect estimations?

Activity-based costing organizes activities into several cost pools, to allocate overhead costs. The idea is that the time, materials, and labor used to create a product or perform a given activity, are accounted for.

Companies using activity-based costing often identify hundreds of activities with costs associated.

It is important to be aware of the negatives associated with activity-based costing when consulting the applied overhead costs given:

Activity-based costing systems can be costly and time-consuming to implement. From identifying costs associated with activities to identifying the tracking cost drivers.
Using per unit cost information from activity-based costing does not account for fixed costs in the calculation. Fixed costs do not change in total with changes in activity.
The activity-based costing system is not useful for companies with only one or two processes, which have little variation. For example, if a company manufactures one product only, then overhead costs will be associated with the manufacture of that one produce.

Allocating incorrect estimations

Edspira - Underapplied or Overapplied Manufacturing Overhead (How to Dispose of It).

Summarize activity-based costing results

The summary of activity-based costing results detailed below, need to be reviewed and approved by the relevant personnel before continuation of this Environmental Accounting Internal Audit is possible.

{{form.Online_documentation_URL_(5)}}Summary of activity-based costing results

Environmental costs of each process have been identified during the task 'consulting the business ledger and supplier invoices'.

If a link to online documentation summarising these costs identified was provided, this link is presented below:

Environmental costs for each process were broken down across different activities and cost drivers associated with each activity were identified.

If a link to online documentation summarising these costs identified was provided, this link is presented below:

Predetermined overhead rate for each activity was calculated.

If a link to online documentation summarising these predetermined overhead rates was provided, this link is presented below:

Applied overhead costs have been calculated and assessed to be identified as overapplied or underapplied.

If a link to online documentation summarising these overhead rates was provided, this link is presented below:

Approval:

Summarize activity-based costing results

Will be submitted

Reduce environmental costs:

The largest environmental costs are likely to include:

Waste and effluent disposal
Water consumption
Energy
Transport
Consumables and raw materials

Analyze costs associated with waste production and disposal

Begin your cost reduction analysis identifying true costs associated with waste. Check off the subtasks when each has been explored.

A long text form field is provided for you to summarize the target activities identified for environmental cost reduction or elimination.

1

Consider the true value costs of unused raw materials and their disposal and review for cost reduction or elimination.
2

Consider the true value costs of waste transport, storage and handling, and review for cost reduction or elimination.
3

Consider the true value of possible penalty costs for compliance failures associated with waste products, for example, pollution, and review for cost reduction or elimination.
4

Consider taxes for landfill and review for cost reduction or elimination.

Waste production and disposal: summarize target activities identified for cost reduction or elimination

For more information on reducing and managing waste, view the following guides:

1

Wast Reviews, Policies, and Action plans
2

Reduce Your Business Waste To Save Money

Quick links to these guides are provided below:

Analyze costs associated with water consumption

Identify true costs associated with water consumption. Check off the subtasks when each has been explored, and populate the long text form field as required.

1

Consider the total cost of water use and review for cost reduction or elimination.
2

Consider the total cost of water disposal and review for cost reduction or elimination.

Water consumption: summarize target activities identified for cost reduction or elimination

Mains water supply charges are rising on a global scale along with sewage and trade effluent charges. Controlling water supply is therefore important.

To find out how to monitor your waste use, consider the following guides:

1

Monitor Your Water Use

For information on how to save water, view the following guides:

1

Save Water At Commercial Premises
2

Save Water At Industrial Premises

Quick links to these guides are provided below:

Analyze costs associated with energy consumption

Identify true costs associated with energy consumption. Check off the subtasks when each has been explored, and populate the long text form field as required.

1

Identify inefficiencies and wasteful practices, for example, use of non-energy saving light bulbs, review for cost reduction or elimination.
2

Identify energy sources and suppliers, review for cost reduction or elimination by considering more sustainable suppliers and renewable energy sources.

Energy consumption: summarize target activities identified for cost reduction or elimination

Government initiatives and grants encourage energy efficiency. For more information, see the following guide:

1

Tax Breaks And Finance For Business Property

For more information on how to save money by being more energy efficient, see the following guide:

1

Save Money By Using Energy More Efficiently

Quick links to these guides are provided below:

Analyze costs associated with transport

Identify true costs associated with transport. Check off the subtasks when each has been explored, and populate the long text form field as required.

1

Consider ways to encourage employees to use public transport or to walk/run/cycle to work, and identify cost reductions this could potentially make.
2

Look at options to invest in more fuel-efficient vehicles, and identify cost reductions this could potentially make.
3

Establish a route planning procedure for business travel, taking the most fuel-efficient routes, and identify cost reductions this could potentially make.

Transport: summarize target activities identified for cost reduction or elimination

For more information on how to implement the above, see the following guides:

1

Workplace Travel Planning
2

Reducing Your Vehicle Emissions

Quick links to these guides are provided below:

Analyze costs associated with consumables and raw materials

Identify true costs associated with consumables and raw materials. Check off the subtasks when each has been explored, and populate the long text form field as required.

1

Establish a recycling scheme, and identify potential cost savings from implementing this scheme.
2

Consider using renewable materials and review for cost reduction or elimination.
3

Consider a different contract type with suppliers. A contract where suppliers are paid for the service supplied and not the volume provided. This will encourage suppliers to adopt a sustainable practice. Review potential cost savings this could have.

Consumables and raw materials: summarize target activities identified for cost reduction or elimination

For more information regarding the above, see the following guide:

1

Supply Chain Efficiency

Quick links to these guides are provided below:

Supply Chain Efficiency

Consider other processes that have associated environmental costs

The dropdown form field represents a conditional step in this template. Selecting 'Yes' or 'No' from the dropdown menu will lead you to the relevant pathway in your active checklist.

The processes specifically considered, named below, are processes most likely to have the largest environmental costs associated.

1

waste production and disposal
2

water consumption
3

energy consumption
4

transport
5

consumables and raw materials

However, there may be other processes not considered in this Environmental Accounting template with environmental costs associated that need to be considered.

Are there other processes not yet considered, that need to be explored for potential environmental cost reduction?

Summarize additional target activities to reduce or eliminate environmental costs

Take the time to work through true environmental costs not already considered and identify possible cost reductions and eliminations. Summarize these additional target activities in the long text form field below.

Summarized target activities need to be reviewed and approved before the completion of this Environmental Accounting Internal Audit.

Summarize target activities identified for cost reduction or elimination that have not yet been considered

Summarize activities identified as targets to reduce and/or eliminate environmental costs

In the dropdown form field below, you have the option to send this summary report to relevant stakeholders. The dropdown form field is a conditional step. Selecting 'Yes' or 'No' from the dropdown menu will lead you to the relevant pathway in your active checklist.

The summarized activities identified as targets to reduce and/or eliminate environmental costs need to be reviewed and approved by the relevant personnel before the completion of this internal audit.

Target Activities to reduce and/or eliminate environmental costs

Waste production

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Water consumption

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Energy consumption

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Transport

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Consumables and raw materials

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Additional processes considered

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Would you like to send the above summary via email to relevant personnel?

Approval:

Summarize additional target activities to reduce or eliminate environmental costs

Will be submitted
Summarize activities identified as targets to reduce and/or eliminate environmental costs

Will be submitted

Email summary report

Produce an action plan:

Set targets

Targets need to be reviewed and approved by the relevant personnel for the continuation of this Environmental Accounting Internal Audit.

Based on the activities identified to reduce or eliminate environmental costs, formulate target for environmental cost reduction/elimination.

Check your set targets to ensure the following have been considered:

1

Set targets for reducing waste.
2

Set targets for improving energy efficiency.
3

Set targets for cutting water use.
4

Set targets for improving reuse or recycling or materials and equipment

Approval:

Set targets

Will be submitted

Estimate cost savings and payback period

Your changes to reduce environmental costs and to employ more sustainable actions in your business will have immediate or delayed costs savings.

Take the time to estimate the cost savings you will achieve and to estimate payback periods of any investments made.

1

Estimate cost savings
2

Estimate payback periods (if required)

Enforce periodic progress reports

All relevant departments will need to assess their progress towards achieving the set targets. For this assessment, ensure that periodic reports are produced, reporting on the department's progress.

Our dynamic due date feature has been implemented on this step to ensure that periodic reports are assessed in a months time.

1

Implement monthly progress report production as a routine task to be completed by relevant departments, to track progress.

Communicate action plan:

Produce a flow chart

Check off each subtask on its completion.

You are presented with a conditional step. Selecting 'Yes' or 'No' in the drop-down menu given will direct you to the relevant pathway in this process.

Produce a flow chart to show the businesses main activities. Include the following in this flow chart:

1

Break down the processes into associated activities.
2

Indicate costs, including the applied overhead costs associated with each activity.
3

Indicate environmental costs to be reduced or eliminated.
4

Use the flow chart to communicate the changes to be made

Communicate targets set to employees

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Would you like an email to be sent to relevant stakeholders communicating the targets set?

The flow chart should not be overly detailed but should show the key information where you can make savings.

Communication is important to ensure that employees are enthusiastic and knowledgeable about the given changes. Flow charts have visual clarity meaning multiple processes and associated activities can be viewed easily in a single document, making it an excellent way to communicate the changes required from running this checklist.

Email targets

Assessment of targets:

Assess periodic reports

You are presented with a conditional step. Selecting 'Yes' or 'No' in the drop-down menu given will direct you to the relevant pathway in this process.

1

Assess progress and determine if progress is on schedule or off schedule

On schedule progress attainment.

Would you like to email assessment results to the relevant stakeholders?

Email assessment report

Re-examine targets

Targets set

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1

Re-examine the above targets to ensure they are achievable

Identify reasons as to why the targets have not been met.

Set new targets taking into account previous failures.

Would you like to email the target failure assessment to relevant stakeholders?

Email target failure assessment

Determine if targets have been achieved

This is a stop task. Completing the Environmental Account Internal Audit is not possible until all targets have been met.

Continuation of the assessment tasks is required until all targets have been met.

This is a stop task, which means you cannot progress in this environmental accounting internal audit until the required form fields are complete.

The conclusion put forward in regard to whether every target has been met needs to be reviewed and approved by the relevant personnel before the continuation of this Environmental Accounting Internal Audit is possible.

1

Every target has been met

Approval:

Determine if targets have been achieved

Will be submitted

Assess benefits:

Assess financial and environmental benefits

You can document your cost savings achieve in an online document and provide the URL link.

Alternatively, you can upload a file summarizing the savings achieved.

Financial and Environmental benefits detailed need to be reviewed and approved by the relevant personnel before these benefits can be emailed to the relevant personnel.