University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

96

Pages:

1
Author:

stud_ice13

This passage explores alternative methods of computing income by considering the environmental impact of business operations. The example of Puma’s Environmental Profit and Loss (EP&L) report highlights how businesses can evaluate their impact on the environment in monetary terms. Here's a breakdown of the key points: 1. Environmental Profit and Loss Report (EP&L): Puma developed an EP&L report to quantify the impact of its business activities on the environment. The report measures both profit (monetary value of activities benefiting the environment) and loss (monetary value of activities harming the environment). The EP&L approach is innovative because it goes beyond merely measuring metrics like water usage or carbon emissions, translating environmental impacts into financial terms. 2. Findings from Puma’s EP&L: In a given year, Puma’s report indicated no profits from environmentally beneficial activities, but it did report costs related to harmful activities. The net environmental loss was over 70% of the company’s GAAP net income for that year, suggesting a significant impact. Furthermore, 85% of the company’s environmental costs were attributed to suppliers and processors at early stages of the supply chain, with roughly 66% coming from the footwear division. 3. Impact on Management Decisions: By monetizing environmental effects, the EP&L report allows companies like Puma to identify and prioritize areas for environmental improvement. This aids in strategic decision-making to reduce environmental costs effectively. 4. Da Bomb’s Environmental Initiatives: The example of Da Bomb, a company mentioned in the chapter’s opening, illustrates how businesses can take socially responsible actions. Proceeds from the sale of Da Bomb’s “Earth Bomb” support ocean cleanup efforts, and the company has created over 150 jobs in its community. This passage demonstrates the increasing importance of integrating environmental considerations into financial reporting and decision-making processes.