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EMA, MFCA and CP – three facets of the same diamond?

Seakle Godschalk, Don Huisingh, Christine Jasch, Katsuhiko Kokubu

and Maryna Möhr-Swart

13th EMAN Conference on Environmental and Sustainability Management Accounting

1-3 September 2010, St Andrews, Scotland

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Presentation Scope

1. Brief introduction of • Environmental Management Accounting (EMA)• Material Flow Cost Accounting (MFCA)• Cleaner Production (CP)

2. Comparative discussion of EMA, MFCA and CP

3. Guidelines for integrated application of EMA, MFCA and CP

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EMACP

MFCA

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Environmental Management Accounting

EMA is broadly defined as the identification, collection, analysis, and use of two types of information for internal decision making:

– physical information on the use, flows, and fates of energy, water, and materials (including wastes) and– monetary information on environment related costs, earnings, and savings.

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Environmental Management Accounting

• Environmental accounting and environmental performance indicators for environmental management systems > environmental cost accounting > environmental management accounting

• Drivers – US EPA, UK legislative changes, international accounting standards and ISO 14 000 series

• UN Expert Working Group [1999-2005] and IFAC [2005] established EMA as discipline

• IFAC International Guidance Document on Environmental Management Accounting

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Material Flow Cost Accounting

• Tool for quantifying the flows and stocks of materials in processes or production lines in both physical and monetary units

• Originated in Germany• Strong uptake in Japan• Being formalised in ISO 14 051: Environmental

management -Material flow cost accounting- General framework

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Cleaner Production

Cleaner Production is the continuous application of a preventative strategy to processes and products to increase efficiency, prevent the pollution of air, water and land, reduce waste at source and minimise risks to humans and the environment.

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Cleaner Production

• Preceded by Pollution Prevention Pays [3P]

• 3M company in USA 1975• Coined Cleaner Production by

UN in 1990• 1992 UNEP – Cleaner

Production Programme• National Cleaner Production

Centres in about 45 countries• Journal for Cleaner Production

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Common Objectives

• Reducing environmental impacts

• Reducing costs > increasing profits

Can we achieve synergy by applying these approaches in combination?

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Type of Organisation

EMA CP MFCA

All types of organisations

Mostly manufacturing but

also production and service organisations

Mostly manufacturing organisations

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Primary level of application EMA CP MFCA

Organisation, site or cost centre

Organisation, production

processes but even multi-organisation

and regional

Production process

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Scope of issues covered

EMA CP MFCA

Raw, auxiliary, packaging and

operating materials, energy, water,

waste, all environmental costs

- quantitative

Material, energy, water, health and safety, waste and

pollution – quantitative and

qualitative

Raw materials

[Energy, water, and system costs

allocated proportionally] -

quantitative

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Solutions

EMA CP MFCA

Quantitative and financial

Quantitative, financial, technical and non-technical,

and qualitative

Quantitative and financial

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Benefits EMA CP MFCA

•Reduced costs and increased profits

•Reduced environmental

impacts

•Reduced environmental,

health and safety impacts

•Secondary – reduced costs and

improved triple bottom line

•Reduced material usage and costs

•Secondary – reduced

environmental impacts

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Starting point EMA CP MFCA

•Mass balance and distinction of inputs

into Product and Non-Product Outputs

•“What has gone where”

•Process

•“What is happening where”

•Input raw materials

•“What goes where”

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Main methodology used EMA CP MFCA

•Top down•Id material, energy

and water inputs and related costs

•Allocate to Product and Non-Product

Outputs•Id all other

environmental costs•Improve structure and consistency of

physical and financial info

systems

•Id processes•Id energy, water and

material inputs•Id issues

•Id potential solutions•Social,

environmental and economic cost-

benefit•Recommend

solutions

•Id quantity centre•Calculate all input

resources•Allocate material flows into product and material loss

•Calculate costs of these streams

•Allocate all other costs [energy, water, operating materials,

labour and machinery] to

products or material losses

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Focus of efficiency efforts

EMA CP MFCA

•Whole system•Information systems

•Physical flow management

•Material, energy and water efficiency

•Waste and pollution reduction

•Health and safety for workers and

consumers•Environmental

impacts

•Material efficiency

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External costs

EMA CP MFCA

•Can be included •Increasingly included

•Supply chain management

•Industrial ecology

•Not included

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Treatment of energy

EMA CP MFCA

•All energy considered Non-Product Output

•Energy consumed > equipment, lighting,

processes

•Energy allocated proportionally to

product and material loss

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Treatment of wasteEMA CP MFCA

•Calculates total cost of waste

•Quantitative and qualitative info on

waste and pollution•Waste and pollution

prevention emphasised

•Calculates total loss of material

•Allocates other costs proportionally•Waste cost not as comprehensive as

EMA

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Can synergy be achieved?

• For this presentation – focus on internal synergy • Combination of the application of EMA, CP and

MFCA can result in significant synergy• Focus on reduction of environmental impact, wastage

and costs

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Synergy: Role of EMA

• Comprehensive picture of physical flows and all environmental costs [apparent and hidden]

• Focus on gradually improving consistency of financial and physical information systems, taking a top down approach

• Could point to areas for further detailed analysis using CP or MFCA

• Evaluate savings/cost implications/benefits [physical quantities and monetary] of CP and MFCA options

• Ongoing management support for efficiency programs• Link to EMS• Supports environmental reporting

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Synergy: Role of CP

• Comprehensive picture of quantitative and qualitative situation regarding wide range of aspects including health and safety

• Very strong on waste and pollution information

• Analyse situations and generate technical and non-technical solutions

• Suggest process changes and awareness training

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Synergy: Role of MFCA

• Use for detail analysis where material efficiency is driving force

• Identify material flows and associated system costs

• Generate material related solutions

• Evaluate material flow benefits of suggested solutions

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EMA

CP

MFCA• Material flow analysis

• Overall picture of physical flows and env costs

• Info systems

• Cost-benefit analyses

• Reporting support

• Quantitative and qualitative picture

• Generate solutions

Internal synergy/integration between EMA, CP and MFCA

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Thank you.

Questions?

Environmental & Sustainability Solutions

envsustsol2@mweb.co.za+27 (0) 82 8827700

http://www.envsustsol.co.za