Carbon Business Accounting: The Impact of Global Warming on the Cost and Management Accounting Profession

Abstract

The concentrations of greenhouse gases in the atmosphere have risen dramatically, leading to the possibility of costly disruption from rapid climate change. This calls for greater attention and precautionary measures to be put in place, both globally and locally. Governments, business entities and consumers would be affected by the extent to which such precautionary measures are incorporated in their decision-making process.

Business entities need to consider such issues as trading in carbon allowances (or permits), investing in low-carbon dioxide (CO₂) emission technologies, counting the costs of carbon regularity compliance, and passing on the increased cost of carbon regulation to consumers through higher prices. Such considerations require information for informed decision making. This paper reports on a qualitative research study undertaken to consider the impact of the Kyoto Protocol mechanisms on the changing information paradigms of cost and managerial accounting.

It is demonstrated that the information from strategic cost management systems will be particularly useful in this new carbon economy, especially in evaluating the “whole-of-life” costs of products and services in terms of carbon emissions. Similarly, the study discusses how strategic management accounting information would facilitate decisions on business policy, human resource management, marketing, supply chain management, and finance strategies and the resultant evaluation of performance.