Academic journal article Journal of Applied Management Accounting Research

Costing Life: Air, Water and Food

Academic journal article Journal of Applied Management Accounting Research

Costing Life: Air, Water and Food

Article excerpt


Air, Water and Food, are the fundamental requirements for life to exist on this Earth. However, emitting greenhouse gases into the atmosphere is not only causing climate change, but also air pollution. Management accountants can provide policy related decision information on investments and other actions taken to mitigate the impact of greenhouse gases and other air pollutants. Water costs are related to the issues of climate change. It is clear that many industries depend on water in the supply chain for their workforce and production and to maintain a healthy operating environment. However, the average cost of water is so cheap that there's no incentive to conserve or protect it. Should the water price be reflective of its value or is water a basic human right? All these arguments should be backed by reliable cost calculations, and price demand forecasts, clearly an area for management accounting involvement.

Finally, the paper addresses the issue of 'food', i.e. how big business has taken ownership of the genetically modified (GM) 'seeds' required to grow the food. By using patents, they have taken away a farmer's right to save seeds for the next season. The paper argues that management accountants need to undertake the calculations that favour humanity, rather than profits.


Cost of Climate Change

Cost of Air Pollution

Price of Water

Genetically Modified (GM) Seeds


The origins of management accounting can be traced to Commerce along the 'Silk Road', where traders calculated the cost of the venture and the profit they could make by undertaking such trade. Then with the advent of the industrial revolution, cost accounting became recognised as a profession in the 'works' departments of the many factories that sprung up in that period. Once again, the objective was profit maximisation, and cost accountants calculated the 'cost' of a product manufactured in this world of industry. Cost accounting morphed into 'management accounting' where forecast of future profits were made. Management accountants provided information to general management as to the best mix of products and services that would enhance the future profitability of their organisations.

In more recent times we have come to know that 'profit' alone, ignoring all other 'externalities' (such as the needs of the environment and society) is not enough. There is no point earning large profits if it damages the rivers, pollutes the air and underpays the labour that toils to produce the goods and services demanded by our consumerist society. Worst still is when this labour is housed in sub-standard and unsafe 'sweat-shop' factories and in many cases even child labour is exploited.

But the most serious effect of this unrelenting chase to achieve maximum profits is the damage it is causing to this earth, and the ability of future generations to survive. The release of green-house gases and the damage it is causing to our climate is a scientific fact. Only politicians who are either after the funding and clout of big-business, or simply too ignorant to understand the science, try to run the argument that the climate change that we see all around us, in every country, is not caused by mankind. Management accountants can play a role in the area of 'carbonomics' by using tools such as Life-Cycle Costing (LCC) to show the carbon emission impact of marketing our products; from the initial mining of the base raw material needed for the product; to the fuel needed to manufacture the product; to the transportation required to deliver the product to the point of sale; to the final waste disposal of the product after its useful life. Clearly, management accountants have to look beyond profits made by just only selling the products; to what damage this unrelenting chase for efficiency and productivity is causing to the Earth's environment. Another almost irreversible effect of this relentless chase after profits and a consumerist lifestyle is the effect it is having on air pollution; caused by vehicle emissions and industrial pollution. …

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