Environmental Management Accounting Procedures and Principles

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Environmental Management Accounting Procedures and Principles The Kyoto Protocol 8 covers industrial and energy linked global warming gas emissions. The main substances are Carbon Dioxide, Methane, Nitrous Oxides, Sulfur Hexafluoride, Perfluorcarbons and Hydrofluorcarbons, resulting from fuel combustion, process reactions and treatment processes. All greenhouse gas emissions should be calculated in metric tons of CO2 equivalent. Conversion factors for the global warming potential based on CO2 can be found in the annex. CFC emissions contribute to the depletion of the ozone layer. The Montreal Protocol covers ozone-depleting substances and standardizes their ozone depletion potential (ODP) in relation to the reference substance CFC-11. Once the volumes purchased have been assessed, these conversion factors (see annex) should be applied to calculate ozone-depleting emissions in metric tons of CFC-11 equivalents. Even if a certain substance is not emitted, it should be recorded in the input/output balance as n.r. (not relevant). This will indicate to the internal or external reader that certain substances were not omitted from consideration, but were not used. 5.4. Organization of stock management and production planning Input/Output items are partly derived from the profit and loss accounts. Only this list is a complete record of all materials purchased (in value terms). To the extent that a company works with material classification numbers, the amounts purchased can be derived relatively easily from the storage system. Checking stock accounts and flow accounts for consistency is crucial for the material balance. It should be possible at least with regard to raw and auxiliary materials and product packaging that in any given year the balance sheet can be derived in value and volume from the balance sheet of the previous year plus the flow of accounts of that year. Systems of increasing complexity can be used for storage administration, depending on the size of the company and the value of the product warehouse. Examples ranked by complexity of the information system are: 1. Material purchase value is recorded as expenditure directly during procurement; a further tracking of quantities used is not possible. This system is common in small and mediumsized enterprises and with operating materials. 2. Material stock numbers are used to record material quantities as well, but this system does not record materials on stock. The system enables determination of annual quantities purchased but not the place and time of consumption in the company. 3. Material is taken from the warehouse by means of a stock issuing form. Here product use can be determined exactly by value and quantity. 8 The text of the Protocol to the UNFCCC was adopted at the United Nations Framework Convention on Climate Change (UNFCCC) in Kyoto, Japan in December 1997. -52-
Environmental Management Accounting Procedures and Principles 4. The company uses internal order forms connected to the production planning system. Thereby, stock issuing can be tracked by order. 5. Stock issuing is also assigned by cost centres. 6. Waste and disposal costs and quantities are also recorded through storage administration by way of internal records. 7. Waste and disposal costs are additionally assigned to the relevant costs centres. The following output systems can be differentiated: 1. Only turnover is known, not actual production volume. 2. Production statistics exist, maintained by means of the outgoing stock. 3. There is a production planning programme that calculates estimated input and output based on the production planning system; it is checked against actual input and output by way of order forms. 4. Product and non-product output (scrap, losses, waste and emissions) can be tracked by cost centres. Discrepancies between material purchase and material consumption (in the company) are important because, apart from the time lag, losses in interim storage can cause considerable waste and costs that can be traced to a variety of causes. Losses are frequently caused by employees’ private use of materials, in addition to material aging in the warehouse, becoming obsolete or unusable, or contaminated through careless treatment or otherwise destroyed. In part, discrepancies between production output and sales have similar causes. In addition, there are discrepancies due to usage within the company, returns, quality control, repackaging for different destinations or customer requirements, etc. The discrepancy between materials consumed and production output reflect actual processbased waste and scrap. This review is distorted if material purchase must be compared against sales because of inadequate internal data systems. Inventory losses should be addressed separately as each type of loss requires different actions for improvement. The amount of sales (turnover) needs be considered only for the calculation of its difference to production volume and for an assessment of the underlying causes. Ideally, an input/output comparison should compare materials consumed in production against the actual production volume. Stock losses should be quoted separately. However, this is only possible if a sophisticated production planning system is in place, in which auxiliary and operating materials and waste as well as raw materials and packaging are considered. -53-
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Environmental Management Accounting Procedures and Principles

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