Environmental Management Accounting Procedures and Principles

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Environmental Management Accounting Procedures and Principles There can be significant time lags between material purchasing, material use in production, the finished product being put in stock and final delivery to and invoicing of the customer. As production patterns change, emissions may occur much later than material inputs or product output. These time distortions can be limited once the material flow balance relates material input to production (consumption and not purchase) to relating product output of production (and not product turnover). Changes in stock as well as in material input and product output can be significant. There are major losses of materials and products in stock, which should be accounted for by separately adding them to the material flow balance. Compani es wi eld a very powerf ul cont r ol li ng tool by cons tant l y refi ning the mat eri al f low bal ance at the cor por at e lev el , whi ch should be done on a monthl y bas is together wi th the fi nanci al acc ount i ng data. 5.5. Consistency and consolidation The information gathered from environmental management accounting on the corporate level can and should be divided into accounting by divisions, sites, cost centres and products. As product managers, cost centres, sites, divisions and top managers will probably collect and be interested in information with different system boundaries, aggregation issues have to be dealt with. EMA covers the preparation and provision of environmental cost and performance information for the use of multiple internal and external stakeholder groups. This information can be aggregated for different decision levels in the company and is often presented in a separate environmental report for external stakeholders. A well structured and consistent underlying information system is crucial for the quality and credibility of the data presented. Over the last decade, significant progress has been made in identifying the core environmental issues to be reported on and the appropriate performance indicators through which performance can be both computed and communicated. At the same time, however, little progress has been made in establishing the conceptual foundations necessary to provide the secure foundation that any form of internal or public reporting requires and that is a prerequisite for comparison and benchmarking. -56-
Environmental Management Accounting Procedures and Principles INPUT OUTPUT Fiscal year Fiscal year Material input from stock inventory Product sales statistics Correction Materials outside stock control (Materials without stock number) Material description (Formula of products) Uncorrected material output Material usage input list Material by production planning Conversion factors Correction Products without material description Net material output Correction of pro rata reject and scrap percentages Changes in stock inventory Material input Material gross output Comparison, consistency check Time lags Cause analysis New calculation of reject percentages OK Detailed measuring of specific items Figure 22. Consistency check with the production planning system -57-
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