Environmental Management Accounting Practices in Japan

Abstract

Environmental accounting practices in Japan have been led by two governmental initiatives. One is the MOE initiative which emphasized external disclosure. The other is the METI initiative which emphasized the applications of environmental accounting to internal management, namely Environmental Management Accounting (EMA). To characterize corporate environmental accounting practices in Japan, a questionnaire survey was administered to all companies listed in the first section of the Tokyo Stock Market. After a brief review of these governmental initiatives, this paper will examine the survey results. From the results it is found that environmental accounting is still oriented mainly toward external information disclosure, but that the application to internal management (EMA) has increased steadily. The survey results are also used to assess a set of hypotheses regarding factors and conditions important to promoting adoption and maximizing the benefits of EMA. Findings suggest that key factors include: a well-established environment department actively engaged in decision-making across the firm, understanding of environmental accounting concepts by top and middle management, and the use of specialized EMA tools.