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A Study of Green Accounting Practices in
India
*Dr. Preeti Malik (Assistant Professor)
**Dr. Alka Mittal (Reader)
Maharaja Surajmal Institute
researchwork12215@gmail.com 
ABSTRACT: Social responsibility regarding the
environment is one of the crucial areas in today’s
corporate social responsibility. In order to sustain in
this competitive world most of the industrial and
corporate houses globally are incorporating the
concept of environmental element in their business
operations. These industrial houses are clear in their
perspective that along with the quality in their
businesses they have to incorporate the concept of
environment too in order to be successful in their
fields. It has major area of concern not only in the
field of science globally.
A careful analysis of costs and the benefits of the
environmental pollution are very important now days.
Green accounting will help the organizations to
identify the resource utilization and the cost incurred
on the eco system by the activities of the industries.
This green accounting is a new system in accounting
which records costs and benefits rendered by the eco
system to a business concern. Green accounting or
environmental accounting is a new challenge of
accounting system. The present research paper
concentrates on exploring the concept of green
accounting, its practices and reporting in India.
Key Words: Green Accounting, Green Accounting System,
Resource Accounting, Environment Protection, Accounting,
Environmental Cost Benefit analysis.
 
Introduction:
Accounting for environment helps in accurate
assessment of costs and benefits of environmental
preservation measures of companies. It provides a
common framework for organizations to identify and
account for past, present and future environmental
costs to support managerial decision-making, control
and public disclosure.
The severity of environmental problems as a global
phenomenon has its adverse impact on the quality of
our life. Measures are being taken both at the national
and international level to reduce, prevent and mitigate
its impact on social, economic and political spheres.
The emergence of corporate environmental reporting
(CER) in India has been an important development,
both for better environmental management and
overall corporate governance. Global awareness of
stakeholders on corporate environmental performance
has already made traditional reporting redundant.
Corporate houses run into the risk of loss of faith of
their stakeholders, if in future, environmental
performance information is not included in their main
stream reporting.
Simple adherence to mandatory environmental
reporting is insufficient to meet the environmental
disclosure expectation of stakeholders. Mandatory
reporting is nothing but a minimum prescribed
reporting requirement. Companies around the world
aspire consciously for improved transparency in
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disclosure as their core competence. Environmental
disclosure through internet would be the future of
scientific reporting. A number of recent national and
international surveys have identified increase in
growth of companies reporting on internet.
Environmental reporting of Indian companies can be
broadly categorized into two types’ mandatory
disclosure and voluntary disclosure. Preliminary
investigation of this study shows that Indian
companies practice more of voluntary environmental
reporting in the form of satellite reporting,
sustainability reporting, GRI reporting and internet
reporting.
In year 2001, a country wide survey, the first of its
kind, was carried out by Business Today, a business
magazine, and The Energy Research Institute (TERI,
2001) to understand the environmental practices of
corporate India. Findings of the survey revealed that
more than 75% of the sample had environmental
policy; about 70% have environmental audit system;
60% had an environment department; four out of
every ten Indian Companies had formal environment
certification (ISO 14001)
As per Indian Constitution, Article 51A of Directive
Principles “It shall be the duty of every citizen of
India, to protect and improve the natural environment
including forests, lakes, rivers and wildlife and to
have compassion for living creatures.” The
constitutional provisions are backed by a number of
laws - acts, rules, and notifications like Factories Act
 
Vol. 4, No.6, December 2015
1948; (Prevention and Control of Pollution) Act
1974; Forest (Conservation) Act 1980; Air
(Prevention and Control of Pollution) Act 1981;
Water Biomedical waste (Management and Handling)
Rules 1998; Municipal Solid Wastes (Management
and Handling) Rules, 2000; Ozone Depleting
Substances (Regulation and Control) Rules 2000;
Noise Pollution (Regulation and Control)
(Amendment) Rules 2002; Biological Diversity Act
2002. The Department of Environment was
established in India in 1980 to ensure a healthy
environment for the country. This later became the
Ministry of Environment and Forests (MOEF) in
1985. The EPA (Environment Protection Act), 1986
came into force soon after the Bhopal Gas Tragedy
and is considered an umbrella legislation as it fills
many gaps in the existing laws.
The Ministry of Environment & Forest, Government
of India (GOI), has brought a number of regulatory
and non regulatory initiatives, in its efforts in
harmonizing environmental protection with economic
development. In 1991 GOI has made its first public
announcement about the need for environmental
disclosure in annual reports. In addition to the above
requirement, companies are required to prepare
director's report as per director’s report rules, 1988.
Further, the Companies' Bill 1993 & 1997 had
proposed the amendment of section 173 to disclose
through its board of directors report the measures
taken for protection of environment. There is also a
mandatory requirement for Indian companies to
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Vol. 4, No.6, December 2015

report on conservation of energy, technology Special emphasis of the research is on generation of

absorption, etc. in accordance with the provisions of reports and their standards, for the range of business
Section 217 (1) (e) of the Indian Companies Act and regulatory purposes.
1956. In India, financial accounting & reporting
guidelines are issued and governed by the Institute of Malarvizhi P (2008) in a study corporate
Chartered Accountants of India (ICAI). Companies environmental reporting on the internet: an insight
Act mandates the preparation of annual accounts of into Indian practices tried to establish the approach
companies in accordance with the accounting and scope of environmental accounting and reporting,
standards issued by ICAI (Chatterjee, 2005). as it exists today. The study was based on a sample of
Review of literature: 24 documents comprising annual reports,

Over the past decades companies have recognized the environmental or sustainability reports and other

benefits of environmental reporting. As a result, there relevant reports of past years. Initially companies in

was dramatic increase in the number of companies the sample were classified as manufacturing and

reporting in numerous ways. Early reporters are quick nonmanufacturing sectors. Since some companies

to realize that environmental disclosure is more of a operate in both sectors analyzed, the assignment to a

governance and strategic issue than a simple specific one was determined on the basis of main

reporting tool (Roome, 1992; Parker, 1997; Parker, activity carried out by the company.

2000a). Regardless of the medium of reporting, Green accounting methodology for India and its

companies are bound to satisfy country specific/ States, a project done by Haripriya Gundimeda et.al

international reporting standards and requirements. It (2005). argue the case for Green Accounting for India

is important to understand as to how far standard (i.e. a framework of national accounts and state

setting improves credibility in reporting through accounts showing genuine net additions to wealth)

major surveys. However, most studies are based on and to present a preferred methodology and models to

content analysis of annual reports. reflect natural capital and human capital externalities
in India’s national accounts, measuring as

Nasir Zameer Qureshi et.al., (2012 )in their research depreciation the depletion of natural resources and

paper, environmental accounting and reporting: an the future costs of pollution, and rewarding education

essential component of business strategy, describes as an addition to human capital stock. Hecht, Joy E.

the environmental component of the business (1997), the world conservation union, explains
strategy, producing the required performance reports Environmental accounting as an important tool for
and recognizing the multiple skills required to understanding the role played by the natural
measure, compile and analyze the requisite data. environment in the economy. Environmental
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accounts provide data which highlight both the model is to present a novel view of the different
contribution of natural resources to economic well- activities to be undertaken by organizations to
being and the costs imposed by pollution or resource facilitate environmental accounting and reporting.
degradation. It also explains what is environmental
accounting why it matters how it is done who is Identification of Environmental Reporting
working on it and how to get started. The data parameters This is the first stage in environmental
underlying these aggregate indicators are also used accounting process where in organizations identify
for a wide range of less publicized but equally their respective environmental reporting parameters
valuable policy analysis and economic monitoring such as environmental policy, health safety and
purposes. environment, energy conservation, corporate
sustainability/ environmental initiatives,
Mukesh Chauhan(2005), explains the various forms sustainability reporting, waste management, water
of environmental accounting, its scope, limitations management, wind/renewable energy sources,
and legal framework in Indian context. He came out environmental information system, environmental
with a suggested framework for implementing green disclosure practices, environmental targets,
accounting practices in India and concluded that It is environmental reporting indicators, environmental
the call of the time that corporate prepare a firm cost and benefits, environmental liabilities and
environmental policy, take steps for pollution control, environmental assets.
comply with the related rules and regulations, Defining the Environmental Reporting
mention adequate details of environmental aspects in Parameters The second stage in the environmental
the annual statements. For sustainable development accounting process requires the organization to
of country, a well-defined environmental policy as clearly spell out the operational meaning of each
well as proper follow up and proper accounting parameter they identified and on the basis of which
procedure is a must. they wanted to measure the environmental
performance in the long run.
Stages to be followed by the corporate for Specify the Environmental Targets to be achieved

green accounting in India: It is in this stage that the organization tries to

formulate the environmental targets to be achieved
The study developed a model which specifies six
both in short run and long run, say the short term
aspects to be covered in environmental accounting in
environmental policy of the organization as well as
order to measure the ultimate environmental
the long term environmental policy.
performance of the organization. The aim of this

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Vol. 4, No.6, December 2015

Developing the Environmental Performance Source: http://www.iiste.org

Indicators In this stage, organisations need to think
about the indicators of their environmental Legal Framework for Environmental Accounting
in India:
performance such as environmental policy
framework, health and safety standards to be While industrial licensing has been abolished for all
followed, energy conservation practices to be practical purposes, environmental clearance from
followed, waste management programmed to be various Government authorities has now taken the
undertaken, water management policies etc. centre stage.
Measure the Environmental Performance
Indicators Here, organizations try to measure the With increasing global concern over the protection of
actual environmental performance in terms of the the environment, India too has set up a Union
predetermined standard performance indicators. Ministry of Environment with the object of
Measurement may be either qualitative or coordinating among the states and the various
quantitative in nature. For instance, indicators such as ministries, the environmental protection and anti-
environmental policy framework need to be pollution measures. Necessary legislation has also
qualitatively measured while; waste management been passed.
programmes are to be measured quantitatively.
Report the Environmental Performance Results The various laws relevant to environmental
In the last stage, organizations integrate their protection are as under:
environmental performance with that of financial (a) Directly related to environment protection:
performance, so as to give the environmental impact • Water (Prevention and Control of Pollution)
on the financial performance Act, 1974.
• Water (Prevention and Control of Pollution)
Cess Act, 1977.
• The Air (Prevention and Control of Pollution)
Act, 1981.
• The Forest (Conservation) Act, 1980.
• The Environment (Protection) Act, 1986.
(b) Indirectly related to environment protection:
• Constitutional provision (Article 51A).
• The Factories Act, 1948.

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• Hazardous Waste (Management & Handling)
Rules, 1989.
• Public Liability Insurance Act, 1991.
• Motor Vehicle Act, 1991.
• Indian Fisheries Act, 1987.
control facilities and 165 units are in the process of
installing such facilities. 125 units have been closed
down.
As a result of notices issued by the Central Board

• Merchant of shipping Act, 1958. 2137 units which did not have requisite effluents

• Indian Port Act. treatment systems, 480 units have been closed down
and 1457 units are about to be closed. 106 units have
• Indian Penal Code.
set up such systems and 94 units have been granted
• The National Environment Tribunal Act,
extension of time.
1995.

During the year 1997-98 around 680 complaints

It is important to note that all new projects require
regarding various types of pollution air, water, noise
environment clearance. This clearance concerns both
and soil have been received and attended to. The
the Union Ministry of Environment and Forests and
concern of the Ministry for protecting the
the corresponding State Govt. department of
environment in the coastal waters and the coastal belt
environment. Guidelines have been issued and all
has led to the imposition of a no-construction belt of
such projects are expected to obtain environmental
300 meters beyond the high water tidal limit on the
and anti-pollution clearance before they are actually
Indian coast line. This has affected the beach hotels
set up.
and coastal resorts.

A Central Pollution Control Board (CPCB) has also

Apart from the general concern for construction of
been set up. Wherever cases of violating of standards
the environment, the concern for the management of
of water or air pollution have been detected, show
hazardous substances for the protection of the forest
cause notices have been issued to industrial units and
wealth and wild life and for preventing biological
all such units are being kept under constant
degradation have also brought about some restrictions
surveillance.
which the existing industrial units and also
entrepreneurs wishing to set up new plants and
According to the Annual Report of the Ministry
factories should keep in view.
1997- 98, out of 1551 large and medium industries
identified in the 17 categories of highly polluting
industries, 1261 have installed the requisite pollution
Green Accounting Practices in India:
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that very little information is found in the

1. Very few corporations give adequate
annual report.
information regarding environmental issue. If
3. In the words of Jong Seo Choi, research
as per requirement of applicable law they
studies have examined the extent to which
have to prepare and submit any information
companies produce social information, of
relevant to environment they do so. The
which environmental information would be
Environment Ministry has issued instruction
part. A number of general themes that emerge
in this regard to prepare environment
from this include the following:
statement. It can be observed through their
i. The proportion of companies
accounts that mainly the following types of
disclosing and extent of that
information are given:
disclosure is low.
(i) What type of devices installed for
ii. There is some variety in disclosure
pollution control.
over time, between countries and
(ii) Steps taken for energy conservation.
between industries. Social disclosure
(iii) Steps taken for raw material
in general and environmental
conservation.
disclosure in particulars reflects the
(iv) Step taken for waste water and
changing business climate and social,
production process waste.
economic and political environment
(v) Step taken for improvement of quality
in which they occur. However, the
of product and services, process of
total amount of voluntary disclosure
production, etc.
stays fairly constant over time and
2. A study was conducted among 80 executives
what changes is the subject addresses
of different industries by Dr. B.B. Padhan and
in the disclosure.
Dr. R.K. Bal which revealed that corporate
iii. There is a very definite size effects in
world is fully aware of the requirements of
those larger companies are more
environmental reporting. They are also aware
likely to disclose than smaller
of the environmental issue. The corporate
companies.
executives have also expressed their views in
iv. Very little disclosure would qualify as
favour of environment reporting by the
information under any normal criteria
industries. Despite their awareness and
and very little of it indeed will
consent over environmental reporting by
contain numbers, financial or
industries is it very poor. It is so inadequate
otherwise.
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4. Environmental reports as contained in the 5. It was also revealed that most of the
Directors Report of three Indian Companies companies disclose the environment
are as under: information in descriptive manner rather than
i) Asian Paints (India) Ltd, (1993-94): to financial type i.e. no account is made for
“Ecology and Safety: Samples of treated the degradation of natural capital when
effluents are periodically checked for calculating corporate profits.
Compliance with standards”
ii) Goodlass Nerolac Paints Limited (1993-
94): “ Pollution: The company regularly
monitors measures in force in accordance Table No. 1
with the Pollution Control Act for the Extent to which Indian Corporates Practice
protection of environment and for Voluntary Environmental Reporting
ensuring industrial safety. The company
carries out improvements regularly to
ensure full compliance with the statutory
requirements.”
iii) Maruti Udyog Limited (1993-94):
“Environment: Modification of the
existing effluent treatment plant was
undertaken to take care of additional
effluents generated due to capacity
expansion. Data on non–methane
hydrocarbons in Paint Shop and Engine
Testing shop, ambient air quality, stack
emissions and effluents are being Source: Asia Pacific Journal of Research February 2014
regularly monitored and the parameters
are maintained well within prescribed Conclusion:
limits. Development of green belt around Environmental accounting is in preliminary stage in
gas turbine and R&D areas was further India and whatever shows in the accounts in this
augmented by plantation of 3000 regard is more or less compliance of relevant rules
additional saplings. and regulation in the Act. Actually, unless common
people of India are not made aware towards
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Vol. 4, No.6, December 2015

environmental safety, development of accounting in of the Economic Research Forum ,26-28

October
this regard is a little bit doubtful. It is the call of the
7. Mukesh Chauhan(2005), Concept of
time that corporates prepare a firm environmental Environmental Accounting and Practice in
policy, take steps for pollution control, comply with India, The Chartered Accountant November
720-726
the related rules and regulations, and mention 8. Nasir Zameer Qureshi
adequate details of environmental aspects in the et.al.,(2012).Environmental Accounting and
Reporting: An Essential Component of
annual statements. For sustainable development of Business Strategy, Asian Journal of Research
country, a well-defined environmental policy as well in Banking and Finance, Vol.2 Issue 4, April
9. Parameswaran,V(2011), Environmental
as proper follow up and proper accounting procedure accounting: Indian Perspective, International
is a must. seminar on Green economy and Official
Statistics, 6-8, July
10. Sherine Farouk, Jacob Cherian & Jolly Jacob,
Green Accounting and Management for
Sustainable Manufacturing in Developing
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