Life Cycle Assessment and Cost Accounting on Corporations

for Eco-Efficient Production Systems

Andreas Moeller, Leuphana University Lueneburg, Germany

1
How to Support Eco-Efficiency and Cost Accounting in SMEs?

• Both – Eco-Efficiency Analysis and Cost Accounting – are Efficiency

Analyses, different evaluations of a shard material and energy flow model:
– Calculation of Costs (Cost Accounting)
– Calculation of Environmental Impacts (Life Cycle Impact Assessment)

• We can use the same data sources and methods, however several
challenges:
– Different boundaries (in LCA: whole life cycles)
– Modeling of the Material and Energy Flow Model (How to do it so that
only 1 model allows evaluating it in very different and flexible ways?)
– Corporations (incl. SMEs) as Multi-Product Systems
– Combination of economic thinking and science & engineering
(managers and engineers)

• Do we need an integrated Sustainability Accounting Approach?

2
Life Cycle Assessment Framework as a Starting Point (ISO 14.xxx)

Economic Thinking:
We are interested in Goal & Scope
eco-efficiency

Combination of economic Life Cycle Inventory

thinking and science & Analysis
engineering

“Science-based” Life Cycle Impact

economic thinking Assessment
again (impacts)

3
Integration of Cost Accounting – Approach #1

Goal & Scope

Life Cycle Inventory

Analysis

Life Cycle Impact

Cost Accounting (LCC)
Assessment

4
Integration of Cost Accounting – Approach #2

Material & Energy Flow Model

Goal & Scope
as Generic Data Source

Shared Efficiency
Calculations

Life Cycle Impact

Cost Accounting
Assessment

5
Agenda of this Talk
Approach #2

First Step:
Sustainability Accounting:
Material & Energy Flow Model
Goal & Scope
as Generic Data Source Period-oriented
material & energy flow
models
Shared Efficiency
Calculations

First Step:
Cost Accounting
Life Cycle Impact Efficiency Analyses
Assessment
+ Eco-Efficiency
+ Cost Accounting
as evaluations of the
Hypotheses: material & energy flow
1.We can deal with different boundaries models
(life cycles don„t play a role in corporate
cost accounting)
2.We can model multi-product systems
3.We separate causal analysis and efficiency
analysis

6
Sustainability Accounting?
New Accounting Systems Required?

• Private Sector:
Double-Entry Bookkeeping
– Integration of stocks and flows
• Assets, active capital
• Profits and expenses
– Period-oriented (1 year)
– Financial flows and stock
– No mappings for physical inputs and outputs of internal processes

• Public Administration:
Input/Output-Accounting
– Problems with stocks (with debts)
– Financial flows and stocks
– Period-oriented (1 year)
Material Flow
• Sustainability: Networks (MFNs)?
???
7
Idea:
We apply Petri-Nets as a
Sustainability Accounting Approach

8
Specification of a Petri-Net #1
Structure

• A triplet

N  (P,T, A)
with

P T  0
and Place
A  (P  T) (T  P) Arrow

is called a net N. It consists of:

Transition
– A set of places P
(places are rather passive elements, they represent the state of the system)
– A set of transitions T (transitions are active elements, they can “fire”)
– A set of arrows A, which connect places and transitions,
note that direct connections between 2 places or 2 transitions are not allowed.

• A net N represents the static structure of a Petri-Net

9
Example
Paper Mill and De-Inking

10
Petri-Nets as an Accounting System?

Can we apply Petri-Nets as an accounting system

to analyze the material and energy flows within
a production system?

11
 Petri-Nets as an Accounting System

Account Account
(stocks) (flows)

12
Example #1
(data from Heijungs, Suh 2002)

13
Example #2: Cement Production
Material Flow Networks as a Bookkeeping System

Coal (crushed) 42.000t

P6:Ressource
n
P6:Ressource P8:Verpackun
n g

P5: Gips (RiL) T2:LKW- P2:Zwischenlage

P21:Altreifen Transport
Gips r(Gips)

P7:Emissione
T14:Transport n
Altreifen
T13:Transport
P19:Stahl-
Hüttensand
werk
P7:Emissione
n
P13
T12:Steinkohle
BRD T11:Kohlenmahlun
P17:Steinkohl g P20:Lager P18:Lager
e
Zwischenlager Altreifen Hüttensand
T5:Verpacke P9:Zementprodukt
P6:Ressource n e,
P15 P14:Mischbet P12 P11:Homogenisierungs P1:Klinkerlager verpack
n
t -silo t

P16:Ressource T10:Abba T9:Mischen T8:Rohlmehlmahlun T7:Rohmehl- T6:Drehofenanlag T1:Kugelmühl P4:Zement- T4:Belade P10:Zementprodukt
n
für u g homogenisierun e
mit e lager n e,
unverpack
Rohmehl g Rostkühler t

P7:Emissione
n

P7:Emissione
n

P6:Ressource T3:Mix P3:Energie,

n Deutschland elektrisch Portland
P7:Emissione
Cement
n
Mixture of Cement Clinker
651.000t
Lime etc. Stock 25.000t
14 820.000t

14
Example #3: MFN of a Chemical Procee (Sankey-Diagram) Scenario 1A
(Prof. Dr. Thissen)

P2: 34.01 % intermediate 1

raw material 2 T10:
transfer
T11:
supplpy
store 1
T17:
transfer
P50: P50:
manpower manpower

1,596,722.13 kg 0.00 kg %
72.11
T13: T14:load
T12:
tank reactor
unload
raw 2 P50:
manpower

P50:
manpower

P14:
P12: P14:
invest
utilities invest
P14:
P14: P50:
invest P15:
invest manpower
packing
P12: material
T19: T6: utilities
T1: T9:
T15:
supply
T16: T2:
T5:
transfer
PTS
batch
silo
unload
I1
store 2
transfer
store 2
main R300 2nd floor
E71
silo T20: P52:
transfer waste
I2

P12:
intermediate 1
utilities T21:
T22:
P50:
manpower
P50:
manpower
S1, screw conveyor
transfer
I1 P50:
manpower
3,281,523.90 kg
T8:
T7: P12: P12:
store 1
P1: T4: T3:
unload, utilities utilities

0.00 kg
transfer
E72
P50:
manpower R302 P14:
invest R301 P50:
manpower

raw material 1 P52:

waste
P52:
waste
T25:

2,116,585.14 kg
S2, screw conveyor

P12:
utilities
intermediate 2
61,22 % T26:
buffer
2,822,110.55
0.00 kg kg
silo
T32: P14:
transport invest
via BBO P50: P12:
manpower utilities
P53:
final product
T31:
P12: P14: P50: P15: P50: transport
T18: T27: utilities invest manpower packing manpower
unload cooling P12:
material
packing screw utilities
A85

P15:
P14:
invest
T28:
new
T33:
unload
T24:
delivery T30:
2,808,000.00 kg
transport
packing packing
material
P40
grinding store 96 I2 P50:
manpower

P50:
Ciba
100 %
manpower

T23:
intermediate 2 T34:
transfer transport T29: P50:
manpower
I2 I2 grinded
P50:
manpower
external
grinding
2,822,110.55 kg (incl.
P51:
processing

packing)
89,34 %

15
Example #3: MFN of a Chemical Procee (Sankey-Diagram) Scenario 1B
(Prof. Dr. Thissen)

P2: 34.01 % intermediate 1

raw material 2 T10:
transfer
T11:
supplpy
store 1
T17:
transfer
P50: P50:
manpower manpower

2,098,635.92 kg 1,213,821.03 kg
T12:
unload
T13:
tank
raw 2
T14:load
reactor
P50:
72.11 %
manpower

P50:
manpower

P14:
P12: P14:
invest
utilities invest
P14:
P14: P50:
invest P15:
invest manpower
packing
P12: material
T19: T6: utilities
T1: T9:
T15:
T16: T2:
supply
T5:
transfer
PTS
batch
silo
unload
I1
store 2
transfer
store 2
main R300 2nd floor
E71
silo T20: P52:
transfer waste
I2

P12:
intermediate 1
utilities T21:
T22:
P50:
manpower
P50:
manpower
S1, screw conveyor
transfer
I1 P50:
manpower
3,099,217.42 kg
T8:
T7: P12: P12:
store 1
P1: T4: T3:
unload, utilities utilities

0.00 kg
transfer
E72
P50:
manpower R302 P14:
invest R301 P50:
manpower

raw material 1 P52:

waste
P52:
waste
T25:

2,781,912.73 kg
S2, screw conveyor

P12:
utilities
intermediate 2
61,22 % T26:
buffer
2,665,326.98
0.00 kg kg
silo
T32: P14:
transport invest
via BBO P50: P12:
manpower utilities

P53:
final product
T31:
P12: P14: P50: P15: P50: transport
T18: T27: utilities invest manpower packing manpower
unload cooling P12:
material
packing screw utilities
A85

P15:
P14:
invest
T28:
new
T33:
unload
T24:
delivery T30:
3,690,667.00 kg
transport
packing packing
material
P40
grinding store 96 I2 P50:
manpower

P50:
Ciba
100 %
manpower

T23:
intermediate 2 T34:
transfer transport T29: P50:
manpower
I2 I2 grinded
P50:
manpower
external
grinding
3,709,213.07 kg (incl.
P51:
processing

packing)
89,34 %

16
Example #3: MFN of a Chemical Procee (Sankey-Diagram) Scenario 1C
(Prof. Dr. Thissen)

P2: 34.01 % intermediate 1

raw material 2 T10:
transfer
T11:
supplpy
store 1
T17:
transfer
P50: P50:
manpower manpower

3,193,444.25 kg 0.00 kg
T12:
unload
T13:
tank
raw 2
T14:load
reactor
P50:
72.11 %
manpower

P50:
manpower

P14:
P12: P14:
invest
utilities invest
P14:
P14: P50:
invest P15:
invest manpower
packing
P12: material
T19: T6: utilities
T1: T9:
T15:
supply
T16: T2:
T5:
transfer
PTS
batch
silo
unload
I1
store 2
transfer
store 2
main R300 2nd floor
E71
silo T20: P52:
transfer waste
I2

P12:
utilities T21:
intermediate 1
T22:
transfer

6,563,047.80 kg
P50: S1, screw conveyor
P50: I1 P50:
manpower
manpower manpower
T8:
T7: P12: P12:
store 1
P1: T4: T3:
unload,

0.00 kg
utilities utilities
transfer
E72
P50:
manpower R302 P14:
invest R301 P50:
manpower

raw material 1 P52:

waste
P52:
waste
T25:

4,233,170.29 kg S2, screw conveyor

P12:
utilities
intermediate 2
T26: 5,644,221.11 kg
%
61,22kg
0.00 P14:
buffer
silo
T32:
transport
via BBO P50:
invest
0.00 kg kg
5,616,000.00 P12:
manpower utilities

P53:
final product
T31:
P12: P14: P50: P15: P50: transport
T18: T27: utilities invest manpower packing manpower
unload cooling P12:
material
packing screw utilities
A85

P15:
P14:
invest
T28:
new
T33:
unload
T24:
delivery T30:
5,616,000.00 kg
transport
packing packing
material
P40
grinding store 96 I2 P50:
manpower

P50:
Ciba
100 %
manpower

T23:
intermediate 2 T34:
transfer transport T29: P50:
manpower
I2 I2 grinded
P50:
manpower
external
grinding
0.00 kg (incl.
P51:
processing

packing)
89,34 %

17
Material Flow Networks (MFNs)

• A Material Flow Network (MFN) consists of:

– A net (P,T, A) (structure of the MFN)

– A specification of the time period

 – A set of materials

– A mapping which allows representing stocks at the begin and the end of
the period

– A mapping which allows representing flows within the period

– A balance equation, which integrate stocks and flows

(the balance equation allows calculating the stock at the end of the
period, very simple)
18
Evaluation of Material Flow Networks
Input/Output Balances

Input/Output Balance
System
System Boundary

Input
Flows Output
Flows

Input/Output Balance:
- Period-oriented (e.g. 1 year) input and output material and energy flows,
- No distinction between, products, raw materials, waste, emissions,…
- It is NOT an efficiency analysis, so no direct decision support.
19
Example #1 – Input/Output Balance

Selected Subnet

Input Flows of the Output Flows of the

Subnet Subnet

20
Example #1 – Input/Output Balance and Default Boundaries

Output Places
(red)

Input Place
(green)

Input Flows of the Output Flows of the

Default Subnet Default Subnet

21
Example #2 – Cement Production

Material Flow
Network

Input/Output Balance

22
Conclusions – First Step:
Material Flow Networks as a Sustainability Accounting System

MFNs can be characterized as follows:

• MFNs allow analyzing material and energy flows and stocks of a given system (production
system, supply chain, life cycle of a product,…) and time period (e.g. 1 year)

• MFNs are a bookkeeping system for material and energy flows and stocks

• Performing an MFN-based material flow analyses (MFA) is causal analysis (Eichhorn); the
models describe what happened within a time period (e.g. 1 year), MFN are period-oriented

• MFNs are in line with thinking and orientations in science & engineering

• MFNs are not a (direct) decision support instrument (e.g. they do not support final analyses, which
allow identifying the best alternative)

• However, MFNs can serve as a data provider of LCI analysis and Product Carbon Footprinting,
LCI / LCA and PCF are evaluations instruments of MFNs

• The question of data input must be solved to convert MFNs into an effective instrument for MFA:
– Discrete Event Simulation (e.g. Petri-Net based)
– Continuous Simulation (System-Dyamics like)
– Flowsheet Modeling (Chemical Engineering)
– … 23
Second Step:
Efficiency Analyses as Evaluations of Material Flow Networks

• Causal Analyses (Step 1):

Insights into material and energy flows,
better understand of processes,
process chains, loops etc.
– Input/Output-Balances
– Sankey Diagrams

• Efficiency Analyses (Step 2):

Insights into the relationship
of products / services and required
efforts
– Carbon Footprint of a product
– Life Cycle Assessment of a product
– Costs of a product Nowadays:
Main focus on
• Improvement of products and processes efficiency analyses

24
Basics of Efficiency Analyses
Starting with Means-End Relationships, Transition to Causal Analyses and Back

1. Reference Flow (LCA, PCF)/

Decision Cost Object (Cost Accounting)

Positive
Effects

2. Material Flow Analysis

Causal Principle
Negative
Impacts:
Costs and
Environmental
Impacts

3. Associated Material & Energy Flows

(Means)
Material Flow Networks as a Data Source
Preliminary Steps and Evaluation Methods Required

Life Cycle Assessment, Cost Accounting, Product Carbon Footprinting

Preliminary Conventional Life Cycle

Steps Calculation Impact
Material Flow Steps Assessment
Networks Inventory
as a Product
Calculation Carbon
Bookkeeping
System Footprints

Cost
Accounting

Causal Analysis Efficiency Analysis

(Natural Sciences & (Economic Perspective:
Engineering) Decision Support) 26
Preliminary Steps
Efficiency Analyses

• Creation of flowcharts from Petri nets (MFNs)

• Specification of the link between

– Causal Analyses and Engineering & Science Perspective
– Efficiency Analyses Economic Perspective

• Bridging the gap: Application of insights from production theory,

in particular Dyckhoff‟s enhancements of conventional production theory

27
Bridging the Gap between Causal Analyses and Final / Efficiency Analyses

• MFNs do not provide information about the reasons why we establish

production processes.

• The computer does not know...

– why a transformation of substances and energy makes sense
(why do we establish a production process?),
– the substances we want to have and substance we don‟t like,
– Why recycling could be an attractive design option,
– …

• For humans that‟s not a big problem:

– We like gold and platinum
– We avoid carbon dioxide emissions

28
Why Production Processes?
How can we Identify the Function of a Process or Production System?
For Humans no Problem!!!

Raw Material

Emissions
Function of the
Production System
(Reference Flow Electricity 10kWh)

29
Why Production Processes?
How can we Identify the Function of a Process or Production System? –
Really no Problem?

Function of the
production System? Waste?
Emissions?

30
Conventional Solutions
Input, Output, Positive Outcomes, Negative Impacts

• Conventional production systems

Cost Services,
Raw Materials Product

Cost Production
Capital Process

Cost
Labor

We think about We think about

negative impacts as an input: positive outcomes as an output:

Input Output
= =
Negative Impacts Positive Outcomes
Example

Positive Outcomes
Negative Impacts (Products, Services)

Waste? Emissions?

32
Problems
Input, Output, Positive Outcomes, Negative Impacts

• Recycling systems in the electronic waste sector:

– Positive outputs: We want to have them!
– Negative outputs: We DO NOT want to have them!

Raw Products,
Materials Services
Production
Required System Waste,
Energy Emissions

How can we identify

negative impacts
(emissions)
on the output side?
Basics of Production Theory
Dyckhoff‘s Extension of Conventional Production Theory

• Categorization of material and energy flows (based on Dyckhoff 1994):

– Desired flows – “Goods”

(we want to maximize these flows, e.g. products)

– Undesired flows – “Bads”

(we want to minimize these flows, e.g. emissions)

– Neutral flows – “Neutrals”

Basics of Production Theory
Goods, Bads, and Production Processes

Good Neutral Bad

Input Raw By-factor Recycling

materials material

Output Product By-product Emissions

Goods:
We want to have these objects (products, services)

Bads:
We don‟t want to have these objects (waste etc.)
Basics of Production Theory
Simple Single-Product Processes

• Goods, bads, and productions processes:

Product
p1
Raw materials Production
rm1
Process Emission
e1

• We can identify the positive outcomes:

– Goods on the output side

• We can identify the negative impacts:

– Goods on the input side (raw materials)
– Bads on the output side (emissions)
Example

Electricity:
Good, Output

Carbon Dioxide:
Bad, Output

Sulphur Dioxide:
Bad, Output

Fuel:
Good, Input

37
Basics of Production Theory
Multi-Product Processes and the Allocation Problem

• Common joint productions (joint processes):

Product #1

Raw Production
Product #2
materials Process
Emissions /
waste

• We can identify two different positive outcomes:

– Goods on the output side (Product #1)
– Goods on the output side (Product #2)
Basics of Production Theory
The Opposite of a Production Process: a Reduction Process

• Goods, bads, and reduction processes:

Recycling
materials
Reduction
Raw Process Emissions /
materials waste

• We can identify the positive outcomes:

– Bads on the input side (recycling materials)

• We can identify the negative impacts:

– Goods on the input side (raw materials)
– Bads on the output side (emissions / waste)
Basics of Production Theory
Recycling: Joint Production and Reduction Processes

• Recycling systems as joint productions and reductions:

Recycling Recycling Secondary

materials raw materials
Process
Raw
(joint reduction &
production process) Residual waste
materials

• We can identify the positive outcomes:

– Bads on the input side (recycling materials)
– Goods on the output side (secondary raw materials)

• We can identify the negative impacts:

– Goods on the input side (raw materials)
– Bads on the output side (residual waste)
Conclusions from Production Theory

• We introduce a „Material Type“:

– Goods green
– Bads red
– Neutrals yellow

• In case of multi-product processes (joint productions) we have to deal with

them (see ISO 14xxx):
– System expansion
– System expansion / avoided products
– Specification of allocation rules

41
The Link to Methods in LCA
and Cost Accounting: The
Derivation of Process Vectors Raw materials Product
rm1 p1

We analyze all input and output flows of

Production Emission
Transitions and interpret them as e1
Process
production coeeficients!
#2

Raw materials Intermediate Pr.

rm1 ip1

Production
Process  p1 
#1  
Emission ip
 1 
 0  e2
p2  rm1 
Process
   
 ip1  Process
Vector p2
 e1 
p1  rm1 vector p1  
 0 
 
 0 
 
e
 2 
Example MFA-based Process Vectors

2 
 
10 
p1   1 
 
0.1

 
 0 

100 
 
  0 
p2  10 
 
 2 
 
50
Further reading: Heijungs, Suh 2002, p. 13
43
Analysis of the Coefficients of Process Vectors – From here we can Apply
Conventional LCI Methods (see Heijungs and Suh 2002)

2  Fuel(good,input) 2 
Negative
Impact
   
10  Electricity (good,output) 10  Positive Outcome
(Functional Unit)

p1   1  CarbonDioxide(bad,output) 1 
    Negative
0.1 SulphurDioxide(bad,output)
 0.1 Impacts
   
 0  CrudeOil(good) 0 

100  Fuel(good,output) 100  Positive Outcome

    (Functional Unit)

 0  Electricity (good) 0 
p2  10  CarbonDioxide(bad,output) 10  Negative
    Impacts
 2  SulphurDioxide(bad,output) 2 
   
50 CrudeOil(good,input) 50
44
Basic Model for Inventory Analysis (Heijungs, Suh 2002, p. 14)

2  2 100 

    Technology Matrix A
10  10
 0 
p1   1  P  ( p1 p2 )   1 10 
    Environmental
0.1
 0.1
 2  Interventions B
   
 0   0 50

100 
 
 0 
p2  10 
 
 2 
 
50
45
Basic Model for Inventory Analysis
0
As  f with f   
1
We calculate the scaling vector s:

1 2 100  0

sA f 
1
s  A f   f   
10 0  1
We calculate the life cycle inventory vector g:
 1 10  0.12 
g  Bs 
   
g  Bs  0.1 2 s  0.014 
   
 0 50 0.1 
Negative coefficients of g: input (goods),
positive coefficients of g: outputs (bads)

Heijungs, Suh 2002, p. 17 & 18 46

 Example

0.12 
 
g  0.014 
 
0.1 
0
f   
1



47
Example
Life Cycle Inventories of Cement Production Material Flow Network
(Cement Production as a Multi-product System)

48
Example
Life Cycle Inventories of Cement Production
Input/Output Balance Sheet

Two Products on the

Output Side (green)

Waste (here “used tires”)

on the Input Side (red)
49
Example
Life Cycle Inventories of Cement Production
Life Cycle Inventory Cement (Output) Exactly 1 product (green):
“Portland Cement”,
No waste input (red)

50
Example
Life Cycle Inventories of Cement Production
Life Cycle Inventory Cement, packaged (Output) Another product (green):
“Portland Cement, packaged”

51
Example
Life Cycle Inventories of Cement Production
Life Cycle Inventory Tires for Disposal (Input) Waste Disposal LCI (red):
“Tires for Disposal”

52
Tentative Conclusions

Material Flow Networks: Calculations for Inventory Analyses:

MFA LCA

Statements about material and energy Management support (as a question of social
flows (as a question of natural sciences) sciences)

• Natural laws • Mean-end relationships

• Causal analysis only • Final analysis
• Throughput • Efficiency
• No goods, bads • Link to causal analysis
• Descriptive models • Decision support instrument
• Non-linear processes • Linear processes
• Stocks • No stocks
• Sequential calculation • Matrix calculation

We can combine them:

Period-oriented LCI-like LCA, PCF,

Material Flow Analysis Calculations Cost Accounting
53