Environmental and Material Flow Cost Accounting Principles and Procedures Christine Jasch 4y Springer
Contents Foreword by Tarcisio AIvarez-Rivero, UNDESA Acknowledgments List of Abbreviations List of Figures List of Tables Executive Summary v ix xv xvii xix xxi 1 What Is EMA and Why Is It Relevant? 1 1.1 The Issues Behind EMA 1 1.2 Challenges for Current Accounting Practices 5 1.2.1 Communication Between Accounting and Production Departments 6 1.2.2 Missing Links Between the Production Planning and Financial Information System 7 1.2.3 Hiding Environmental Costs in Overhead Accounts 7 1.2.4 Posting of Inventory Differences 8 1.2.5 Investment Appraisal Based on Incomplete Information 9 1.3 Definition of Environmental Costs and Environmental Management Accounting (EMA) 10 1.4 Monetary Accounting 16 1.5 Physical Accounting 18 1.6 EMA Links to Financial, Statistical, Environmental and Sustainability Reporting Requirements 23 1.6.1 The EC Recommendation and the EU Directive on Environmental Issues in Company Annual Accounts and Reports '. 24 1.6.2 The UN System of Integrated Environmental and Economic Accounting (SEEA) and Classification of Environmental Protection Expenditure (CEPA) 26 XI
xii Contents 1.6.3 The Guidelines of the Global Reporting Initiative (GRI) 30 1.7 EMA Uses and Benefits 33 2 The Input Side of the Material Flow Balance 37 2.1 Overview on Material Flow Balances 37 2.2 Raw Materials 39 2.3 Auxiliary Materials 40 2.4 Merchandise 40 2.5 Packaging 41 2.6 Operating Materials 41 2.7 Energy 43 2.8 Water 43 3 The Output Side of the Material Flow Balance 45 3.1 Products and By-products 45 3.2 Non-product Outputs (Waste and Emissions) 46 3.2.1 Waste 46 3.2.2 Waste Water 47 3.2.3 Air Emissions 48 4 Environmental Performance Indicators 49 4.1 ISO 14031 Standard on Environmental Performance Evaluation 50 4.2 Environmental Performance Indicators of GRI 51 4.3 General Requirements for Indicator Systems 51 4.3.1 Relevance 53 4.3.2 Understandability 53 4.3.3 Target Orientation 53 4.3.4 Consistency 53 4.3.5 Comparability 54 4.3.6 Balanced View 54 4.3.7 Continuity 55 4.4 System Boundaries for Performance Indicators 55 4.5 The Problem of Finding a Meaningful Denominator 56 4.5.1 Specific Consumption/Eco-intensity 59 4.5.2 Eco-efficiency Ratios 59 4.5.3 Percentage Distribution 61 4.6 Calculating Savings Based on Performance Indicators 62 5 Environmentally Relevant Equipment 65 5.1 Classification of Environmentally Relevant Equipment 67 5.1.1 End-of-Pipe Equipment 68
Contents xiii 5.1.2 Integrated Cleaner Technologies 69 5.1.3 Scrap Producing Equipment and Energy Conversion Losses 71 5.2 Environmental Investments According to SEEA and CEPA 72 6 Monetary Information 75 6.1 Overview on the EMA Cost Categories in the Excel Template for Total Annual Environmental Costs 76 6.2 Distribution by Environmental Domain 78 6.3 Material Costs of Non-product Output 79 6.3.1 Estimating Loss Percentages 80 6.3.2 Calculating Processing Costs of NPO 81 6.4 Waste and Emission Control Costs 82 6.4.1 Equipment Depreciation 82 6.4.2 Operating Materials, Water and Energy 83 6.4.3 Internal Personnel 83 6.4.4 External Services 84 6.4.5 Fees, Taxes and Permits 84 6.4.6 Fines 85 6.4.7 Insurance 86 6.4.8 Remediation and Compensation 86 6.5 Costs for Prevention and Other Environmental Management Costs 87 6.5.1 Equipment Depreciation 88 6.5.2 Operating Materials, Water and Energy 89 6.5.3 Internal Personnel 89 6.5.4 External Services 90 6.5.5 Other Costs 90 6.6 Research and Development Costs 90 6.7 Environmental Earnings and Savings 91 6.8 Case Study of SCA Laakirchen Pulp and Paper Plant 91 7 Linking Physical and Monetary Information 97 7.1 Environmental Expenditure in the Profit and Loss Statement 97 7.2 Improving the Consistency of Materials Inputs and Product and Non-Product Output 100 7.3 Tracing Materials in Corporate Information Systems 106 7.4 Cost Accounting Basics and Terminology 109 7.5 Mapping Costs Centers, Production Planning and Technical Monitoring 112 7.6 Activity Based Costing 113 7.7 Material Flow Cost Accounting (MFCA) 116 7.8 Investment Appraisal and Budgeting 120 7.8.1 Capital Budgeting Basics 121
xiv Contents 7.8.2 Calculation Sheet for Environmental Investments and Savings 123 7.9 Benchmarking Production Sites 125 8 Case Study of a Brewery 131 8.1 Working with the EMA Excel Templates 131 8.2 The Material Flow Balance 132 8.3 The Brewery, Its Production Flow and Cost Centers 135 8.4 Total Annual Environmental Costs 136 9 How to Organize an EMA Pilot Project 161 9.1 Defining System Boundaries and Sites for Pilot Testing 161 9.2 Developing a Project Plan 164 9.3 Extracting EMA Data from Enterprise Resource Planning Systems 166 9.4 Elements of an Internal EMA Standard 170 9.4.1 Objectives and Scope 173 9.4.2 Definitions 174 9.4.3 Responsibilities 174 9.4.4 Material Flow Data (Input-Output Analysis) 175 9.4.5 Environmental Cost Categories and Assessments 175 9.4.6 Procedure for Data Gathering 176 9.4.7 Internal Reporting 177 9.4.8 External Reporting 178 9.4.9 Appendix: Excel Templates for EMA Assessment ""by Business Groups 178 9.5 Summary of Recommendations from Case Studies 179 9.5.1 Data Collection of Material Purchase by Material Groups in Financial Accounting 179 9.5.2 Estimation and Recalculation of Material Scrap Percentages 180 9.5.3 Depreciation of Projects/Investments Before the First Year of Cost Assessment 180 9.5.4 Distinction to Health and Safety and Risk Management 181 9.5.5 Product Oriented Pollution Prevention 181 9.5.6 New Cost Centers and Accounts 181 9.6 Outlook 182 References 185 Index 189