Environmental Management Accounting Procedures and Principles

Environmental Management Accounting
Procedures and Principles
• A further advantage of cost-related environmental performance indicators is that
environmental issues are thereby “translated“ into costs and savings - i.e., management’s
language. An executive may hardly be able to imagine what effect 450 cubic meters of
hazardous waste have on profits and whether it is worthwhile to conduct a waste prevention
study. If the same amount is expressed in waste disposal costs of $ 200,000 - the issue
may be clearer. The data on waste disposal expenditures available at accounting
departments mostly derive from the waste disposal fees. By adding indirect waste disposal
costs (storage, transportation, personnel and purchasing expenditures for the materials to
be disposed) to the waste disposal fees, opportunities for cost-effective environmental
protection measures may be identified.
For data collection it is important to make a clear distinction between basic data and possible
reference units. Often the product quantity sold within one year differs from the quantity
produced in that period (e.g., due to sales from stock) or components are purchased from an
outside manufacturer, which do not cause environmental impact at the company assembling
the final product. In a multi-stage production process restocking or destocking of inventory
may result in changes of the production output. As a consequence, relative environmental
performance indicators may lose their significance if input of resources or emissions in one
year are related to the production of other periods of time. In case of changes in stock, the
input and emissions take place in another period. For this reason, it may be useful to relate the
production to the quantity produced in the most important stages of production instead of basic
output and sales figures.
For the environmental performance indicators such as: energy input in kWh/kg of production;
water input in l/kg of production; and waste categories produced in kg/kg of production, the
resource input and emissions of one period should relate to the goods produced in that period.
In practice, neither the quantity of products sold nor the addition of finished goods to stock are
suitable as reference units, as they include internal changes of stock of previous periods and
purchased semi-finished and finished products.
For this reason, it is better to use the total output of manufacturing stages as a reference unit.
If it proves to be impossible to allocate the input and emissions to a specific main source or
cause, the reference variable should be calculated as a (weighted) average of the required
production stages.
For personnel-related inputs (e.g., copying paper) or emissions, it is usually appropriate to use
the number of employees as a reference unit, particularly in service and administrative
businesses (banks, government agencies, insurance companies). Again, care needs to be
taken to use uniform definitions as to how the reference units are determined (part-time staff,
apprentices, holidays, shift work, etc.). This is important for internal comparisons over time and
for comparison of indicators between sites.
7.4.1. Specific consumption/Eco-intensity
Eco-intensity is defined as material input in kilogram (absolute indicator) in relation to output in
product and/or service units in kilogram (hectoliter, respectively), e.g., water input per
hectoliter of beer production. Often the total output in kilograms is not a meaningful reference
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