Environmental costing and sustainable accounting: A comprehensive review: Delving into methods of accounting for environmental impacts in financial statements

Abstract

This study provides a comprehensive review of the integration of environmental costs into financial reporting within the framework of sustainable accounting. The main objectives were to explore the historical evolution, current practices, challenges, and future trends in environmental accounting, and to assess its impact on businesses, the economy, and stakeholders. Employing a systematic literature review and content analysis methodology, the study analyzed peer-reviewed journal articles, industry reports, and policy documents from 2013 to 2023. Key findings reveal a significant evolution in environmental accounting, transitioning from a marginalized practice to a mainstream component in financial reporting. Current practices are characterized by innovative approaches and technological advancements, reflecting a shift towards holistic and sustainable business operations. The study identified challenges such as the complexity of integrating environmental costs, the need for standardized reporting frameworks, and the requirement for skilled expertise. Opportunities include enhanced corporate transparency, improved stakeholder engagement, and alignment with global sustainability goals. The study concludes with strategic recommendations for business leaders and policymakers, emphasizing the adoption of environmental accounting as a strategic business approach and the development of comprehensive environmental accounting standards. Future research directions include exploring the impact of environmental accounting across different industries, the role of emerging technologies, and the long-term effects on business performance and sustainability. This study contributes to the understanding of environmental costing within sustainable accounting, highlighting its growing importance in the corporate world.