Environmental Management Accounting Procedures and Principles

More documents

Recommendations

Info

Environmental Management Accounting Procedures and Principles Supplier Material Incoming Production Outgoing storage storage Products & Packaging Customer Material losses Disposal system Residual Substances - solid waste - effluent - exhaust - heat / noise emission Disposal Figure 35SEQARABISCH. Source: IMU Augsburg. The company - seen as a material flow system Flow cost accounting performs an important function within flow management, namely that of quantifying the elements in the material flow system and improving in-house information flows, as well as revealing points of departure for economically and ecologically oriented modifications to the flows of materials. In quantifying the material flow system, the company creates a database containing quantities, values and costs, consistent throughout. The database shows those quantities (in physical units like numbers, kg, m 3 , KWh etc.), values (= physical quantity x input price) and costs that refer to the material flows (e.g., material costs, inventory values and waste volumes) and to all the other costs incurred by the company in maintaining the material flow system (e.g., personnel costs, depreciation). The focus of flow cost accounting is not to determine the share of total environmental costs, but to focus on material flows for assessment of total costs of production. Flow cost accounting is thus an improvement on existing accounting approaches - in two respects: economic and ecological. 1. Seen from the economic perspective, flow cost accounting is based on actual material costs. These, in manufacturing companies, often constitute by far the largest costs. By comparison, the system costs, i.e., those costs incurred in maintaining the system, comprising mainly personnel costs and depreciation, are much lower. And waste disposal costs are in general relatively insignificant. Usually the costs concerned purely with disposal (e.g., waste disposal fees, external waste transport) account for between 1 – 2 per cent of the total costs for a manufacturing company. -80-
Environmental Management Accounting Procedures and Principles Depreciation, rent and lease 6% Other costs 13% Material costs 56% Personnel costs 25% Typical Ratio of costs in the manufacturing sector Statistisches Bundesamt, Stat. Jahrbuch 1999 industry Figure 3SEQARABISCH6. Source: IMU Augsburg Typical proportion of costs in the manufacturing This average cost structure in German manufacturing companies corresponds largely with the results of an American study conducted by Business Week magazine (22 March 1993) which puts the share of material costs in US companies at 50 to 80 per cent. Conventional accounting approaches are not able to provide sufficiently precise data regarding the costs of materials. With such inconsistent and incomplete data and the myriad of data islands, a company will hardly be able to track the point of internal material consumption and pinpoint exact flows and whereabouts of every single material through the material flow system. Flow cost accounting eliminates this information gap by linking quantitative physical and monetary data to the material flows. The course taken by materials entering a company becomes transparent - and informed decisions can be taken regarding which materials with which values go into the product as added value and which materials with which values leave the company unproductively as waste. In companies participating in pilot projects, this flow-oriented transparency often led to new ways of designing products that reduced materials intake and to new measures for increasing overall efficiency (by reduction of rejects, scrap, damaged products, etc.). -81-
Page 1 and 2:
E C O N O M I C & Environmental Man
Page 3 and 4:
Environmental Management Accounting
Page 5 and 6:
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19 and 20:
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 35 and 36:
Page 37 and 38:
Page 39 and 40: Environmental Management Accounting
Page 89: Environmental Management Accounting
Page 141 and 142:
Page 143 and 144:
Page 145 and 146:
Page 147 and 148:
Page 149 and 150:
Page 151 and 152:
Page 153:
show all

Environmental Management Accounting Procedures and Principles

Create successful ePaper yourself

Delete template?

Save as template?