A Survey of the Environmental Conservation Costs

Topics: Economics

Keywords: Environmental Conservation; Local authorities; Environmental costs 0 201 3 Published by SUBNET 1 . Introduction This paper investigates the environmental conservation costs by local authorities in Kenya. Environmental conservation cost refers to the investment and costs measured in monetary values, allocated for prevention, reduction, and or avoidance of environmental impact, removal of such impact, restoration following the occurrences of a disaster and other activities. These are costs borne by companies and organizations for environmental conservation I. . Private costs.

The costs do not include costs borne for health damage or environmental pollution suffered by third parties or society as a whole resulting from the business activities of companies and other organizations I.

E. Social costs. It means the burden placed upon society as a result of the environmental impact Of a specific company or other organizations, or Of an unspecified entity. Social cost is also referred to as “external cost’ or “external discover/’ such as damage suffered by a third party or damage caused to forests or agriculture due to environmental impact resulting from the cuisines activities of a company or other organization will not result in a direct economic burden for that company provided that there is no proof of causal relationship but the society as a whole may be considered to have sustained a loss Medley (1997).

Environmental conservation cost can be categorized into one, business area costs which are costs for activities to reduce environmental impact which occur within the business area due to key business operations. The business area is the region where the organization can directly manage environmental impacts.

Get quality help now

Proficient in: Economics

5 (339)

“ KarrieWrites did such a phenomenal job on this assignment! He completed it prior to its deadline and was thorough and informative. ”

+84 relevant experts are online
Hire writer

Business area cost s associated with environmental conservation is divided into pollution prevention cost, global environmental cost and resource recycling cost. Secondly, administration cost which is the cost for management activities conducted by companies and other organizations for environmental conservation activities. The cost includes the cost for efforts that directly contribute to reducing the environmental impact generated through business activities, and the cost for efforts for communication a Corresponding author.

Kali Samuel, Tell. : +020 086 808. 89 Kali & Mutual ‘International Journal of Finance & Banking Studies Volvo 2, No , 2013 SIGNS 2147-4486 with society by companies and other organizations, like the cost for environmental training for employees, cost for environmental improvement activities such as nature conservation, greening, and beautification. Thirdly, environmental remediation costs. These are costs allocated for recovery Of the environmental degradation due to business activities like the cost to restore natural environment back to its original state, provision or insurance fees to cover degradation to the environment.

Fourth, social activity cost which is a cost related to environmental conservation conducted for the good f the broad range of society Gulch (2000). This is considered a cost for environmental conservation efforts consisting of social activities with no direct relationship to the business activities of the company or other organizations like cost for environmental activities like planting of greenery, beautification and landscape preservation. Fifth is the R&D cost which constitutes spending for research and development activities allocated to environmental conservation. Lastly are the upstream/ downstream costs. Upstream cost is a cost for efforts to reduce the environmental impact that is reared prior to the input of goods and services into business areas, as well as the cost related to such efforts I.

E. Provision of materials for goods and services. Downstream cost is a cost for efforts to reduce the environmental impact that is created after goods and services have been output from business areas, as well as the cost related to such efforts I. E. Use and consumption of goods and services Medley (1997).

The study seeks to determine environmental costs by local authorities in Kenya. The study acts as an exploratory on environmental accounting forming a basis for further search and illustrate important findings for the groups including the local authorities in Kenya and the stakeholders of local authorities like consumers of their services, business partners, investors, employees of particular local authorities and the residents. The local authorities can be able to establish the benefits they get from environment conservation as well as the costs of undertaking environmental activities, utter researchers, local government of Kenya as well as other scholars. . Literature Review The section presents both theoretical (untested) as well as empirical (tested) literature relevant to he subject of study. Accounting for environmental costs and performance can support a company’s / organization’s development and operation of an overall environmental management system.

Understanding the environmental costs and performance of processes and products can promote more accurate costing and pricing of products and can aid organizations in the design of more environmentally preferable processes, products and services for the future. Better management of environmental costs can result in improved environmental performance and significant benefits to human health as well as business success. The disclosure of environmental accounting regarding environmental conservation activities of companies and other organizations, including public interest organizations and local public entities, provides a means for stakeholders to understand, evaluate, and give their support to such efforts. Environmental accounting continues to take root as part of the social system. Taking into account, developments in environmental accounting at companies and other organizations, it has the objective of supporting the introduction and implementation of environmental accounting at companies and other organizations.

Environmental accounting is also intended to insure that the information disclosed takes into consideration the needs of the various stakeholders. Another objective is to improve the effectiveness of environmental accounting methodology, so that by employing given guidelines in organizing environmental accounting data, companies and other organizations can monitor their data not only for publication, but also further their objective of internal environmental management (Bailey, 1991). The quantitative management of environmental conservation activities is an effective way of achieving and maintaining sound business management. In other words, in carrying out environmental conservation activities, a company or Other organizations can accurately identify and measure investments and costs related to environmental conservation activities, and can prepare and analyze this data. By having better insight into the potential benefits of these investments and costs, the company can not only improve the efficiency of its activities, but also utilize environmental accounting as a discipline which plays a very important role in supporting rational decision-making.

In addition, companies and other organizations are required to have accountability to takeovers, such as consumers, business partners, investors, employees, local residents, and administration, when utilizing environmental resources, I. E. Public goods, for their business activities. Disclosure of environmental accounting information is a key process in performing accountability. Consequently, environmental accounting helps companies and other organizations boost their public trust and confidence and are associated with receiving a fair assessment (Lehman, 2000).

The functions of environmental accounting are divided into internal and external functions. As one step of an organization’s environmental information system, internal function makes it possible to manage environmental conservation cost and analyze the cost of environmental conservation activities versus the benefit obtained, and promotes effective and 90 Kali & Mutual [International Journal of Finance & Banking Studies Volvo 2, No 3, 2013 SINS: 2147-4486 efficient environmental conservation activities through suitable decision- making. It is desirable for environmental accounting to function as a business management tool for use by managers and related business units. On the other hand, by disclosing the quantitatively measured results of its environmental conservation activities, external functions allow an organization to influence the decision-making of stakeholders, such as consumers, business partners, investors, local residents, and administration. It is hoped that the publication of environmental accounting results will function both as a means for organizations to fulfill their responsibility for accountability to stakeholders and, simultaneously, as a means for appropriate evaluation of environmental conservation activities (Lehman, 2000).

Local authorities in Kenya are the bodies controlling local governance in Kenya. Local Authorities in Kenya are governed by the local government Act cap 265 laws of Kenya. Kenya has 1 75 local authorities which are categorized into city councils, town councils, municipal councils and county councils. The Act spells out wide ranging powers and functions for local authorities, where most of these functions undertaken by the local authorities relate to provision of public services, promotion of good governance and simulation of good economic growth. The functions and responsibilities cover basic services such as markets, garbage collection, street lighting maintenance, velveteen planning, roads, sewerage, community welfare, slaughterhouses and burial of destitute people.

There are also provisions of health to the community through health centers as well as dispensaries. Besides health facilities the council provides housing, schools and recreational facilities and maintenance of parks (Local government Act caps 265 laws of Kenya). Local authorities get their funding from the local authorities transfer fund (LATA) which is a block grant that transfers 5% of the national income to the local authorities. It distribution is SSH 1. 5 million to ACH of the 175 local authorities in Kenya (per annum).

This is 60% in proportion to the total population of each local authority, 40% in proportion to the urban population of each local authority. The second source of funds is road maintenance levy fund (ARMFUL) which is collected from fuel levy on petroleum products and transit toll collections. The third source of funds is the contribution in lieu of rates (COLOR) which a local tax levied on property like land by the local authority as authorized by the central government . ML Circular (2009). Machined (2009) in his study on local government processes ND the environment in Africa stated that by and large, the conventional planning approaches have either ignored or underestimated the growing environmental concerns.

The search for planning responses to the devastating environmental concerns has culminated in the assembly of an ‘environmental tool box’ containing an assortment of instruments notably, pop Elution control and licensing, Environmental Impact Assessments (Eels), natural resource management plans and environmental auditing. Most of these instruments are quasi-planning in nature normally deployed to complement the conventional land-use planning tools but largely outside the rotational planning practice. This points out that, in the mainstream planning activities, the emerging environmental management specializations have increasingly drifted apart – theoretically, legally, administratively and in their specific responses to environmental problems. The irony of this compartmentalizing is that urban planning largely grew out of the pragmatic concerns for the health of citizens and their social well-being in the wake of the industrialization cities of the nineteenth century. The growing magnitude of the negative environmental concerns impacting sustainable urban development must be redressed by ‘personalizing’ the symbiotic relationships between urban development and environmental management through the application of the relevant planning instruments.

In the study by Kappa (2005) on Lesotho local government system, he stated that there was need for control of natural resources like sand and stones as well as environmental protection like pollution land/site allocation, water supply and market provision. Indention (2005) in the review of local government financing in Ireland, stated that environmental protection expenditure was 695. 2 million which was 19. % Of the total expenditure for 2004 and that water supply and sewerage consumed 450. 6 million which was 12.

% of the total expenditure giving evidence that governments are responding to environmental challenges. Local studies on environment accounting have been done. UNDO (2000) on its study on millennium development goals in Kenya stated that the current needs assessment recommended that it would take SSH to develop and implement a strategy for integrating principles and practices of environmental accounting within and /or alongside the system of national accounting (SAN) – even if on a pilot basis. Ministry of youth affairs (2010) on environmental and social management framework (SAME) stated that one of the key environmental and social issues in Kenya is health and environment and further explains that most of the urban areas in Kenya are faced by domestic waste and sewage management problems with only 32 out of the 1 75 local authorities having any form of sewage collection and disposal infrastructure. Enema (2005) in its strategic plan for 2005-2010 stated that there was lack of sewerage system and facilities for 143 out of 175 local authorities which led to increased cases of environmental health robbers due to 91 pollution of the ecosystem by heavy metals and chemicals such as nitrates.

Wean and Mutual (2007) in their study on e-governance in local authorities in Kenya stated that the LAYOFFS is limited to financial management and has only three main components, revenues, budgeting and financial management and expenditure, a study that fails to mention environmental accounting issues. According to Kibitz (2004), Environmental costs are obscured in conventional accounts and yet they are real costs that should be accommodated by all firms and industries. Management of the environmental costs will result in improved environment, production and generally wealth of the urban population in the study area. This study would also argue for a clearer policy of the management of extractive industries and any other industry that largely tends to exploit natural resources. This will also contribute to the sustainability of the growth and development of not only the urban regions but also the rural.

Being a pioneering study on one of the industries in an urban centre, other studies covering the various industries and regions will be encouraged. It is the ultimate purpose of this duty to have other studies expanded to include all firms and sectors in the economy. To arrive at aggregates for the whole economy it is important to begin with the microeconomic production units. In his studies Hosannas (1996) stated that in the coming decades, the continued urban population growth and especially the continued growth of the urban poor was expected to immensely challenge global sustainability. As at 2001, there were 43 cities in Africa with populations of more than one million and it is expected to increase to almost 70 by 201 5 (UNPIN, 2001 Nassau would be among these ties.

More problems of overcrowding, informal settlements, inadequate housing, poor infrastructure etc. Are bound to increase. Infrastructural development has been slow in keeping pace with burgeoning needs of the urban population. Since most urban environmental problems result from poor management, poor planning and absence of coherent urban policies (Hosannas, 1996); it is important that these dimensions be addressed in all sectors of the urban domain. Another study by Hosannas (2003) stated that the conventional national accounting systems, excludes: domestic production; reduces directly extracted from communal resources for household consumption and not traded in the market, and; benefits from ecological services, cultural, aesthetic, etc.

Though GAP included income from extracted resources corresponding value of these assets lost to the economy was omitted. Depletion of natural and human capital was excluded from total national wealth of a nation and hence the measures of economic performance were wrong and misleading. Daly (1996) explained clearly that sustainable development sought to meet the needs of the present without compromising the needs of future generations. In other words, the present generation must leave the air, water and natural resources as pure and unpolluted as when it found it. Strong sustainability clarifies that in the case of renewable resources annual off-take must be kept equal to the annual growth increment while in the case of nonrenewable depletion should be at a rate equal to the development of renewal substitutes.

That meant that stock of natural capital should not be reduced below a level that generated sustained yield unless good substitutes were then available. Hosannas (2003) stated that sustainable development therefore, had to be financed in such a manner as to compensate for future depletion of exhaustible resources. He gave the example where policies had ensured sustainability from mining in South Africa, where the capital component (C) was fully reinvested in alternative forms of capital Hosannas (2002). According to Disgusts and Male, the correct index of checking if development is sustainable is wealth. When accounting prices that reflect trade-offs among present and future well- beings and among contemporaries are used to determine well-being, wealth becomes a good index for showing whether development is sustainable or not.

Poverty causes a society to elk out living through adverse exploitation of resources and this is the state of the populations in the Less Developed Countries (Olds) (Disgusts & Male, 1995). Accounting for externalities has been adopted in the microeconomic level within the firm in hydroelectricity (EPA 1996), health sector (EPA 2000), chemical and oil companies (EPA AAA) and electroplating operations (ERA, 1 Bibb) among others. The studies sampled, applied various environmental accounting techniques to evaluate environmental costs of economic activities in an industry. The results showed existence of positive environmental costs in all cases with an implication that most economics activities have environmental costs which are yet to be accounted for. Enema (2005), in its report stated that there were challenges that led to unsuitable management practices of ecosystems and their inherent biodiversity.

Increased slum settlement in urban areas due to rapid rural-urban migration resulting in environmental problems of overcrowding, poor garbage disposal and environmental diseases like cholera, dysentery and typhoid. Kisser (1999) in his studies on local government planning and management stated that there were increased environmental pollution and degradations resulting from uncontrolled industrial smoke-emissions, discharge of untreated industrial effluent into rivers, dumping of toxic waste and deforestation of peer-urban woodlands. 92 In the annual report by the ministry of petroleum, the Egyptian general petroleum corporation(2000) stated that natural resource damages is a new category of environmental liability which had been established in the United States according to a number of regulatory such as the clean water Act and the oil pollution Act. Such resources include flora, fauna, land, air, and water sources. The liability can arise from accidental release as well as lawful release to air, water, and soil.

As a result there was a wide range of environmental expenditures such as abatement costs, elimination costs and handling of waste costs just to mention but a few, as well as environmental capital expenditures as a result of buying a new and/ or new cleaner technology. Goals such as environmental costs optimization, better environmental performance, identifying the true (full) costs and identifying the social costs all require knowing the different current and potential costs. However the study further stated that knowing the environmental costs depended upon the organizational purpose for using such data like cost allocation, capital budgeting, product design and all that managerial decisions . He report ends by stating that the domain and scope of applying the costs if sometimes to be vague whether the costs are environmental or not. SETAE (1993) on its report on a multi-disciplinary approach to solving problems of the impact of chemicals and technology in the environment stated that some companies were paying a significant portion of their total environmental costs o clean up pollution caused decades before like remediation costs related to superfine only being incurred by then but pertained Of decades before that time.

Due to the fact that the corporate environmental expenditures being often substantial, including them in the product costs affected the profitability of the products, facilities and divisions. Many companies according to the report include current operating costs pertaining to past environmental liabilities in their current product costs with the justification ,other expenses that created future benefits were charged to product costs or corporate overhead, including product development,research and development, and advertising expenses. Thus, current products benefited from those prior expenditures and the product costs must bear the costs related to prior production, just as it reaps the benefits. Therefore, from the above studies it is apparent that organizations are involved in environmental conservation costs and local authorities in Kenya are such kind of organizations that have both direct and indirect interactions with the immediate environment, thus, local authorities must incur environmental conservation costs. The studies mint out that there is need to find out the various environmental conservation costs local authorities in Kenya go through.

2. 1 Accounting Theory The accounting theory has evolved through a long passage of time during which substantial changes in human behavior and market structures have taken place. The theory outlines how accountants have identified certain broad assumptions on which financial results of a business are prepared . These assumptions are called accounting concepts which define the rules under which financial statements of an entity should be prepared. The theory rings out boundary rules like entity, periodicity and going concern concepts to determine what should and should not be reported.

Once the boundary is set, it should then determine how the accounting data should be recorded I. E. Money measurement, historical cost, realization accruals, matching, duality and materiality. The theory limits the room for individual maneuvers, a number of ethical rules like prudence, consistence and objectivity have evolved, which suggest that there is a moral dimension in financial reporting. . 1.

1 Green budgeting theory (in Environmental accounting in local overspent) It is by initiative of the local Agenda 21 (ALAI after the ROI summit (1992) and the Johannesburg summit (2002) that schemes of environmental accounting at sub-national levels of government started to be developed: a bottom-up approach. , source of a large diversity of initiatives, in contrast to the top-down approach followed by nationals statistics offices coordinated, in addition, by supranational organizations such as the United Nations and Rheostat. Amidst the consequent fragmentation of local experiences, the only exception is the Gobbet scheme, promoted by the International Council for Environmental Initiative (ICICLE), which has been implemented in more or less the same form by a few local governments in several countries. Its basic idea is to implement a budgeting system for natural resources that conforms to the community financial budgeting: the current institutions and procedures must provide the model for the budgeting of natural resources. It is based on environmental indicators and as such it does not aim to provide a monetary evaluation of the environment, or to maintain long term, detailed and systematic accounts to be used in logic design and programming.

Rather, its purpose is to help monitoring the effectiveness of local governments in achieving the set targets in matter of environmental policy, and communicating objectives, achievements or failures between policy makers and citizens. In principle, the objective could be more ambitious: inserting environmental issues on the political agenda not in an ad hoc manner but rather as systematic reporting to the 93 city/local council. The environmental master budget should confront the highest council decision-making committee with environmental and sustainable development issues. Local authorities should be able to predict, plan, control, monitor and report the consumption Of natural resources, as part of their environmental management activities as called by the Labor Charter (1994), the Lisbon Action Plan (1996) and the Hanover Conference (2000). However, for these reasons, the potential of environmental accounting as an aid to economic programming and decision making, in general and at the local level in particular, is still largely neutralized.

One of the features of environmental budgeting, as has been implemented, is legibility in the choice of indicators – a choice that reflects, case by case, the interests and criticalness of specific local jurisdictions.

Cite this page

A Survey of the Environmental Conservation Costs. (2018, Feb 13). Retrieved from https://paperap.com/paper-on-a-survey-of-the-environmental-conservation-costs/

A Survey of the Environmental Conservation Costs
Let’s chat?  We're online 24/7