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Aplinkos tyrimai, ininerija ir vadyba, 2005.Nr.4(34), P.

77-88
Environmental research, engineering and management, 2005.No.4(34), P.77-88

ISSN 1392-1649

From Environmental Management Accounting to Sustainability


Management Accounting
Christine Jasch1, aneta Stasikien2
1

Institute for Environmental Management and Economics


Kaunas University of Technology, Institute of Environmental Engineering

(received in September, 2005; accepted in November, 2005)


Over the past decade sustainability was involved into policy statements of many companies.
Environmental and in recent years increasingly social management systems are implemented by companies as
a means to manage and control their environmental and social performance. However, as the most of
performed researches show, the real impact of such tools is rather low. Also the researches revealed that
environmental and social responsibility remains separated from the traditional core business strategies and
management systems, which are geared nearly solely towards financial performance indicators and ecological
issues are left aside. Therefore sound management tools are needed that help to overcome this gap between
Environmental and business management systems, to integrate the financial, environmental and social
management systems and to improve environmental performance of companies.
This article shows the concept of Environmental Management Accounting (EMA) developed for the
United Nations Division of Sustainable Development and for the International Federation of Accountants
(IFAC). It has been applied on case studies in the Austrian automobile sector and further developed into a
tool for sustainability management accounting. The article ends with current experiences and trends for
sustainability management accounting in Lithuanian companies.
Keywords: environmental management accounting, sustainability management accounting,
sustainability accounting, environmental costs, health and safety costs, external costs, intangible items.

1.

Introduction

Conventionally, sustainable development is


described in three dimensions: social, environment
and economic. However, these dimensions are not
separate, but strongly influence each other. For most
companies to have an interest in sustainable
development there needs to be a financial benefit as
well. But often organisations are not able precisely
identify their environmental or social costs and even
less - the benefits and savings from improved
environmental and social performance.
As companies become more complex,
decentralized and at the same time exposed to
increased demands for environmental protection and
corporate social responsibility, the need for effective
managerial accounting systems considering the
company's environmental and social impacts
increases. Accountants and environmental managers
need guidance for answering the questions like: What

are environmental and social costs? How much


money are we costing and saving? How can
environmental risks be evaluated? What financial
information should be disclosed? How can the
environmental accounting system be integrated into
the financial accounting systems?
For many years sustainability has been more
seen in more in environmental perspective, but
presently more and more the social side of
sustainability is gaining importance. This shows even
more the necessity of defining clearer concepts and
appropriate strategies for sustainability.

Ch. Jasch, . Stasikien

2.

the UN DSD EMA Workbook [9] and the Guidelines


for Sustainability Reporting developed by the Global
Reporting Initiative [7] were taken as a starting point
as the companies originally had also planned to go for
sustainability reporting. It could be seen from
discussions with companies that the interest for
sustainability accounting is closely related to
sustainability reporting and the attempt to integrate
the related requirements with existing information-,
accounting- and management systems. Another
related tool are sustainability balanced scorecards [6,
11]. While the GRI Guidelines focus on sustainability
reporting and performance indicators, the focus of this
project was on related sustainability management
costs. The related tool deals with monetised (or
potentially monetised) information only, which in the
environmental dimension is based on a material flow
balance.

What is Sustainability Management


Accounting

Sustainability accounting and reporting can be


defined as a subset of accounting and reporting that
deals with activities, methods and systems to record,
analyse and report, firstly, environmentally and
socially induced financial impacts and secondly,
ecological and social impacts of a defined economic
system (e.g. a company, production site, nation, etc.)
Thirdly, sustainability accounting and reporting deals
with the measurement, analysis and communication of
interactions and links between social, environmental
and economic issues constituting the three dimensions
of sustainability [12].
While sustainability reporting has seen an
impressive upswing in recent years, partly due to the
Guidelines published by the Global Reporting
Initiative [7], sustainability accounting is in a very
early stage of development.
The concept of sustainable development asks for
an integrated reflection of financial, social and
environmental aspects. Sustainability management
accounting is a tool that assists organisations in
becoming more sustainable by highlighting costs,
risks and benefits. It extends traditional financial and
cost accounting to take account of sustainability
impacts at the organisational level. As sustainability is
based on a broad stakeholder approach, also the
external effects of the organisation and its products
are considered. The focus is on extending the range of
monetised information (covering environmental,
social and economic impacts) on which decisions are
made. We still talk of management accounting, as
external effects are considered for internal decision
making and there are no reporting requirements [10].
The model for sustainability accounting of the
SIGMA project [14] distinguishes between stocks at a
particular point in time (like in a balance sheet) and
resource flows in a period (like the Profit and Loss
Account), however highlighting, that in addition to
sustainability accounting being in its infancy, the
stock part of the model being the least developed.
According to the Sigma project, sustainability
accounting seeks to explore all three dimensions by:
1. disaggregating the internal accounts to show
costs and benefits relating to economic, social
and environmental performance; and
2. extending the accounting boundary to consider
the monetary value of external economic, social
and environmental impacts.

Timing of impact

Stock

Flow

Type of impact

Location of impact

Internal

Social

External

Economic

Environmental

Fig. 1. Sustainability Accounting in three dimensions [14]

The general structure for the Sustainability Cost


Assessment can be seen in Table 1. The detailed
structure with examples for the different
environmental and social cost categories is presented
in Table. In the following the columns and lines of
Table 1 are explained shortly, while the later sections
provide more detail on specific cost categories.
The Sustainability cost assessment scheme in
Table 1 clearly distinguishes between costs internal to
the organisation, which can be partly taken from the
profit and loss account and the cost centre reports and
other cost categories, which refer to costs that cant be
taken from the company records, like externalities,
intangibles and risk aspects, but which have financial
implications as well. The costs assessment scheme
does not imply adding up the columns and rows in
Table 1, but rather gives an overview on the relation
between the different cost categories. For each
column, a separate cost assessment scheme in excelformat has been provided in the pilot projects. Table 2
shows them for the environmental and social
dimension [13].

The enlargement of the UN DSD EMA


methodology into a sustainability accounting tool in a
project with the Austrian automobile sector was based
on similar considerations, but taking a slightly
different approach in dealing with stocks. They are
reflected in the intangible items and related risk
aspects, as they are very hard to quantify.
For the development of the columns for the
sustainability cost assessment scheme shown in Fig. 1

78

From Environmental Management Accounting to Sustainability Management Accounting

General structure for sustainability cost assessment

1. Treatment of
undesired effects
2. Prevention

3. Material flows
4. Earnings

5. Intangible items
6. Risk aspects

External effects

Other Costs

Value
added
accounting
derived
from the profit & loss
account

e.g.: depreciation of
end-of-pipe equipment,
waste treatment and
disposal costs
e.g.: R&D for emission
prevention, personnel
for environmental
management, external
consultants and
verification
e.g.: purchase value of
non-product-output

e.g.: costs resulting from


unimplemented protection
measures (accidents, sick
Formation of value
leave.)
added
e.g.: facilities for health
care, safety training, fire
protection representative,
cost of health and safety
and
personnel

e.g.: sale of waste


materials, subsidies for
environmental
protection measures
e.g.: environmental
quality of the site
e.g.: risk of hazardous
accidents

e.g.: revenue from


recreational facilities for
employees, subsidies for
employee related issues
e.g.: human capital
e.g.: accident risks

Distribution of value
added between
stakeholders

e.g.: life cycle


costing, negative
effects of emissions
Positive external
effects, e.g.: value
added in the region

e.g.: business
relations, brand name
e.g.: operational risks

Costs for treatment of undesired effects and


prevention. The distinction between costs for
treatment of produced emissions and costs for
prevention has been very helpful in structuring the
environmental cost categories. So the attempt was
taken to use the same division between treatment of
undesired effects and prevention also for the social
dimension.
It has been shown in many pilot projects that
while costs in the category treatment do not add to
productivity and are simply costly, costs in the
category prevention help to reduce treatment costs
and cost of lost materials, thus improving ecoefficiency.
The IFAC Guidance document on EMA [8] also
draws that distinction between waste and emission
control costs and prevention and other
environmental management costs, which, together
with R&D projects, help to reduce the material costs
of non-product output and thus increase ecoefficiency. The IFAC cost categories are:
1. Material Costs of Product Outputs;
2. Material Costs of Non-Product Outputs;
3. Waste and Emission Control Costs;
4. Prevention
and
other
Environmental
Management Costs;
5. Research and Development Costs;
6. Less Tangible Costs.

The scheme has been developed to assess total


annual environmental and social costs and earnings of
the previous business year and record significant
intangible items, risk aspects as well as external
effects, which have or may in the future have financial
impacts as well. On this basis the costs and benefits of
environment, health and safety departments and
corporate social responsibility can be made explicit,
especially in comparison with previous or upcoming
years or in relation to a defined base year.
3.

Product Responsibility

Society

Training & Education

Internal costs
Social performance costs

Safety

Air & Climate (Energy)


Waste Water
Waste
Soil & Ground Water
Noise
Landscape
Environmental Manag.

Environmental costs

Health

Table 1.

Internal environmental and social costs

The internal environmental costs are the best


developed part of sustainability accounting. The
columns refer to the different environmental media
effected. In the social dimension the columns relate to
the most significant cost carriers based on the GRI
social indicators and the costs actually found in the
pilot companies.
In many companies of previous pilot projects the
environmental department is also responsible for
health and safety issues. Therefore these two
responsibilities were sometimes added as columns to
the environmental costs assessment already in
previous projects. This makes sense also, as some
environmental effects are closely related to health and
safety considerations.
79

Ch. Jasch, . Stasikien

Table 2.

Detailed structure for the environmental and social management costs

Environmental dimension
1. Treatment of undesired effects Costs resulting from unimplemented
protection measures

Social dimension
Costs resulting from unimplemented protection
measures

1. Depreciation

End-of-pipe equipment and proportion of


equipment producing waste and emissions
from cost center reports of equipment
defined above
from cost center reports of equipment
defined above
for waste disposal and sewage
for non compliance in the environmental
dimension
for increased environmental risks

Equipment to reduce the health and safety impact, e.g.:


noise reduction equipment
Protective gas, equipment for fire department

Compensations, e.g.: to fishermen;


recultivation, clean-up of contaminated sites
Emission prevention
for environmental management and
certifications
for environmental management and emission
prevention

Compensations e.g.: damages for pain and suffering

3. Research and Development

for emission prevention

for the reduction of accidents or other risk aspects

4. Equipment for integrated


prevention

Proportionate share of integrated pollution


prevention equipment, additional costs of
green electricity

5. Other prevention costs

Environmental communication and


publications, donations for environmental
protection

Equipment for health care e.g.: fitness area for


employees, ergonometric chairs, safety equipment, e.g.:
for employee protective clothing, additional costs
associated with environmentally sound air-conditioning
systems
Social/ethical communication and publications,
donations for social initiatives including infrastructure
outside the operation site e.g.: schools in the
neighbourhood; voluntary social expenses, voluntary
employee benefits

3. Material Flows

Costs of non-product output, valued by


purchase price
Input x loss-%
Input x loss-%
Input x loss-%
Essential operating materials by 100%,
administration is not considered

2. Maintenance, operation
materials and external services
3. Personnel
4. Taxes, fees, charges
5. Fines, penalties, costs of
authority proceedings
6. Insurances
7. Recultivations and
compensations
2. Prevention
1. External services
2. Internal personnel

1. Raw Materials
2. Auxiliary Materials
3. Packaging Materials
4. Operating Materials
5. Merchandise
6. Energy
7. Water
8. Product
4. Earnings
1. Product
2. Other Earnings

overtime resulting from sick leave of employees, costs


of staff away sick or injured
for additional payments for exhausting and/or dirty work
for non compliance in the social/ethical dimension
for increased safety and other risks in the social
dimension

Accident prevention and risk reduction


for training and security measures, e.g.: trainers, other
consultants and auditors
for personnel working on health and safety issues;
poison and radiation protection representatives; accident
prevention, e.g.: training, internal audits, medical
examinations, fire protection representative, company
medical officer

Not considered (unless there is a significant


loss percentage)
Input x loss-% for own production, external
procurement by 100%
Costs of external procurement and extraction
Product scrap x production costs
Internal earnings
Internal earnings
e.g.: earnings from the sale of residual
materials or excess cleaning capacity of the
wastewater treatment plant, subsidies for
equipment investments, insurance benefits
for environmental accidents, recourse
receivables in connection with accidents of
other firms

e.g.: earnings from recreational facilities for employees,


contributions to staff canteen, subsidies for employee
qualification measures, insurance benefits for employee
accidents, recourse receivables in connection with
accidents of other firms

5. Intangible Values

Intangible environmental values


Intangible social/ethical values
e.g.: environmental quality at the company e.g.: know-how, human capital, employee motivation,
site, relations with authorities and neighbours attractiveness as employer, reputation, creativity

6. Risk aspects
Imputed risks

Environmental risks
Social/ethical risks
Decontamination risks, accident risks, risks Liability risks, risks of legal developments, e.g.: working
of legal developments, e.g.: emission trading conditions, Image risks, e.g. involvement in child labour
accusation

80

From Environmental Management Accounting to Sustainability Management Accounting

placed below the line of the internal costs and have


been described qualitatively.
For companies listed on stock exchange this
value gap is visible. There is a significant difference
between the book value of an organisation as reflected
in the value of assets and liabilities in the balance
sheet and the equity market value as determined by
demand and supply of their equity on the stock
market. This gap reflects the shareholders valuation of
intangible assets not represented in the balance sheet
and relates to an organisations capabilities and
competencies based on its human and social capital.
An intangible asset is an identifiable nonmonetary asset without physical substance, which is
controlled by an enterprise and from which future
economic benefits are expected to flow to the
enterprise. In acquisition transactions, these items
form part of good will that exceeds the book value in
the balance sheet and in accordance with IAS 38 [5]
may be recognised as an asset.
Intangible items and/or risks of an enterprise can
comprise the following:

Environmental dimension: environmental quality


at the site, relations with authorities,
contamination risks, planned legal requirements,
e.g. CO2 emission trading

Social dimension: special know-how, human


capital,
employee
motivation,
attractive
employer, liability risks, dangerous working
conditions

Economic dimension: business relations,


supplier
and customer structure, market
position, brand name

A problem found during the case studies was,


that such win-win situations are more likely in the
environmental dimension. When the same amount of
products can be produced with less natural resource
inputs and less waste and emission output than before,
the eco-efficiency has increased and this is good from
an environmental as well as from an ecological
viewpoint. But, in the social dimensions such win-win
situations are harder to find. The companies in the
pilot projects were very sceptical about the positive
effect of clearly showing voluntary benefits to
employees and society, as these are the first ones to be
cut down for saving efforts. The only clear win-win
situation relates to the costs of staff away for sickleave and due to accidents. While it is clear, that not
all sick-leave can be contributed to company internal
reasons, it is also accepted, that there is a relation
between good health and safety systems, employee
motivation and the average days of staff sick-leave.
Material flows. With regard to material flows
(the 3rd cost category), the non productive material
input as well as the costs for non productive material
output (waste and emissions) are considered a cost
aspect in the environmental dimension. In addition,
they have external effects due to material extraction
and waste and emission impact. The material flows in
the social dimension are comparatively minor and
were captured in the treatment and prevention
categories.
Earnings. The business activity as such not only
results in earnings, which may partly come from
environmental and social activities, but may also
result in positive external effects , such as creation of
jobs in a region with a lot of unemployment or other
stimulation of regional economy, e.g. by preferring
regional suppliers.
Value added. The basis for the assessments was
the profit and loss accounts and specific cost centre
reports. The GRI guidelines and other references
propose to arrange those into a value added statement.
This column is therefore not structured like the other
dimensions.
Intangible items and risk aspects. Until now all
recorded data was based on real expenditure or costs
and could therefore be extracted (with more or less
effort depending on the quality of the operational
information systems) from the data supplied by the
accounting system. But the value of an organisation is
influenced and constituted of more than the book
value. During purchase transaction, this additional
value of intangible assets becomes more concrete.
Corporate social responsibility and a good
environmental, health and safety management system
contribute significantly to these values.

Ideally, all these aspects should be identified and


given a value at the end of the business year.
However, methods therefore are in its infancy and the
companies in the case studies were hardly able to
precisely name these aspect and far away from
quantifying them. But they do provide arguments for
improved sustainability management. So in the
workshops, they were discussed in depth and merely
reported in the tool, but without a monetised value.
External effects. The other category - beyond
the books and hard to quantify - covers all negative
and positive external effects arising from the
organisations activities. Externalities are also included
in the Sigma framework [14] and in the GRI
economic performance indictors [7] and in the IFAC
EMA guidance document [8]. The main argument
therefore is the extended stakeholder view when it
comes to sustainability. Another argument is, that the
monetarised external impact of an organisation should
as well influence its decision making as well as point
into direction of future requirements, as these
negative effects tend to become internalised via legal
frameworks, if significant.

Intangible items comprise e.g. trade marks,


market position, reputation, customer relations and
satisfaction, qualification of employees. All these
items, which in combination make up the value of an
organisation, at the same time may be regarded as
future risks. They are sometimes dealt with under the
term issue management. These aspects have been

4.

Social performance costs

It was one of the attempts of the project to


calculate the financial impact of the social
81

Ch. Jasch, . Stasikien

workers, i.e. the cost of the members of the safety


team, safety representatives, fire protection
representatives and dangerous goods agents.
Equipment or clothing that is solely or mainly used to
increase employee safety is also included.
Training and education was also defined as a
separate column, as it constitutes a significant social
cost factor. However, there are several overlaps to
training in specific areas like environment, health and
safety.
Human rights as well as Diversity and
opportunity do not make up any significant costs in
Austrian SMEs. This is also true for most of the issues
addressed in Society and Product Responsibility.
The column Society mostly consists of donations
to non-profit organisations and other voluntary
spending. Costs qualifying as voluntary social
benefits and social sponsoring are integrated here as
well. In the USA, several organisations have made a
commitment of spending 1 % of profit before taxes
for donations to non profit organisations and projects
for the community, e.g. AMD, a company in the
electronics sector, reports in its sustainability report of
having spent 6,3 Mio USD, equalling 1 % of profit, in
the year 2003 [1]. Other organisations go even
further. AVON, a corporation dealing with cosmetic
products, reports of spending 10 % of the profit of
2002 or 46 Mio USD for charity [2]. However,
suppliers in the automobile sector in Austria face a
very severe price pressure which conflicts with
voluntary
initiatives
for
corporate
social
responsibility. Therefore donation are limited to the
local fire brigade and school projects. A more
common Austrian approach is to allow staff to
participate in emergency activities as part of their
working hours, e.g. clean up activities after a flooding
or rescue teams after avalanches.
Product Responsibility has cost aspects mostly
relating to customer health and safety research
activities and implemented design adjustments.

performance indicators in addition to the already well


developed environmental performance costs.
The social performance indicators of the GRI
Guidelines [7] are structured as:

Labour Practices and decent work (employment,


labour/management relations, health and safety,
training
and
education,
diversity
and
opportunity)

Human rights (strategy and management, non


discrimination, freedom of association and
collective bargaining, child labour, forced and
compulsory labour, disciplinary practices,
security practices, indigenous rights)

Society (community, bribery and corruption,


political contributions, competition and pricing)

Product Responsibility (customer health and


safety, products and services, advertising,
respect for privacy)
Labour practices and decent work comprise the
breakdown of the workforce by region and
employment type. The only cost related GRI indicator
is Employee benefits beyond those legally
mandated. Most companies have voluntary
contributions to lunch buffets or voluntary annual
staff celebrations. These voluntary benefits were
included in the category Other costs. We decided
not to take the total costs of wages, as they are already
included in the value added accounting column for the
economic performance. Also mandatory social
security or pension funds and dismissal pay reserves
are not included but only the costs resulting from the
social commitment of the company beyond paying
wages and social security.
Health and Safety are two very important costs
aspects in Austrian companies. They were separated
into two columns, as most of the costs in the social
performance category relate to these two aspects.
The category Health costs for Treatment of
undesired effects includes the costs for staff away
sick, one of the most significant cost aspect. Under
Prevention the costs for the company medical
officer as well as occupational medicine and
vaccinations against flue and ticks (both quite
common in Austria) are recorded. Revenues may
come from owned recreational facilities for
employees. In Austria, some larger corporations have
their own hotels and sport centres, which are available
for employees at a very low rate. Also subsidies or
insurance payments for labour related events would
be recorded here.
Safety in the section on Treatment includes
costs resulting from unimplemented protection
measures, e.g. for staff away because of working
accidents, invalidity payments and costs for overtime
of other staff to make up for the lost working days.
This category again proved to be a significant cost
category, which can be reduced by increased spending
in the prevention category. The prevention part
contains external services, e.g. for safety training,
which is carried out by external consultants, the
company medical officer and internal personnel costs
that result from efforts to increase the safety of

In the social dimension of sustainability the third


cost category for material flows remains empty since
material flows are recorded mainly for their internal
environmental costs related to scrap and for their
external environmental and social effects (described
later). The internal cost implications resulting from
material flows and relating to social issues (e.g. safety
equipment) were neglectable in the case studies and
would easily be covered in the categories treatment
or prevention under the other columns of the social
dimension.
5.

The economic dimension

The economic performance indicators of the


GRI Guidelines [7] are structured in a common value
added accounting format and the upcoming revision
of the GRI guidelines will further promote this
approach. It is therefore not explained in depth in this
paper.
82

From Environmental Management Accounting to Sustainability Management Accounting

6.

Positive and negative external effects can arise


of the product and research and development: There
are positive effects if the product is especially
environmentally friendly or promotes the use of
environmentally friendly products but also, if research
makes the product more safe to use or reduces its lifecycle environmental impact, e.g. by increasing the
recyclability or by introducing new production
processes utilising renewable materials. Sometimes,
the products themselves reduce environmental or
social impact compared to other applied technology or
procedures. Negative effects relate to environmental
and social impacts of the product or its components
during the life cycle stages of material extraction,
transport, customer use and final disposal. However,
quantification of these effects is still in its infancy.
The external effects of the companies were not
recorded quantitatively as the relevant data was not
available in any of the firms, but rather discussed
qualitatively in a brainstorming workshop. The most
important mentioned negative external effect was
noise and emissions from transport of raw materials
and finished products. A positive external effect
always highlighted was the provision of work places
in a region with high unemployment.

External effects

In the area of external costs it is attempted to


monetise the external effects (externalities) of an
organisation and at least to discuss and record them
qualitatively. The Global Reporting Initiative lists
indirect economic impacts as indicator in the
economic section and asks organisations to identify
major externalities associated with the reporting
organisations` products and services [7]. However,
no more guidance is provided and based on a survey
of the entries to the European Sustainability Reporting
Awards 2002 and 2003 it can be stated that external
costs are hardly found in sustainability reports.
External effects are by definition not included in
the financial accounts, but they do effect the
organisation in the light of stakeholder relations,
image and possible future requirements. Full costs
accounting refers to the external dimension of an
organisations impacts on its stakeholders. Common
external effects of production sites relate to waste and
emissions, but may also relate to the products [3].
However for small suppliers of e.g. carpet tiles,
mechanical components, isolating materials, paint
shops, pressure die casting, their share of the
negative impact of the whole car or the transport
sector in a country is impossible to quantify. Those
small companies are never the sole contributor to a
negative effect, which is typically recorded on a
regional system boundary. There is an ongoing
discussion in environmental and ecological economics
on contingent valuation methods of willingness to pay
(WTP) or willingness to accept (WTA) [4], both
approaches very difficult to apply by single
companies.
But, negative external effects from waste and
emissions can also be estimated by calculating the
costs of the best possible treatment with respect to
available technology. This approach, using avoidance
and restoration values, is also less controversial as the
WTP and WTA methods, as it is based on actual costs
that would be occurred by the organisation in order to
prevent or reduce its external footprint [14] and may
become a future requirement. The interesting thing
about this approach of estimating external effects
based on investment costs and trading prices, is that
these costs are as well important internal (future)
costs information and as well act as an estimate for
external costs, thereby linking the micro and macro
perspective.
Positive external effects may arise from
production as well and companies have shown a great
interest in having those discussed and reported as
well. A company site can have multiple positive
external effects on a region. It can increase the value
added of the region if it chooses its suppliers in the
close vicinity and can increase the stability and
growth of a region by providing safe working places.
For the Austrian automobile sector, these job creating
effects are highly valuable, which is also seen by the
subsidies and other benefits granted to these
companies.

7.

Analysis of drivers for Lithuanian enterprises


to implement Sustainability Accounting

Number of industrial enterprises in Lithuania


implementing sustainable industrial development
measures is increasing (see Fig. 1.). However, most of
implemented measures are in the areas of cleaner
production and environmental/ quality management
systems. In other areas such as product oriented
measures of sustainable industrial development and
sustainability reporting; activities are in the phase of
initiation.
200
180
160
140
120
100
80
60
40
20
0
1993

Fig. 1.

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Number of enterprises in Lithuania implementing


sustainable industrial development measures in
1993-2003 [17]

In January 2005, there were 156 companies in


Lithuania that implemented certified environmental
management systems in accordance to international
standard ISO 14001 [20]. However, it should be
stressed that not in all cases companies manage to
implement effective management systems that lead to
improved performance. In some cases, companies
implement management systems that formally satisfy
83

Ch. Jasch, . Stasikien

Experience of the companies related to Cleaner


Production investment project development and
implementation was very important driver for
increased awareness of their environmental
responsibility and also contributes for a great interest
in modern economically and environmentally
sustainable solutions and positive corporate culture
[15, 18].
For introduction of the EMA methodology
conceptual approach was used, which includes
following main steps:

training materials and training seminars

company case studies

further dissemination of EMA.

all formal requirements of the standards and use


certificates only for improving their market position.
APINI experts apply EMS development methodology
based on preventive approach, i.e. on CP concept.
Therefore 33 Lithuanian companies have EMS based
on CP principles (Fig. 2.).
180
160

160
140
120
100

APINI
Total

73

80
60
33

40
21
20
1 1

10

11

18

25

The seminars were attended by mixed audiences


of financial and technical experts from companies,
some with an environmental background, some
without. The financial experts learned some basic
concepts of material flows identification and
evaluation and the technical experts learned some
basic concepts of cost accounting.
The results of the seminars led to visiting
companies mostly interested in EMA implementation,
examining their environmental problems and
gathering data at the first hand.
Analysis of the results shows that in all cases the
environmental costs were significantly higher than
those, which company declares in official reports
(Table 3).

33

0
1999

Fig. 2.

2000

2001

2002

2003

2004

Diagram of EMS implementation progress in


Lithuania [20]

This kind of concepts integration, i.e. integration


of CP and EMS, provided a possibility to demonstrate
effectiveness of implemented management systems in
improving performance of companies.
In September 2004 EMA methodology
developed by IOW, Institute for Environmental
Management and economics, Vienna, Austria [9] was
introduced to representatives of industrial companies.
The pilot testing was performed in 18 economically
significant
Lithuanian
industrial
companies.
Table 3.
No.
1.
2.
3.
4.
5.
6.
7.
8.

Environmental costs of the analysed companies


Type of company
Food production company
Food production company
Publishing company
Asphalt production company
Cement production company
Textile company
Furniture production company
Electronics

Traditional accounting system (EUR)


75
250
540
6300
32450
348000
5400
7800

EMA methodology (EUR)


3 740
6400
6250
44600
16305600
1800000
27100
39100

company, e.g. new policy, new methods and new


procedures (Fig. 3.) [20].
In addition to production process management,
the overall management system should be modified in
such way that effective communication with all
stakeholders is ensured. It is obvious that such
changes relate to the enterprises informational and
reporting system. Any changes in management system
or implementation of technical improvements require
adequate human and financial resources. Integrated
implementation of the key sustainable industrial
development measures could enable more efficient
use of human resources and could result in significant
savings.
Moreover systematic and integrated application
of these measures would enable to increase their
effectiveness and would lead to additional cost
savings associated with more efficient use of natural

According the results the areas of most intensive


cost can be clearly identified. Also majority of
company representatives stated that the revealed
hidden costs strengthen pollution prevention and
cleaner production initiatives.
After interviews with the companies, which
participated in the testing of EMA methodology, it
can be concluded that they will be very active in
implementing the methodology, because they rapidly
catch-up advantages and got unique ideas about how
to use the developed data.
However, effectiveness of the measures
identified applying EMA and efficiency of their
implementation largely depend on integration level of
these measures in the overall strategy of enterprises
and everyday activities. It means that adequate
changes are needed in the management system of a

84

From Environmental Management Accounting to Sustainability Management Accounting

resources, reduced waste generation, more effective

operational procedures, etc. [16, 19].


Planning
-

Improvement
-

Management
control

Top
management
commitment

Monitoring
-

Fig. 3.

8.

Monitoring and
measurements
Preventive and correction
actions
Internal and external audits

Work group establishment


Policy development
Identification of actual requirements
Setting performance indicators,
objectives and targets
Development of material and energy
balances
Application of EMA
Identification of significant
environmental aspects
Development of CP innovations
(environmental, economic and technical
assessment of proposals)
Development of action programmes

Implementation
-

Allocation of responsibilities
Training of employees
Communication (internal
and external)
Operation control
Document control
Preparations for emergency

System for sustainable measures implementation in industry

lost working days because of sick leave and accidents


and the overtime pay to make up for these lost
working days. The work of the EHS department helps
to reduce these costs. The cost assessment scheme
allows to see the relation between costs for treatment
of undesired effects due to unimplemented protection
measures and lost material purchase value in
comparison to the prevention costs, which mainly
consist of the internal management departments and
related external consultants.
Several questions arose on where precisely to
draw the boundary line between normal operating
costs and sustainability costs that go beyond. If all
personal costs are considered part of economic
costs, than one possibility would be to only include
voluntary costs exceeding mandatory expenditure for
wages, social security etc. But this raises several other
problems. One is, that if all voluntary expenses for
employees are clearly listed, top management under
price pressure might be willing to cut them down. In
addition, the distinction between mandatory and
voluntary has not been helpful in the environmental
category. For internal decision making, it is clearly
relevant to have knowledge on all cost aspects,
regardless if they are voluntary or mandatory.
If on the other hand we include all personal costs
under social, than the additional information of the
tool would not be significant. We could end up
arguing, that as sustainable development implies a
harmonised approach including all activities within a
company, actually all expenditures in the profit and
loss account are relevant. This is definitely so for the
economic dimension, but our goal was to define a
border line between the economic dimension and the
other environmental and social dimensions.
If we take this idea further, the profit and loss
account, that is normally split up to different cost
centres reflecting the production steps and
administrative departments, would simply be slightly
reorganised. And in effect, this was the pragmatic

Results and outlook

It should be stressed that an assessment of


sustainability management costs is of interest as well
for organisations, who already publish a sustainability
report and want to assess the financial effects as well
as for small and medium sized companies, who use
the assessment as a starting point to shape their
environmental, health and safety (EHS) system. The
main benefits are arguments and data background e.g.
for investment appraisal or performance indicators as
well as improved consistency of information and
management systems. As analysis of Lithuanian
companies shows:

A company which follows preventive strategies


and implement EMA will focus on
environmental objectives and measures in order
to reduce their costs, i.e. EMA strives for
identifying and exploiting win- win solutions,
and thus aim for measures that help to assess
whether environmental standards are met in the
most cost efficient way.

EMA is becoming increasingly important for


product and process design, cost allocation and
control, capital budgeting, purchasing, product
pricing and performance evaluation. Companies,
which use EMA as a part of integrated
management system, are provided with accurate
and comprehensive information for the
measurement and reporting of environmental
performance.

EMA accordingly influences internal companys


objectives to optimise production process,
learning and finance perspectives
Therefore we see EMA as a toll that provides a
good chance to integrate environmental objectives
into existing common business systems.
The two major cost drivers are the purchase
costs of non product output and the costs related to
85

Ch. Jasch, . Stasikien

11.

decision taken. We took the departments for health


and safety, risk management, research and education
and added voluntary social expenditures and some
other issues addressed in the GRI guidelines.
In effect, this is also the way, that environmental
management accounting has been taken, from seeing
the environment as something quite separate from
production to an integrated approach for material flow
management. Also technological development has
shifted from end-of-pipe technologies to integrated
equipment, that doesnt produce waste and emissions
during production. So in a couple of years from now,
corporate social responsibility may have become so
integrated into all operational departments that it may
no longer be necessary to separate sustainability
management
accounting
from
operational
management accounting in order to show its costs,
benefits and risks, if not implemented.

12.
13.

14.
15.

16.

References
1.
2.
3.

4.
5.
6.

7.

8.

9.

10.

AMD
(2005),
Sustainability
Report
2003,
http://www.amd.com
AVON (2005), Sustainability Report 2002,
http://www.avoninvestors.com
Bebbington J, Gray R, Hibbitt C and Kirk E (2001)
Full Cost Accounting: An Agenda for Action, ACCA
(Association of Chartered Certified Accountants)
Research Report No. 73.
Constanza R., et.al., (1998) The value of the worlds
ecosystem services and natural capital, Ecological
Economics, 26:3-16
European Union (2003) Journal of the European
Union L261/336-361, International Accounting
Standard IAS 38: Intangible Assets.
Figge F, Hahn T, Schaltegger S and Wagner M (2003)
The sustainability balanced scorecard as a framework
to link environmental management accounting with
strategic management, in Bennet M., Rikhardson P.
Schaltegger St. (Eds.), Environmental Management
Accounting Purpose and Progress, Kluwer
Academic Publishers, Dordrecht.
Global Reporting Initiative (2002) Sustainability
Reporting Guidelines, [online][cited 21 May 2004]
Available
from
Internet
URL:http://www.globalreporting.org/guidelines/2002/
GRI_guidelines_print.pdf
IFAC (2004) International Federation of Accountants,
International
Guidance
on
Environmental
Management Accounting (EMA), August 2005,
Available from Internet URL: http://www.ifac.org
Jasch C (2001) Environmental Management
Accounting: Procedures and Principles, United
Nations Division for sustainable Development,
Department of Economic and Social Affairs (United
Nations publication, Sales No. 01.II.A.3) Available
from
Internet
URL:
http://www.un.org/esa/sustdev/sdissues/technology/pr
oceduresandprinciples.pdf
Jasch C , Schnitzer H (2002) Environmental
Management Accounting How to profit from
environmental protection Vienna, Austrian Ministry
of
Technology
and
Innovation.
Available
from
Internet
URL:
http://www.ioew.at/ioew/download/ema-theoryenglish.pdf

17.

18.

19.

20.

86

Schaltegger S ,Dyllick T (Eds.) (2002) Nachhaltig


managen mit der Balanced Scorecard, Gabler,
Wiesbaden.
Available only in German.
Schaltegger S., (2004) Editorial of the CSM
Newsletter 02/2004, Available from Internet URL:
http.//www.uni-lueneburg.de/csm
Schaltegger S., Hahn T., Burrit R., UN DSD (United
Nations Division for Sustainable Development)
(2002) Environmental Management Accounting:
EMA and the links between different levels of
decision making, United Nations Publications, New
York
and
Geneva.
Available
from
Internet
URL:
http://www.un.org/esa/sustdev/sdissues/technology/es
tema1.htm
SIGMA Project, (2003) The SIGMA Guidelines
Toolkit, Sustainability Accounting Guide, London
Staniskis J. K., Stasiskiene Z Cleaner Production
Financing: possibilities and barrier // Clean
Technologies and Environmental Policy, 2003, Vol.5,
No.2, pp.142 - 147.
Staniskis J. K., Stasiskiene Z Environmental
management accounting in Lithuania: exploratory
study of current practices, possibilities and strategic
intents // 9th European Roundtable on Sustainable
Consumption and Production, Bilbao, Spain, 2004,
http://www.erscp2004.net/downloads/papers.
Staniskis J. K., Stasiskiene Z. Environmental
Management Accounting for CP Investment Project
Development // Environmental research, engineering
and management. Nr. 1 (23) Kaunas, Technologija,
2003. pp. 60-69.
Stasiskiene Z. Environmental Accounting in
Lithuanian
industry:
analysis
of
necessity,
possibilities and perspectives // Environmental
research, engineering and management. Nr. 2 (16)
Kaunas, Technologija, 2001. pp. 5664.
Stasiskiene Z., Staniskis J. K. Environmental
Management Accounting: An Essential Component of
Sustainable Development Strategy for Lithuanian
industry // Proceedings of 11th Annual International
Sustainable Development Research Conference 2005,
Helsinki, Finland [1-19 p.]
Stasiskiene Z., Staniskis J. K. Integration of
Environmental
Management
Accounting into
Companys Environmental Performance Improvement
System: Case Study of Lithuanian Industry //
Proceedings of 10th European Roundtable on
Sustainable Consumption and Production, Antwerp,
Belgium, 2005. [1-9 p].

From Environmental Management Accounting to Sustainability Management Accounting

Assoc. Prof. Dr. Christine JASCH is founder and


manager of the Vienna Institute for Environmental
Economics and Management (IW).
Current working areas include environmental
performance evaluation and sustainability indicators,
integrated management systems, environmental and
sustainability
accounting,
ethical
investment,
sustainability reporting, sustainable (home) services
and product service systems.
Address:
Rechte Wienzeile 19/10,
A1040 Vienna, Austria
Tel.
+43 1 587 21 89
Fax
+43 1 585 61 68-68
E-mail
Jasch.Christine@ioew.at

Assoc. Prof. Dr. aneta Stasikien, senior


researcher at the Institute of Environmental
Engineering (APINI), Kaunas University of
Technology.
The main research areas: Cleaner Production, Cleaner
production financing, Environmental Management
Accounting.
Address: K. Donelaiio str. 20,
LT-44239 Kaunas, Lithuania.
Tel.
+370 37 300763
Fax
+370 37 209372;
E-mail
zaneta.stasiskiene@ktu.lt

Aplinkos vadybos kat vertinimas: subalansuoto vadybos kat


vertinimo link
Christine Jasch1, aneta Stasikien2
1

Aplinkos vadybos ir ekonomikos institutas, Viena Austrija


Kauno technologijos universitetas, Aplinkos ininerijos institutas

(gauta 2005 m. rugsjo mn.; atiduota spaudai 2005 m. lapkriio mn.)

Per pastarj deimtmet subalansuotos pltros koncepcija tapo daugelio pramons moni
aplinkos apsaugos politikos pareikim pagrindu. Siekdamos valdyti ir kontroliuoti savo aplinkos
apsaugos ir socialin veiksmingum, vis daugiau moni diegia aplinkos apsaugos vadybos
sistemas, o pastaruoju metu pradtos diegti ir socialins vadybos sistemos. Taiau dauguma toki
sistem efektyvumo tyrimo studij parod, kad jis gana maas. Nustatyta, kad aplinkos apsaugos ir
socialin atsakomyb lieka atskirta nuo prastos verslo strategijos ir vadybos sistem, t. y. jos
remiasi ikirtinai tik finansiniais veiksmingumo indikatoriais, o aplinkos apsaugos indikatoriai
paliekami nuoalyje
Tuo tarpu sisteminis rizikos valdymas galina mones palyginti alternatyvas, sistemikai
vertinti ilaidas ir gaunam naud ir nusprsti, kurios priemons yra geriausios, sudaromas
pagrindas rengti veiksm planus, kurie leist diegti rizikos prevencijos ir mainimo priemones,
atitikt mons tikslus ir prioritetus.
Daugeliu atveju moni vadovai, priimdami sprendimus dl investicij aplinkos apsaug,
susiduria su dilema: viena vertus, reglament reikalavimai, savanoriki standartai ir rinkos
spaudimas reikalauja nuolat didinti ilaidas aplinkos apsaugos veiksmingumui gerinti, kita vertus,
informacijos, kurios reikia norint priimti ekonomikai nauding sprendim, negalima gauti laiku,
ne visada ji isami ir tinkamai pateikta. Priimti sprendimai nra gerai sistemikai vertinti
atsivelgiant naudojamas mediagas ir galim j pasirinkim, gaminio kainos nustatym ir pan.
Taip pat monms kyla sunkum vertinant aplinkos vadybos sistem bei kitos aplinkos apsaugos
veiklos naud. Paprastai ie skaiiavimai apima tik ma dal bendrosios ekonomijos, kuri susidaro
dl aplinkos vadybos ar investicij. Taip atsitinka todl, kad daniausiai iuos skaiiavimus atlieka
aplinkos apsaugos vadybininkas, o ne ekonomistas ir neatsivelgiama bendruosius taros valymo,
taros prevencijos ir mediag naudojimo efektyvumo katus.
Kaip parod sukaupta patirtis, norint tinkamai vertinti aplinkos vadybos katus ir priimti
sprendimus dl investicij, ypa svarbu atkreipti dmes ekonomini ir fizikini duomen bei
87

Ch. Jasch, . Stasikien

atitinkam mons skyri veiklos derinim, mediag sraut apskait, tinkam atsitiktini kat
vertinim.
iuo metu plaiai taikomi tradiciniai kat vertinimo metodai teikia ribot informacij apie
ekonomin aplinkos apsaugos ir su ja susijusi priemoni vertinim. Todl mons arba
korporacijos vadovybei jos nepakanka, kad galt priimti subalansuoto verslo sprendimus.
Kadangi trksta informacijos, sprendimus priimantys asmenys nevertina ekonomins gamtos
itekli verts kaip turto ir finansins aplinkos vadybos naudos. Dl i prieasi ir siekiant
subalansuotos pltros atsiranda poreikis tobulinti spendim primimo procedras ir pradti vertinti
informacij apie aliav srautus ir su jais susijusius katus.
Remiantis iais rezultatais, btina sukurti efektyvias vadybos priemones, kurios panaikint
atotrk tarp aplinkos apsaugos ir verslo vadybos sistem, integruot finans, aplinkos apsaugos ir
socialin vadybos sistemas ir itaip pagerint mons aplinkos apsaugos veiksmingum.
iame straipsnyje pristatoma Jungtini Taut Subalansuotos pltros departamento ir
Tarptautins finansinink federacijos sukurta Aplinkos apsaugos vadybos kat vadybos
koncepcija. i koncepcija aktyviai ir efektyviai diegiama vairiose pasaulio alyse. Jos pagrindu
kuriama subalansuotumo kat vertinimo sistema. Pirmieji tokios sistemos diegimo bandymai
atlikti Austrijos automobili gamybos pramonje. Straipsnyje taip pat pristatomi aplinkos vadybos
kat ir subalansuotumo kat vertinimo rezultatai Lietuvos pramonje ir i sistem taikymo
perspektyvos ir poreikis.

88

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