Journal of Cleaner Production 11 (2003) 667–676

www.cleanerproduction.net

The use of Environmental Management Accounting (EMA) for

identifying environmental costs
Christine Jasch ∗
Institute for Environmental Management and Economics, IO¨ W, Rechte Wienzeile 1915, A-1040 Vienna, Austria

Received 28 August 2001; accepted 27 June 2002

Abstract

The Expert Working Group on “Improving the Role of Government in the Promotion of Environmental Management Accounting
(EMA)” was set up by the United Nations Division for Sustainable Development (UN DSD) in cooperation with a number of
government agencies and non-governmental experts to promote Environmental Management Accounting (EMA) through
publications, pilot projects and by establishing an international forum for discussion on the role of governments in the promotion of
EMA.
EMA, Environmental management accounting represents a combined approach that provides for the transition of data from
financial accounting, cost accounting and mass balances to increase material efficiency, reduce environmental impacts and risks
and reduce costs of environmental protection. EMA is performed by private or public corporations, but not by nations and has a
financial as well as a physical component.
The core focus of environmental management accounting and of the EMA UN DSD methodology is assessment of total annual
environmental expenditure on emission treatment, disposal, environmental protection and management. In addition, and that is new
and challenging for most companies, the material purchase value of all non-product output and its production costs are added. This
total sum often provides a frightening picture of total annual costs of inefficiency and gets companies to improve their information
systems and material efficiency options, which is the goal in the light of cleaner production.
The first book published by the Expert Working Group, Environmental Management Accounting—Procedures and Principles
(Jasch, C., United Nations, New York, 2001), defines principles and procedures for EMA, with a focus on techniques for
quantifying environmental expenditures or costs, as a basis for better controlling and benchmarking purposes. The methodology
excludes costs external to the company (so-called externalities, e.g. environmental and social effects that occur to the general
public), but focuses on comprehensive assessment of direct annual expenditure on emission treatment, environmental protection
and management as well as wasted material and energy input (efficiency losses in production). Firstly, total annual expenditure is
assessed, then improvement options, savings and investment projects as well as product prices can be (re-)calculated. The method is
currently applied in several case studies. The following summary provides some of the core definitions and generic assessment
tables.  2002 Elsevier Science Ltd. All rights reserved.

Keywords: Environmental management accounting; Environmental costs; Activity based costing; Full cost accounting; Environmental investment
appraisal; Environmental indicators; Benchmarking; Hidden costs; Environmental information systems; Material flow balances; Material flow cost
accounting

1. The United Nations Initiative Management Accounting (EMA) was organized as a

follow-up to informal discussions on the issue at the
The Expert Working Group on Improving 1998 session of the United Nations Commission on
Government’s Role in the Promotion of Environmental Sustainable
668 C. Jasch / Journal of Cleaner Production 11 (2003) 667–676
∗
Tel.: +43-1-587-2189; fax: +43-1-587-6109.
E-mail address: info@ioew.at (C. Jasch).
Development (CSD 6) in the context of negotiations on
environmentally sound technologies. Those discussions
indicated that a number of governments were involved
or interested in promoting EMA, but that there had been
little or no communication among the agencies
concerned. The participants in the Expert Working
Group are from national environmental agencies and
ministries, international organizations, industry,
accounting firms, academia, and United Nations
agencies.
0959-6526/03/$ - see front matter  2002 Elsevier Science Ltd. All rights reserved.
doi:10.1016/S0959-6526(02)00107-5
The publication, entitled “Environmental
Management Accounting—Procedures and Principles”
[1], is the
first of a series of publications by the Expert Working
Group. It presents the terminology and techniques as
agreed to by members of the group in order to establish
a common understanding of the basic concepts of EMA
and provide a set of principles and procedures to guide
those interested in its application. 1
The publication is intended to minimize the cost of
introducing EMA systems by offering a set of principles
and procedures for EMA based on commonly used and
internationally accepted financial accounting methods.
While the approach to EMA presented in this
publication is not the only way, it is one which the
members of the Group, after extensive consultation,
agree to be sound and cost-effective.
The following text presents the core definitions and
generic assessment tables (including figures) from the
EMA workbook.
2. What is EMA—Environmental Management
Accounting?
Cost (or management) accounting constitutes the
central tool for internal management decisions such as
1 The book was prepared for the United Nations Division for
Sustainable Development UN DSD, Expert working group on
“Improving the Role of Government in the Promotion of
Environmental Management Accounting”. It was commissioned by
the Austrian Ministry for Transport, Innovation and Technology, the
Austrian Ministry for Agriculture, Forestry, Environmental Protection
and Water Management and the Austrian Chamber of Commerce. It
is available for free for download in English under
www.un.org/esa/sustdev/estema1.htm and has also been published in
German by the Austrian Ministry of Transport, Innovation and
Technology (available under www.ioew.at). The IO¨ W is currently
conducting 12 case studies applying the methodology. Also the
members of the UN DSD working group are in the midst of case
studies. Further references on EMA can be found at
www.EMAwebsite.org, and Reference of the Global Reporting
Initiative: www.globalreporting.org.
product pricing and is not regulated by law. This internal
information system deals with the following questions:
What are the production costs for different products and
what should be the selling price of these products? The
main stakeholders in cost accounting are members of
different management positions (e.g. executive, site,
product and production managers).
In practice, many companies do not have a separate
cost accounting system, but calculate on the basis of the
financial accounting data from bookkeeping instead.
Financial accounting, in contrast, is mainly designed to
satisfy the information needs of external shareholders
and financial authorities, both of whom have a strong
economic interest in standardized comparable data and
in receiving true and fair information about the actual
economic performance of the company. Therefore,
financial accounting and reporting are being dealt with
in national laws and international accounting standards.
The core part of environmental information systems
are material flow balances in physical units of material,
water and energy flows within a defined system
boundary. This can be done at the corporate level, but
can also be taken further to directly address cost centers
and production processes or even down to specific
machinery and products. It would then become the task
of process technicians and not necessarily accountants to
tackle and trace the necessary data.
EMA, Environmental management accounting
represents a combined approach which provides for the
transition of data from financial accounting, cost
accounting and material flow balances to increase
material efficiency, reduce environmental impact and
risk and reduce costs of environmental protection. EMA
is performed by private or public corporations, but not
nations, and has a financial as well as physical
component.
EMA metrics for internal decision-making include
both: physical metrics for material and energy
consumption, flows, and final disposal, and
monetarised metrics for costs, savings, and revenues
related to activities with a potential environmental
impact.
Key application fields for the use of EMA data are:
Assessment of annual environmental
costs/expenditures;
Product pricing;
Budgeting;
Investment appraisal, calculating investment options;
Calculating costs and savings of environmental projects;
Design and implementation of environmental
management systems;
 C. Jasch / Journal of Cleaner Production 11 (2003) 667–676
Environmental performance evaluation, indicators and
benchmarking;
Setting quantified performance targets;
Cleaner production and Ecodesign projects;
External disclosure of environmental expenditures,
investments and liabilities;
External environmental or sustainability reporting;
Other reporting of environmental data to statistical
agencies and local authorities.
3. What are environmental costs?
The main problem of environmental management
accounting is that we lack a standard definition of
environmental costs. Depending on various interests,
they include a variety of costs, e.g. disposal costs or
investment costs and, sometimes, also external costs (i.e.
costs incurred outside the company, mostly to the
general public). Of course, this is also true for profits of
corporate environmental activities (environmental cost
savings). In addition, most of these costs are usually not
traced systematically and attributed to the responsible
processes and products, but simply summed up in
general overheads.
The fact that environmental costs are not fully
recorded often leads to distorted calculations for
improvement options and achieved savings.
Environment protection projects, aiming to prevent
emissions and waste at the source (avoidance option) by
better utilizing raw and auxiliary materials and requiring
less (harmful) operating materials are not recognized
and implemented. The economic and ecological
advantages to be derived from such measures are not
used. The people in charge are often not aware that
producing waste and emissions is usually more
expensive than disposing of them.
Experience shows that the environmental manager
rarely has access to the actual cost accounting
documents of the company and is only aware of a tiny
fraction of the aggregate environmental costs. On the
other hand, the controller has most of the information
but is unable to separate the environmental part without
further guidance. In addition, he or she is limited to
thinking within the framework of existing accounts.
Thus, the two departments tend to have a severe
communication problem.
In conventional cost accounting, the aggregation of
environmental and non-environmental costs in overhead
accounts results in their being “hidden” from
management. There is substantial evidence that
management tends to underestimate the extent and
growth of such costs. By identifying, assessing and
allocating environmental costs, EMA allows
669
management to identify opportunities for cost savings
and to actually calculate cost savings of performed
projects and investments. Prime examples are the
savings that can result by replacing toxic organic
solvents by non-toxic substitutes, thus eliminating the
high and growing costs of regulatory reporting,
hazardous waste handling and other costs associated
with the use of toxic materials. Many other examples
deal with more efficient material use, highlighting the
fact that waste is expensive not because of disposal fees
but because of the wasted material purchase value.
Environmental costs comprise both internal and
external costs and relate to all costs incurred in relation
to environmental damage and protection.
Environmental protection costs include costs for
prevention, disposal, planning, control, shifting actions
and damage repair that can occur in companies,
governments or people (VDI, 2000 2). The book only
deals with corporate environmental costs. In this
analysis external costs, which result from corporate
activities but are not internalized via regulations and
prices, are not considered. It is the role of governments
to apply political instruments such as eco-taxes and
emission control regulations in order to enforce the
‘polluter pays’ principle and thus to integrate external
costs into corporate calculations.
What then are corporate environmental costs? Costs
incurred to deal with contaminated sites, effluent control
technologies and waste disposal may first come to mind.
Measures for environmental protection comprise
all activities taken for legal compliance, compliance
with own commitments or voluntary initiatives.
Economic effects are not used as criteria, but the effect
on prevention or reduction of environmental impacts is
(VDI, 2000).
Corporate environmental protection expenditure
includes all expenditures for measures for environmental
protection of a company or on its behalf to prevent,
reduce, control and document environmental aspects,
impacts and hazards, as well as disposal, treatment,
sanitation and clean-up expenditure (see Table 1). The
amount of corporate environmental protection
expenditure is not directly related to the environmental
performance of a company (VDI, 2000).
For company internal calculation of environmental
costs, expenditures for environmental protection are
only one side of the coin. The costs of waste and
emissions include much more than the respective
pollution prevention or treatment facilities.
The concept of ‘waste’ has a double meaning. Waste
is a material which has been purchased and paid for but
which has not been turned into a marketable product.
2 VDI, the German Association of Technicians, together with
German Industry representatives, have developed a guidance
document
670 C. Jasch / Journal of Cleaner Production 11 (2003) 667–676
Waste is therefore indicative of production inefficiency.
Thus, the costs of wasted materials, capital and labor
have to be added to arrive at total corporate
environmental costs and a sound basis for further
calculations and decisions. Waste in this context is used
as a general term for solid waste, waste water and air
emissions, and thus comprises all non-product output.
Materials include water and energy.
Table 1
Total corporate environmental expenditure
Environmental Protection Expenditure (Waste Disposal and
Emission Treatment, Environmental Management and Pollution
Prevention)
+ Costs of wasted material
+ Costs of wasted capital and labor
= Total corporate environmental costs
on the definition of environmental protection costs and other terms of
pollution prevention, VDI, 2000.
The approach taken is based on the underlying
assumption that all purchased materials must by physical
necessity leave the company either as product or waste
and emissions. Waste is thus a sign of inefficient
production. Therefore when calculating environmental
costs, not only disposal fees are regarded, but the wasted
material purchase value and the production costs of
waste and emissions are added.
Adding the purchase value of non-material output
(waste, waste water) to the environmental costs, makes
the share of “environmental” costs higher in relation to
other costs. However, it is not the goal of this paper to
show that environmental protection is expensive. It is
also not the most important task to devote a lot of space
to defining exactly which costs are environmental or
which costs are not, or what percentage of something is
environmental or not.
The most important goal of using EMA is to make
sure that all relevant, significant costs are considered
when making business decisions. In other words,
“environmental” costs are just a subset of the bigger cost
universe that is necessary for good decision making.
“Environmental” costs are part of an integrated system
of material and money flows throughout a corporation,
and not a separate type of cost altogether. Doing
environmental management accounting is simply doing
better, more comprehensive management accounting,
while wearing an “environmental” hat, that opens the
eyes for hidden costs. Therefore, the focus of material
flow cost accounting is no longer on assessing the total
“environmental” costs, but on a revised calculation of
production costs on the basis of material flows.
In the methodology presented, the environmental cost
assessment scheme is first used for the assessment of
annual corporate environmental expenditures including
wasted materials of the previous year. Subsequently, a
breakdown to cost centers and processes can be
performed. The focus of EMA is not on disclosure of
annual environmental costs, but for further internal
calculation, annual expenditure is the first step in a top–
down approach of environmental cost management.
Annual expenses are the best available data source, a
further distinction into cost centers, processes, products
and material flow balances should be done in a step by
step procedure while gradually improving the
information system. Calculating savings, investment
options or estimating future price changes requires
consideration of future costs and is dealt with separately.
Social costs need to be assessed by using a completely
different approach, as most of the costs besides wages,
social security, taxes and voluntary benefits, which are
recorded in the books, occur outside the company and
external effects and need to be estimated.
4. Environmental cost categories
The first category of environmental costs comprises
conventional waste disposal and emission treatment
costs including related labor and maintenance materials
(materials only, if they are recorded on related cost
centers). Insurance and provisions for environmental
liabilities also reflect the spirit of treatment instead of
prevention. The first section corresponds to the
conventional definition of environmental costs
comprising all treatment, disposal and clean-up costs of
existing waste and emissions.
The second block is termed prevention and
environmental management and adds the labor costs
and external services for good housekeeping as well as
the “environmental” share of integrated technologies and
the “scrap” share of operational plants, if significant.
The main focus of the second block is on annual costs
for prevention of waste and emissions, but without
calculated cost savings. The other focus is on higher pro-
rata costs for low-emission process technologies and the
efficiency loss of production equipment determined by
scrap percentages. From the thus defined production
facilities the “scrap” percentage of depreciation is added
to the environmental costs. Thirdly, the costs related to
the environmental management system are determined.
Conventionally, three production factors are
distinguished: materials, capital (investments, related
annual depreciation and financing cost) and labor. The
next two blocks consider the costs of wasted material,
capital and labor due to inefficient production and
condense the core information for material flow cost
accounting.
In the third block, the wasted material purchase
value is added. From the material flow balance sheet, all
material inputs (including energy and water) are
 C. Jasch / Journal of Cleaner Production 11 (2003) 667–676
assessed for their share of non-product output (scrap
percentage, efficiency losses). Wasted materials are
evaluated with their material purchase value or materials
consumed value in case of stock management.
Lastly, the production costs of non-product output
are added with the respective production cost charges,
which include labor hours, depreciation of machinery
and operating materials. Care has to be taken to avoid
double counting with costs already taken care of under
other cost categories. This mainly depends on the quality
of data availability and information systems. In activity
based costing and flow cost accounting the flows of
residual materials are more precisely determined and
allocated to cost centers and cost carriers.
Environmental revenues derived from sales of waste
or grants of subsidies are accounted for in a separate
block.
Costs that are incurred outside the company and borne
by the general public (external costs) or that are relevant
to suppliers and consumers (life cycle costs) or social
costs are not dealt with, as they don’t show up in the
company’s accounts and need a completely separate
assessment methodology.
Table 2 shows the environmental cost assessment
scheme developed for the UN-DSD EMA working
group. The workbook provides more information on the
different cost categories. The media follow the
distinction of the Environmental Protection and
Resource Management Accounts of the System of
integrated Environmental and Economic Accounting
(SEEA) developed by the United Nations Statistics
Division.
5. Why does EMA not include social costs and
externalities?
Environmental management accounting—EMA—has
been developed coming from conventional expenditure
for waste treatment facilities, disposal fees,
environmental protection and management costs and
related issues. EMA adds a significant further cost
factor, that is vital for internal calculation, as a decision
basis for investment projects and for correct product
pricing: the purchase value and production costs of all
non-product output. It is calculated by multiplying the
input side of the material flow analysis in tons, that is
normally set up for environmental management projects
and reporting, with the respective scrap (or efficiency
loss) percentages of each material input. Waste is thus
expensive not because of disposal fees, but because of
wasted material purchase costs.
671
All these costs actually occur in the company, only
they are normally not traced and transparent. Therefore,
they are neglected for decision making. It is the focus of
the UN EMA methodology to make them visible.
Externalities, in contrast, occur outside the company
and don’t show up in its accounts. Environmental and
social costs to the general public are also evaluated by
completely different methodologies, there is no
“purchase value” in the books, but damage costs and
“availability values” are estimated.
EMA in its current approach has been developed for
company internal decision making and therefore focuses
on tracing all real environmental and material efficiency
loss expenditure for a given year. The focus is on
improving a company’s information system and decision
basis. The focus is not on estimating external effects and
“soft” factors, such as image, credibility, ethics, as from
an accountant’s perspective they will sooner or later be
reflected in the annual accounts, but should not distort
the cost basis of a previous year. For the calculation of
investment projects and savings, however, these factors
are considered.
6. Example of the pulp and paper company SCA
Laakirchen
Within the Swedish pulp and paper company SCA,
quantification and interpretation of environmental costs
related to investment decisions and their effects on
waste, emissions and long term profits is an important
issue. SCA Graphic Laakirchen, Austria, has been
assessing environmental costs for years. Since 1999,
they participated in the pilot testing for the EMA scheme
for UN DSD and published the results in their
environmental statement for 2000.3 The explanations and
Table 3 are taken from there.
Table 3 shows the percent distribution of
environmental costs for SCA Laakirchen in the year
2000. The total environmental costs for 2000 were to
Euro 23,758.510, and are 30% above the costs for 1999.
This strong increase is due to raised prices for raw and
operating materials and natural gas.
The distribution by environmental media shows that
the column water/waste water is responsible for 44% of
all environmental costs. Annual operating costs for the
waste water treatment plant count for 13%, but the
purchase costs of the paper chemicals going down with
waste water account for 32% of the costs. A reduction of
paper chemicals is therefore much more important when
searching for potential for cost reduction.
Wasted materials account for 30% of all
environmental costs. Disposal fees are only 3.6%, but
the major share is raw materials in the waste fraction
(26.6% including processing costs).
3 SCA Graphic Laakirchen AG, Environmental Report 2000,
EMAS statement, www.sca.at.
672 C. Jasch / Journal of Cleaner Production 11 (2003) 667–676
Under the category air and climate the efficiency
losses of the site’s gas combustion are assessed. The
sharp increase in the price for gas has raised the share of
this cost category from 19.9% in 1999 to 24.6% in 2000.
The costs of external electricity purchase have not been
added, as it is mainly used for administration, not
production, and the efficiency loss could not be
estimated seriously in the cost assessment.
Analysing the environmental costs by cost categories
makes obvious that the highest share is the material
purchase value of non-product output (80.4%), which is
calculated from all raw, auxiliary and operating
materials in the mass balance that don’t leave the
company within the product.
The earnings in the waste and waste water columns
arise from selling of recyclable materials and from
providing treatment capacity of the waste water plant to
other companies nearby. The research project on
electrochemical waste water treatment, which is also
included under costs for research and development, was
partly
 Table2
EnvironmentalCostAssessmentscheme

Table 3
Environmentalmedia
+climateWasteWasteSoil
Environmentalcost/expenditureAir +groundNoise +vibrationBiodiversity +landscapeRadiationOtherTotal
categorieswaterwater

.Wasteandemissiontreatment
.Depreciationforrelated
equipment
.Maintenanceandoperating
materials(ifnotincludedunder
section3.4.)andservices
1 1.1 .Relatedpersonnel
.Fees,taxes,charges
.Finesandpenalties
1.2
.Insuranceforenvironmental
1.3
liabilities
1.4 .Provisionsforclean-up
1.5 costs,remediation
.Preventionandenvironmentalmanagement
.Externalservicesfor
1.6
1.7 environmentalmanagement
.Personnelforgeneral

SCA Laakirchen: percent distribution of environmental costs for 2000

environmentalmanagement
2.1 activities
.ResearchandDevelopment
.Extraexpenditurefor
2.2
2 cleanertechnologiesandscrap
percentageofoperationalplants
.Otherenvironmental
2.32.4 managementcosts
.Materialpurchasevalueofnon-productoutput
.Rawmaterials
2.5 .Packaging
C. Jasch / Journal of Cleaner Production 11 (2003) 667–676

-
.Auxiliarymaterials
3.1 .Operatingmaterials
3.2
.Energy
.Water
3.3 3.5 .Processingcostsofnon
3.4 3.6 productoutput
3
Environmentalexpenditure
.Environmentalrevenues
.Subsidies,awards
4 .Otherearnings
Environmentalrevenues
5 5.1
5.2
673
674 C. Jasch / Journal of Cleaner Production 11 (2003) 667–676

Environmental media4 Air and Waste water waste Soil and other Total climate
groundwater
Environmental costs categories

1. Waste and emission treatment

1.1. Depreciation for related equipment 0.2% 3.2% 0.5% 3.9%
1.2. Maintenance, operating materials and 5.0% 0.1% 5.1%

services
1.3. Related personnel 0.8% 1.6% 0.7% 3.1%
1.4. Fees, taxes, charges 0.7% 1.3% 3.6% 5.7%

1.5. Fines and penalties

1.6. Insurance for environmental liabilities
1.7. Provisions for clean-up costs, remediation
2. Prevention and environmental management
2.1. External services for environmental 0.1% 0.1%
management
2.2. Personnel for general environmental 0.1% 0.9% 1.0%
management activities
2.3. Research and development 1.5% 1.5%
2.4. Extra expenditure for cleaner technologies
2.5. Other environmental management costs
3. Material purchase value of non product output 3.1.
Raw materials 23.0% 23.0%
3.2. Packaging 0.1% 0.1%

3.3. Auxiliary materials 2.1% 2.1%

3.4. Operating materials 0.1% 32.0% 0.5% 32.5%

3.5. Energy 22.6% 22.6%

3.6. Water 0.1% 0.1%

4. Processing costs of non product output 0.2% 0.9% 1.0%

Total environmental costs 24.6% 44.9% 31.3% 0.1% 1.0% 101.9%

5. Environmental earnings
5.1. Subsidies, awards 0.8% 0.8%
5.2. Other earnings 0.2% 0.9% 1.1%

Total environmental earnings 1.0% 0.9% 1.9%

Balance costs/earnings 24.6% 44.0% 30.3% 0.0% 1.0% 100.0%

funded by the Austrian Industrial Research Promotion further split up to sites, cost centers, processes and
Funds (FFF). product levels. The material flow balance is an equation
based on the idea that “what comes in must go out—or
be stored”. In a material flow balance, information on
7. Material flow balance both the materials used and the resulting amounts of
product, waste and emissions are stated. Materials
The basis of environmental performance include energy and water. All items are measured in
improvements and for assessing the amounts and costs physical units in terms of mass (kg, t) or energy (MJ,
of nonproduct output (NPO) is the recording of material kWh). The purchased input is cross-checked with the
flows in kilograms by an Input–Output analysis. The amounts produced and sold as well as the resulting
system boundaries can be on the corporate level, or waste and emissions. The goal is to improve efficiency

4 Without the categories noise and vibration, biodiversity and landscaping and radiation.
 C. Jasch / Journal of Cleaner Production 11 (2003) 667–676 675

of material management both economically and Raw materials Product

environmentally. Auxiliary materials Main product
A material flow balance can be made for a few Packaging By-products
selected materials or processes, or for all materials and Operating materials Waste
wastes of an organization. The purpose of working to Merchandise Municipal waste
quantify the process balances is to track materials on Energy Recycled waste
their way through the company. The starting point is Gas Hazardous waste
often at the corporate level, since much information is Coal Waste water
available on this system boundary. Also, this level is
Fuel oil Amount
used for disclosure in environmental reports.
Other fuels Heavy metals
During their first environmental review, companies
District heat COD
mostly draw up a screening material flow balance and
Renewables (biomass, wood) BOD
do not go into much detail. On this basis, knowledge is
Solar, wind, water Air-Emissions
gained on where to focus to achieve improvements in
Externally produced electricity CO2
performance and information gathering. By improving
Internally produced electricity CO
the quality of the information available and the
Water NOx
consistency of information systems, a regular
Municipal water SO2
monitoring system can be established. This monitoring
Ground water Dust
system shows resource input and production and waste
output on a monthly basis. As a next step, the material Spring water FCKWs, NH4, VOCs
flows can be subdivided further according to processes Rain/surface water Ozone depleting substances
and cost centers, and they can then also be subjected to it is paid for). All materials purchased during a year
monetary evaluation. must either leave the company as a product, as waste or
Table 4 shows the generally applicable structure of emission, or are stored on site.
the input–output balance at corporate level, which could Table 5 shows the assessment scheme for the
also be used for environmental reporting. Specific materials input–output flow balances. The sign ✓
subcategories will be needed for different sectors, but it indicates the likely source of the data or which records
should be possible to aggregate them in a standardized are likely to be available. The objective should be to
manner, in order to be able to compare them. For EMA, gradually improve the recording of material flows on a
the input side is evaluated for the material loss step by step procedure. The goal is not to have full and
percentage of each material input, based on scrap complete information in the first year but to gradually
percentages, efficiency conversions, etc. and then trace materials as completely and consistently as
multiplied with the respective purchase value. possible, in storage administration, cost centers and in
The input–output balance at the corporate level is production planning. The starting point are the raw
drawn up on an annual or a monthly basis and should be materials, then auxiliary and packaging, lastly operating
linked to the bookkeeping, cost accounting, storage and materials. Improvement options on that way relate to the
purchase systems. All material flows should be listed system of material stock numbers and control
with their values and amounts per year. The assessment procedures, but also to the estimates and control of scrap
scheme for the material flow balance should therefore percentages and other points of measurement in the
record the amounts in kilograms, the values and the company.
corresponding accounts. In addition, it should indicate
whether materials are registered by material stock 8. Process flow charts and stock management
number and whether there is inventory management. It
should also indicate whether there is consumption based The next step after environmental cost assessment and
stock withdrawal according to cost centers. As the first material flow balances have been done on a corporate
step in setting up the materials input–output statement at level is to allocate the data from the system boundary of
the corporate level, quantitative data are collected from the company fence to internal processes.
the accounting and stock-keeping systems. The Process flow charts, which trace the inputs and
accounting system offers annual data on input into the outputs of material flows on a technical process level,
company as a whole, as well as some of the output (if give insights into company-specific processes and allow
the determination of losses, leakages and waste streams
Table 4 at the originating source. This requires a detailed
General input–output chart of accounts examination of individual steps in production—again in
Input in kg/kWh Output in kg
the form of an input–output analysis, but sometimes
linked to technical Sankey diagrams. The process flow
676 C. Jasch / Journal of Cleaner Production 11 (2003) 667–676
charts combine technical information with cost
accounting data. They are not done on a yearly basis but
for a specified production unit, machinery or cost center.
In total, they should aggregate to the annual amount
(Fig. 1).
This level of material flow analysis will be the
responsibility of technicians, but the data gathered
should be cross-checked to ensure consistency with the
cost accounting system. Usually a harmonization of
technical data with data from financial bookkeeping is
not undertaken due to lack of inter-departmental
communication. Experience has shown that such a
consistency check provides great optimization
potentials, and has thus become a major tool in
environmental accounting. Therefore it is desirable for
the technical and financial bookkeeping to be conducted
in a compatible way.
Splitting up the corporate flows into cost centers, or
even down to specific production equipment, allows for
more detailed investigation of technical improvement
options, but also for tracing the sources of costs. Special
attention should be drawn to the quantitative recording
of materials on a consistent kilogram basis. The key
questions answered by the approaches of activity based
costing and cost flow accounting are:
C. Jasch / Journal of Cleaner Production 11 (2003) 667–676 677
678 C. Jasch / Journal of Cleaner Production 11 (2003) 667–676
Fig. 1. Process flow charts: opening of the Black Box.
What cost center have processed how much of the
materials?
Can material input be further divided into production
lines or specific equipment?
How large were the resulting emissions, scrap and
waste, preferably recorded separately for each cost
center, production line and machinery?
What is the correct allocation of costs to products, thus,
reducing the amount of costs hidden in overhead cost
categories?
9. Future developments
The book on EMA for UN DSD focuses on the basics
of different accounting procedures and opportunities for
their improvement by determination of annual
environmental expenditure, cost of non-product output,
cost accounting for material flows and decreased
allocation to overhead cost categories. The application
of the principles focuses on indicator development and
investment appraisal.
Another area of application is reporting. There is a
trend from separate financial and environmental
reporting towards combined sustainability reports. There
is little merit in the long term in the development of
environmental verification principles and financial
statement audit principles on separate tracks, as “in
principle” they should be the same.
The European Commission has firmly rejected a
regulatory approach to corporate social responsibility or
environmental reporting, but invites companies to
voluntarily disclose their efforts. Thus, most companies
refer to the guideline by the Global Reporting Initiative,
GRI, which lists indicators in the triple bottom line
areas. The performance indicators are grouped into
The author has requested enhancement of the downloaded file. All in-text references underlined in blue are linked to publications on
ResearchGate.
environmental, economic, social and integrated
indicators. The last type links a company’s performance
to the macro-level (termed “systemic” indicator) or tries
to bring together two or more dimensions of
sustainability (termed “crosscutting” indicators).
Although companies find it difficult to assess external
costs and benefits (“systemic” indicators), what they do
often disclose still are data on the environmental
investments and annual operating costs. These indicators
can be seen as examples of cross-cutting indicators
between the environmental and the economic
sustainability dimension. As most of these figures are
derived from the cost accounting system, their reliability
can be traced with standard methods, but emphasis has
to be on a clear definition of what is included under
“environmental” costs so that the data are compatible
with next year’s disclosure.
It makes a significant difference, when companies
report about how much they spent on environmental
protection, whether this spending incurred for traditional
end of pipe technologies and fines for polluting, or for
staff training on EMS and nature conservation
sponsorship or whether the costs of non-product output
have been included. That’s why the cost categories are
distinctly separated and should be disclosed separately.
In some countries like Japan and Germany, the statistical
agencies require this sort of information, distinguished
into environmental media, so the columns of the
environmental costs assessment scheme follow the
distinction proposed by SEEA 2000.
Most important, there is little merit in two separate
information systems in an organization, one for financial
and cost accounting, the other for process technicians,
when “in principle” these information systems should
be the same or at least consistent, following the
material flows through the company.
Reference
[1] Jasch C. Environmental Management Accounting—Procedures
and Principles. New York: United Nations, 2001.
Christine Jasch is founder and manager of the Vienna Institute for
Environmental Management and Economics, IO¨ W. She studied Political
Economy, Business Administration and Agriculture and works as an
independent Tax Advisor and Certified Public Accountant in Vienna. Her
scientific emphasis at the Institute lies in the linkage of business and
political economic instruments with environmentally relevant criteria and
methodologies as well as their further development as a decision tool for
environmental management. She is the Austrian delegate to ISO TC 207
Environmental Management, and to the Sustainability Working Party of
the Federation des Experts Comptables Europe´ens (FEE) in Brussels. She
was accredited as lead verifier under the EMAS regulation in December
1995.