green accounting

As an individual, we keep an account for most of the things in our life.  How much we spend a day, a month and year are recorded systematically by most of us. We also record our savings for expected events of life and for unforeseen contingencies. Likewise, a country too maintains records of all its expenses and revenues to analyze its economic performance. These accounts consist majority of quantitative aspects of a country. It neglects a lot of qualitative aspects. For an economy to flourish it is necessary to enhance economic growth as well as development.

We are moving towards development by utilizing all our available potential for the betterment of the society, economy and the environment. We must also advance towards creating conditions which guarantees a sustainable future. The utmost concern in developing countries, especially like India is a gradual shifting of resources. This concern mainly arises due to shifting of the economy from an agrarian to an industrialized one. Under such circumstances, it is necessary to deal with economic indicators that deal with environmental aspects. The traditional System of National Accounts (SNA) gives us measures of GDP and GNP. One of the main drawbacks of these indicators is that it fails to take into account the impact of economic process in the environment. Even if the impact has a positive or negative spillover.

What is a Green Accounting?

As per the United Nations Environment Programme Report,1997 green accounting is the major pathway for a green economy for any country. The green accounting provides information about the use, impact, status, and value of natural resources in a country. It also gives an idea about expenditures on resource management and environmental protection. Introducing green accounts in SNA enables the policy-making body to analyze the relations between economics and environment cost. It also helps to measure the magnitude in quantitative terms in different stages of production process. Therefore, we can acquire accurate information on how much resources are being used and how much had exceeded the viable externality limits by different industries.

Who are the Supporters?

The initiative backs support from the United Nations, World Bank, International Monetary Fund European Commission and Organisation for Economic Corporation and Development. There will be two main approaches to green accounting. First, a satellite or separate account will handle the valuation of natural resources present, used and depleted.  This account shall link with SNA but not integrated with it. The second approach involves modifying the traditional SNA and embody environmental account into it.

Norway happens to be the first country to introduce green accounting into the system in the 1970s. Environmental reporting is discretionary across the world. But some countries have passed legislation which makes it mandatory to publish environmental reports. Denmark, Finland, and Australia are some countries which have strict legislation for environmental reporting. Australia is bound to a policy in which accounting for natural resources such as water, coal, energy, and timber are done annually. Botswana too is making attempts to develop provisions to evaluate its diamonds and other minerals.

Probable Impacts

Economists are of the opinion that India’s growth rate might fall by 2-3% by allowing environmental reporting and human well being in the accounting process. However, green accounting is a complicated process with minimal data, political distress, a problem of double counting it is an important aspect to promote a sustainable framework for an absolute index for nations performance.

India is the second most populated country in the world which make its natural resources vulnerable. Therefore, implementing green accounting can help the nation to protect its depleting resources for a sustainable and healthy environment for the future generations. The policy will be helpful to create a sense of awareness among the common people to official authorities for judicious use of resources.




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