Environmental Management Accounting Procedures and Principles

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Environmental Management Accounting Procedures and Principles Material purchase costs can make up to 70 per cent of total costs of a company. The greatest potential for cost savings are often in the materials cost block, but material flows must be made visible before those savings can be identified. Reducing costs by cutting down on personnel may lead to loss of internal know-how, reduced work motivation and thus to economic losses. The collection and publication of data by statistical agencies on business operations within and across industries can provide insight on the main material inputs. For example, the Australian Bureau of Statistics collects detailed data at regular intervals on the business operations of a sub-sample of some 5,900 manufacturing establishments. 7 Figure 13 presents national estimates based on this sub-sample for the 1994-1995 financial year beginning July, and show differences between sub-sectors of the manufacturing industry in their purchases of material, packaging and energy/water inputs. Comparisons are made by expressing these purchases as a percentage of turnover within each industry sub-class. The results also indicate some of the much wider differences likely to exist across all industries within an economy, albeit indirectly. For example, based on the data in figure 13 it could be expected that materialrelated purchases constitute much less than 30 per cent of turnover within Australia’s service industry. Manufacturing industry class Material purchases (Per cent turnover) Packaging & container purchases (Per cent turnover) Energy & water purchases (Per cent turnover) Printing, publishing & recorded media 29 0 1 Non-metallic mineral products 32 1 5 Metal products 41 0 6 Wood & paper products 41 1 3 All sub-classes in manufacturing 43 2 3 Textiles, clothing, footwear & leather 44 1 2 Food, beverage & tobacco 44 8 2 Petroleum, coal, chemical & associated products 45 2 2 Other manufacturing 46 0 1 Machinery & equipment 51 1 1 Figure 13. Main material inputs in Australian manufacturing – 1994/95 7 Australian Bureau of Statistics, Information Paper: Availability of Statistics Related to Manufacturing, Catalogue Number 8205.0 (Canberra, Australia, 1997). -28-
Environmental Management Accounting Procedures and Principles Before waste and emissions occur, the materials concerned have been: • purchased (materials purchase value); • transported, handled and stocked (costs for stock management, handling and transport); • processed in various production steps (equipment depreciation, work time, auxiliary and operating materials, costs for finance, etc.); • collected as scrap, waste, etc., sorted, transported, treated, transported, stocked, again transported; and finally, • disposed off (disposal fees). Corporation thus pay three times for non-product output: 1. at purchase; 2. during production; and 3. at disposal. This section addresses the first and major part of these costs, wasted materials. The next section addresses handling and processing costs, and other wasted capital and labour costs. Disposal fees and related equipment have been addressed in section 4.1.4. Material input in kilograms and monetary value can by assessed by analyzing the relevant purchase, storage and production data. Further guidance on how to calculate a material flow balance will be provided in the next chapter. The output side of the material flow balance is then combined with the material purchase costs and the share of non-product output is attributed to the different environmental media. Fluctuations in raw material prices may be handled using average prices obtained by internal calculation, with data from cost accounting. Raw materials Non-product raw material output will mostly be disposed of as solid waste. Only in those rare cases where the company’s product is gaseous (industrial gases, perfume), will it be found in the air. More common is a liquid product (beer, milk) that goes down with wastewater. For a first estimate, company internal calculation percentages for scrap can be used to estimate the non-product output of raw materials. Eventually, with more detailed material flow balances, scrap percentages may need adjustment. The reasons why raw materials do not become products are manifold and well worth study. Product returns, obli t er at ion, repac kagi ng for ot her countr ies or speci fi ed cus tomer reques ts , quali ty cont r ol , pr oduct i on los s es , spoil age, was tage, dec ay in stor age, shri nk age, etc . ar e some of the c auses of was te generati on that c al l for meas ur es to incr eas e pr oduct ion eff i ci ency , whi ch may be profi t able both f r om an economic and ec ol ogi cal poi nt of v iew. -29-
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