Environmental Management Accounting Procedures and Principles

Environmental Management Accounting
Procedures and Principles
Total environmental annual investments, separated into end-of-pipe treatment, integrated
pollution prevention technologies (environmental share) and other investments should also be
recorded and disclosed in environmental accounts. Sometimes, the statistical agencies and
environmental protection agencies also ask for this information.
7.4.3. Eco-efficiency ratios
OPIs are sometimes linked not only to physical units such as kilograms, kWh or hectoliters,
but also to monetary variables like turnover and profit. Financial indicators are measured in
terms of monetary units.
The World Business Council for Sustainable Development (WBCSD) defines eco-efficiency as
an indicator that relates “product or service value” in terms of turnover or profit to
“environmental influence” in terms of energy, material and water consumption as well as waste
and emission in terms of volumes. These indicators become useful only when the time series
for both the nominator and the denominator are published together with the indicator
development. The eco-efficiency indicator can then show possible relative reduction of
material input in relation to increased turnover or profit. However, as profit is influenced by
other factors, like world market prices and exchange rates, the interpretation of these
indicators is often difficult. Relating material input to turnover makes more sense, as this gives
a direct relation to production. Examples are profits before taxes as opposed to turnover per
unit water input for a brewery. Turnover would be more meaningful than profit, as it is more
closely related to production input.
Turnover
Turnover is a very good indicator as it directly relates to production volume, which is used as
the preferred reference for the material flow balance. As a physical measure from the material
flow balance, the quantity of products produced and sold is the most useful denominator,
preferably measured in kg, but sometimes in volume or number. If physical data are not
available, turnover in monetary terms is the second best choice.
Net sales
Net sales adjusts turnover by sales discounts, sales returns and allowances. Caution must be
paid as production volumes are not directly linked to monetary sales figures, which are
influenced by sales from stock, commodity prices, currency exchange rates and customer
demand.
Value added
Value added is calculated as net sales minus costs of goods and services purchased. In
theory, this indicator reflects well the contribution of a company to its “products value”. It is
calculated by reviewing the profit and loss accounts and deducting all items comprising
“purchased goods and services” from revenues. However, as the term is not mandatory for
disclosure in may countries, and its calculation requires a lot of accounting discipline, it may
not be generally applied.
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