Environmental Management Accounting Procedures and Principles

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Environmental Management Accounting Procedures and Principles For the material flow balance, it is recommended to enlarge on a sector-specific basis the standardized input-output framework. Figure 23 shows an example for breweries. 5.5.2. System boundaries The essential system boundary for corporations is the company fence and the balance sheet. In-depth data are not often available, i.e., balance sheet data for sites within the corporation. In addition, data from suppliers and consumers are not available, which is why life-cycle costing as well as Iife-cycle analysis continually fails due to problems of data availability. For comparison and benchmarking projects, it is important that the participating sites have a rough process flow chart scheme. Only when the range of products, including the packaging, are homogeneous will it be possible to have valid data. Outsourcing of critical processes, like transport and delivery, cleaning and sanitation, etc., significantly influences material input and emissions data. Breweries provide a good example of these effects. For data comparison between production sites there is a significant difference whether, for example, a malting house is a component of the brewery or whether the brewery acquires its malt from external sources. Similarly, it is of importance for comparison of water and energy data whether bottling occurs on all or only on certain sites and whether all sites bottle in glass or aluminium cans or kegs. In Austria, most breweries also have a non-alcoholic production line for lemonade, which can also distort comparison. Figure 24 shows the production flow scheme of a brewery. Still, most corporations and products are more complex than breweries, so the definition of system boundaries has to focus on specific process steps for specified products and defined product life-cycle stages. When comparing companies and products with regard to environmental performance, it is essential that the system boundaries upstream and downstream are identical. But big organizations tend to include most product life-cycle stages within their own production plants, while small companies are focussed on specific production steps and outsource other production steps. With increased product stewardship and product-service systems, where the ownership of the product remains at the producer and the service is delivered to the customer, EMA will be enlarged by a further component, dealing with the costs at the product use phase. This influences system boundaries when comparing different sites, as the expenditure occurred in the product use phase would have to be separated. Outsourcing of critical processes with effects on technology and emissions has also become popular recently. This is often the case for electroplating processes, which, because of tightened legal compliance requirements, is not continued in outdated on-site equipment, but provided by specialized firms. If the new supplier is equipped with modern technologies better than the old devices, outsourcing can actually be environmentally beneficial. But, the effect can be opposite too. For performance evaluation and product life-cycle assessment (LCA), the production steps and processes covered by the companies or product systems analyzed must be carefully defined so that the production steps covered by an input-output analysis are identical. Figure -60-
Environmental Management Accounting Procedures and Principles 25 shows the product life-cycle scheme. Data comparison within sites, processes and products requires that the system boundaries of the participant are comparable, otherwise the results will be meaningless. 5.5.3. Consolidation Some corporations with many sites and companies have started internal environmental information systems that collect data from all sites and affiliates and produce corporate environmental reports in addition to site-specific emission monitoring and reporting. Often, international corporations comprise numerous sites and public entities, which deliver to subsidiaries and affiliates of the same corporation worldwide. Adjustment of internal deliveries within related plants of a corporation is often only performed for financial data, but not for material flow and other environmental data. Thus, caution has to be paid when relating these figures to each other. Companies with one or more subsidiaries and affiliates produce consolidated financial statements, as user groups, especially investors, are interested in the earning power and risk structure of the whole group. Consolidation of environmental data is of equal relevance, as users are interested to see how transnational organizations with subsidiaries and associated companies operate in different countries worldwide and if they apply the same standards for pollution, safety and environmental policy and management throughout the group. It is essential that the boundaries of the reporting entity are clearly defined and explicitly reported. Financial accounting and reporting standards which deal with different legal constructs through which corporate control is exercised (e.g., joint ventures, associates or subsidiary operations) have hardly ever been used for environmental reporting yet. For the aggregation of environmental data, the following issues may impact on interpretation: • Establishment or closing of production lines or treatment facilities of the operation; • Acquisition or sale of sites and subsidiaries (and the need to adjust prior year data accordingly); • Outsourcing and its impact on historic trend data; • Non-adjustment for internal deliveries within consolidated sites. An important adjustment is for internal deliveries of materials and products. If only the inputs and outputs of each site are aggregated without adjustment of supply from within the corporation, there will be numerous double countings. On the other hand, data for turnover and profit, not net values, will have been adjusted, because of financial reporting standards requirements. Otherwise, the two figures would no longer be related to each other. Reporting can be product-, site- or corporation-oriented. Some companies publish for all three levels. Corporate reports are mainly published by multinational companies and contain data which has to be aggregated from different sites and companies. Often, corporations own -61-
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