BUILDING GREEN SMES THROUGH ENVIRONMENTAL ACCOUNTING: ANALYSIS OF ENVIRONMENTAL-COST MODELS AND ITS IMPACT ON LONG-TERM PROFITABILITY
Keywords:
SMEs, environmental accounting, environmental costs, sustainability, profitabilityAbstract
This article aims to explore the role of environmental accounting, particularly the environmental-cost model, in shaping sustainable green SME business models. The main objective is to examine the extent to which the implementation of environmental accounting practices can improve long-term cost efficiency and profitability, while reducing the ecological footprint of small businesses. The main problem faced by MSMEs is the lack of integration of environmental costs in the financial accounting system, so that external costs such as waste management, energy use, and air pollution are not accurately calculated in the decision-making process. This causes inefficiency and the risk of long-term losses and low competitiveness in a market that is increasingly concerned with sustainability. This study offers a new approach by systematically integrating the environmental cost model into MSME accounting practices. Unlike conventional approaches, this model presents a cost structure based on the product life cycle and its ecological impact. This allows small entrepreneurs to understand the sources of inefficiency and design data-based mitigation strategies, which are still rarely applied in the Indonesian MSME sector. This study uses a descriptive qualitative approach with a case study method on five environmentally friendly manufacturing MSMEs in Surabaya. Data collection techniques include in-depth interviews, participant observation, and analysis of financial statements and operational documents. Data are analyzed using the Environmental Cost Accounting (ECA) approach to evaluate the impact of environmental cost integration on financial performance. The findings show that the implementation of environmental accounting based on the environmental cost model can reduce operational costs by up to 15%, improve compliance with environmental regulations, and strengthen business reputation in the eyes of consumers and investors. In addition, there is an increase in profit margins of up to 10% due to increased production efficiency and consumer loyalty, accompanied by increased access to green financing. The integration of environmental accounting into the financial system of MSMEs not only improves economic efficiency but also accelerates the transition to a competitive green business model. This study recommends the implementation of the environmental cost model as a new accounting standard for sustainability-oriented MSMEs and suggests policy support to expand its adoption.References
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