Accepted Manuscript

Interrelating Material Flow Cost Accounting with Management Control Systems to

Introduce Resource Efficiency into Strategy

Ramona Rieckhof, Anne Bergmann, Edeltraud Guenther

PII: S0959-6526(14)01082-8
DOI: 10.1016/j.jclepro.2014.10.040
Reference: JCLP 4828

To appear in: Journal of Cleaner Production

Received Date: 27 June 2013

Revised Date: 24 September 2014
Accepted Date: 14 October 2014

Please cite this article as: Rieckhof R, Bergmann A, Guenther E, Interrelating Material Flow Cost
Accounting with Management Control Systems to Introduce Resource Efficiency into Strategy, Journal of
Cleaner Production (2014), doi: 10.1016/j.jclepro.2014.10.040.

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 ACCEPTED MANUSCRIPT
1 Interrelating Material Flow Cost Accounting with Management Control Systems

2 to Introduce Resource Efficiency into Strategy

3 Ramona Rieckhof, Anne Bergmann, and Edeltraud Guenther

4 Technische Universitaet Dresden, Faculty of Business and Economics,

5 Chair of Environmental Management and Accounting

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6 Muenchner Platz 1/3, 01062 Dresden/ Germany

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7 Phone: +49 351 463-34313

8 Fax: +49 351 463-37764

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9 E-mail: ema@mailbox.tu-dresden.de

10 12,471 words (without Abstract and Highlights)

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12 Highlights
13 • We review the interrelation of material flow cost accounting (MFCA) with management
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14 control systems (MCS).

15 • Literature provides numerous examples for the diagnostic and interactive use of MFCA.
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16 • There is limited evidence regarding the use of MFCA for beliefs and boundary systems.
17 • We develop a conceptual framework to support the use of MFCA within MCS.
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19 Abstract
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20 In this study, we examine the goal of encouraging corporate strategy to adopt a more

21 efficient and sustainable use of natural resources. Material flow cost accounting (MFCA),
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22 with its flow-based view, is able to support the formulation of a resource-efficient strategy.
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23 However, such goals as resource efficiency can only be achieved if corporations commit

24 themselves to these targets on a strategic level and transfer them to all corporate levels

25 using management control systems (MCS). The four levers of MCS developed by Simons

26 (1995) adopt a key role in this implementation process. We contribute to literature by

27 highlighting that such methods as MFCA require continuous development toward an

28 increased interrelation with MCS, particularly with the four levers of control (LOC), such that

29 the underlying goal of resource efficiency can become part of corporate strategy. Therefore,

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30 in a systematic literature review, we analyze how far MFCA and its direct antecedent

31 approaches currently address the LOC. For this purpose, we analyze the contents of 82

32 studies and derive nine salient issues that are relevant to the interrelation aspect. To guide

33 future research, we moreover ask: What further conceptual developments of MFCA would

34 increase the focus on the LOC? On this basis, we develop a summarizing conceptual

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35 framework consisting of five stages. Because this research approach can also be transferred

36 to other methods that aim for further important economic, environmental, and social

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37 objectives, we purposefully highlight the course toward sustainable development.

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39 Keywords: Material flow cost accounting (MFCA), Management control systems (MCS),

40 Levers of control (LOC), Systematic literature review, Conceptual framework, Resource

41 efficiency
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43 Table of Contents
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45 Highlights .............................................................................................................................. 1
46 Abstract ................................................................................................................................. 1
47 Table of Contents .................................................................................................................. 3
48 List of Tables ......................................................................................................................... 3

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49 List of Figures ........................................................................................................................ 3
50 1. Introduction ....................................................................................................................... 4
51 2. Material Flow Cost Accounting and Management Control Systems ................................... 6

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52 2.1 Material Flow Cost Accounting .................................................................................... 6
53 2.2 Management Control Systems and the Levers of Control Framework ......................... 8

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54 2.3 ...And Why Both Concepts Should Interrelate ............................................................ 11
55 3. Methodology .................................................................................................................... 15
56 4. Results and Discussion ................................................................................................... 17

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57 4.1 Background of the Systematically Reviewed Publications.......................................... 17
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58 4.2 Interrelation of MFCA with the LOC by… ................................................................... 18
59 4.2.1 ...Choosing the Cost Types..................................................................................... 19
60 4.2.2 ...Considering Costs Adequately ............................................................................. 20
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61 4.2.3 ...Applying Causal Allocation Principles .................................................................. 21

62 4.2.4 ...Integrating MFCA with Existing Information Systems ........................................... 23
63 4.2.5 ...Integrating MFCA with Traditional Cost Accounting ............................................. 25
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64 4.2.6 ...Enhancing Reporting ........................................................................................... 26

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65 4.2.7 ...Deriving Indicators for Performance Measurement .............................................. 29

66 4.2.8 ...Introducing an Integrative Flow Management ...................................................... 31
67 4.2.9 ...Communicating Across Departments ................................................................... 33
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68 4.3 Towards a Conceptual Framework for the Integration of MFCA into MCS ................. 34
69 5. Conclusions ..................................................................................................................... 39
70 Bibliography ........................................................................................................................ 41
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71
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72 List of Tables
73 Table 1: Synopsis: Interrelation of the Nine Salient Issues and the Four LOC ..................... 18
74 Table 2: Overview of Publications and their Relation to the Nine Salient Issues .................. 18
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76 List of Figures
77 Figure 1: Five Stages for Interrelating MFCA to MCS .......................................................... 36
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80 1. Introduction
81 Decreasing natural resources represent one of the most critical environmental

82 megatrends (European Environment Agency, 2011). Resources are a sine qua non for the

83 existence of corporations. Thus, corporations are increasingly motivated to enhance

84 resource efficiency, that is, a more efficient and sustainable use of natural resources (Energy

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85 research Centre of the Netherlands, 2013; Organisation for Economic Co-operation and

86 Development (OECD), 2011). With this purpose in mind, a significant number of methods

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87 already exist. Amongst these methods, material flow cost accounting (MFCA) is the most

88 promising (International Organization for Standardization (ISO), 2011; Kokubu and

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89 Tachikawa, 2013) because it is the only internationally standardized approach and therefore

90 enjoys a high legitimacy (Hahn, 2011; Seuring and Mueller, 2007).

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However, we know that the goals of the methods can only be achieved if, as a first
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92 step, corporations commit themselves to these aims on the strategic level. In the second

93 step, the formulated part of the corporate strategy should be transferred to all corporate
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94 levels. Management control systems (MCS) adopt a key role in this implementation process
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95 (Simons, 1995). These systems represent a set of corporate tools for implementing,

96 communicating, and aligning organizational strategies by monitoring and assessing the

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97 dynamics of external as well as internal corporate conditions (Chenhall, 2003). In other

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98 words, the formulation of a strategy focuses on the organization’s objectives, while the

99 implementation of the strategy delivers the means to achieve these objectives. Finally, both
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100 should be merged in strategy formation by moving from a mere planning mode to an
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101 adaptive mode and thus leading to a learning process (Mintzberg, 1978).

102 Transferring these steps to the case of MFCA means considering resource efficiency

103 goals on a strategic level by interrelating MFCA with MCS. However, the international

104 standard ISO 14051: 2011 (ISO, 2011) on MFCA does not intend to specify how to integrate

105 the resource efficiency goals derived from MFCA within strategy nor how MFCA fits into

106 MCS. Furthermore, research also lacks a joint consideration of MFCA and MCS. For this

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107 reason, we conclude that goals of methods, such as resource efficiency in the case of

108 MFCA, are often not considered in corporate strategies.

109 Therefore, we focus our research on the interrelation of MFCA and MCS to introduce

110 resource efficiency into corporate strategy. As we are further interested in how to transmit the

111 goal of resource efficiency and related information into organizations and thus how to use

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112 different types of controls for a more efficient use of resources, we adopt the levers of control

113 (LOC) framework by Simons (1995), which tackles exactly these issues. He states that a

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114 successful implementation of strategy requires four levers, which will form the basis for our

115 research: beliefs systems, boundary systems, diagnostic control systems, and interactive

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116 control systems.

117 Taking this LOC perspective, we ask more precisely: How far does MFCA currently

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address the four LOC? In the existing literature, no comprehensive article could be identified,
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119 neither on MFCA and its antecedent approaches in general, nor on the relationship of these

120 methods with MCS nor in particular with the four LOC, which presents a specific way to
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121 implement MCS. We therefore systematically review the existing literature on MFCA and its
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122 antecedent approaches, i.e., 82 studies, concerning their interrelation with the LOC
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123 framework. On this basis, we inductively derive nine salient issues that are relevant to

124 interrelate MFCA with MCS. To guide future research, we moreover ask when systematically
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125 reviewing the literature: What further conceptual developments of MFCA would increase the

126 focus on LOC? We complement these future conceptual developments identified in literature
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127 with our own deliberations. Subsequently, we develop a conceptual framework that
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128 summarizes these three aspects, hence, the nine salient issues as well as the future

129 conceptual developments based both on literature and our own deliberations. The

130 conceptual framework consists of five stages building on one another. Step by step,

131 corporations can fulfill these stages to closer interrelate MFCA with the LOC and in turn

132 enable an implementation into MCS. In the end, every stage also pushes corporate strategy

133 toward more resource efficiency.

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134 We contribute to literature by highlighting that methods, such as MFCA, require

135 continuous development towards an increased interrelation with MCS such that their

136 underlying goals such as resource efficiency can become part of corporate strategy. To this

137 end, our research results are based on a systematic literature review of MFCA, focusing on

138 the interrelation to MCS. In addition, we develop a conceptual framework to better interrelate

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139 MFCA with MCS.

140 This research approach is also applicable when connecting other methods with MCS

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141 to bring specific goals into corporate strategy. For instance, future research can focus on the

142 megatrend of climate change mitigation. In this case, it would be interesting to assess the

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143 connection of the method of carbon accounting (Stechemesser and Guenther, 2012) with

144 MCS to bring the goal of climate change mitigation into corporate strategy.

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The paper is organized as follows: After an introduction to MFCA and MCS in
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146 chapter 2, we explain our methodological approach for the systematic literature review in

147 chapter 3. In chapter 4, we present our results, which are summarized in a conceptual
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148 framework, and we present our conclusions in chapter 5.

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149 2. Material Flow Cost Accounting and Management Control Systems

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150 We first introduce MFCA and emphasize how it supports the improvement of resource

151 efficiency. Second, we introduce MCS and present how MCS supports strategy
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152 implementation and vice versa. On this basis, we interrelate MFCA with MCS to bring

153 resource efficiency into corporate strategy and derive our research goal.
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154 2.1 Material Flow Cost Accounting

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155 The ISO 14051: 2011 defines MFCA as a “tool for quantifying the flows and stocks of

156 materials in processes or production lines in both physical and monetary units” (ISO, 2011,

157 p. 15). It builds on two antecedent flow cost oriented approaches, residual material cost

158 accounting (RMCA) and flow cost accounting (FCA) (Fichter et al., 1997; Schmidt and

159 Nakajima, 2013), which in the 1990s were already evaluated as the most efficient

160 instruments of environmental cost accounting as they combine the quantitative as well as the

161 cost perspective (Fichter, 1996; Loew et al., 2003; Loew and Fichter, 1998).

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162 RMCA determines environmental costs that would be eliminated if no residual

163 materials occurred (i.e., end-of-pipe perspective) and assumes a causal relation between

164 residual material costs and environmental harmfulness (Fichter et al., 1997; Fischer, 1998b).

165 Nevertheless, this antecedent has spread relatively weakly into practice, which might result

166 from its retrospective focus on residual materials. FCA, which further developed RMCA,

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167 shifts the focus to the relation between corporate activity and environmental impacts and

168 enables an integrated identification of economic-environmental improvement potentials for

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169 processes and products (i.e., begin-of-pipe perspective) (Wagner and Strobel, 1999). During

170 several pilot projects in Germany and Japan, the general principles of FCA were tested for

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171 practicability and, to emphasize the focus on materials, the method was relabeled to MFCA

172 (Schmidt and Nakajima, 2013; Wagner and Strobel, 1999).

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MFCA is suitable in particular for improving resource efficiency as it helps to increase
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174 transparency by visualizing material flows with their related costs and internalized

175 environmental impacts. Four types of flows are distinguished: material, energy, system, and
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176 material loss flows. For reasons of simplicity, they are subsumed under the heading of
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177 material flows. (ISO, 2011)

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178 On the basis of MFCA, corporations can identify inefficiencies and hidden costs, and

179 thereby minimize wastages, and improve environmental and financial performance
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180 simultaneously (Jasch, 2009). The legitimacy of MFCA has recently even been enhanced by

181 the publication of the international standard ISO 14051: 2011 (Guenther et al., 2014; Hahn,
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182 2011; Seuring and Mueller, 2007). The standardization process was supported by a
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183 significant number of case studies, mainly in Germany and Japan, which helped to refine

184 MFCA (Japanese Ministry of Economy, Trade and Industry (METI), 2011). It became

185 apparent that material flows are important for management for two reasons: from an

186 environmental point of view, they reflect the direct environmental impacts of organizations;

187 and from an economic point of view, they help to decrease production costs and, thus, to

188 increase corporate financial performance. (Jasch, 2009, 2006)

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189 Material flows therefore are also relevant for cost accounting. In conventional cost

190 accounting, all costs are assigned to the product. Material losses are hidden in product or

191 overhead costs as they are not disclosed separately. MFCA, however, differs from other

192 tools of conventional cost accounting as material costs are not only allocated to the final

193 products and co-products but also to material losses. This approach is able to increase

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194 transparency by highlighting the costs of material losses and inefficiencies. In the MFCA-

195 logic, less waste leads to less inputs and consequently to less undesired outputs in terms of

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196 waste, wastewater, and emissions, whereas the product remains unchanged. (ISO, 2011)

197 This focus on improving resource efficiency and value creation represents an

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198 additional benefit to traditional methods of cost accounting. Nevertheless, MFCA is not yet in

199 the focus of management control. For this reason, we make the case for bringing resource

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efficiency into strategy by using the method of MFCA within management control.
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201 2.2 Management Control Systems and the Levers of Control Framework
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We will explain in the following why MCS plays a major role in providing management

203 with the means to formulate strategies.

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204 Scholars defined strategy in indefinite ways (Langfield-Smith, 1997). For this article,
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205 we follow the classic version developed by Chandler (1991), who defined strategy “as the

206 determination of the basic long-term goals and objectives of an enterprise, and the adoption
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207 of courses of action and the allocation of resources necessary for carrying out these goals.”

208 (Chandler, 1991, p. 13) Ultimately, strategy delineates how a corporation should compete in
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209 its market by developing a competitive advantage (Porter, 1996a). For a profound
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210 implementation of corporate strategy, the following two requirements have to be met. On the

211 one hand, the formulated strategy necessitates clear communication to all employees to

212 facilitate daily decision-making (Porter, 1996b). On the other hand, the dynamics of external

213 as well as internal corporate conditions require an appropriate tool for their continuous

214 monitoring and assessment as well as potential strategy alignment (Chenhall, 2003). The

215 requirements named are summarized under the heading of management control; the

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216 comprehensive underlying approaches and methods are subsumed under the term

217 management control systems (MCS).

218 Ever since its introduction more than four decades ago by Anthony (1965), MCS and

219 their characteristics have been widely discussed in management science (Strauß and

220 Zecher, 2013). Realizing that besides the focus on formal, mainly financial information for

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221 control, human behavior and sociological elements such as organizational culture and

222 learning (informal and cultural control) within a corporation represent an important role as

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223 well (Gani and Jermias, 2012; Langfield-Smith, 1997; Lowe, 1971), Simons (1995) provides

224 a decisive step towards the modern understanding of MCS by posing the question of how

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225 organizations use different types of control (i.e., the use-perspective) (Berry et al., 2009;

226 Kapu Arachchilage and Smith, 2013). He therefore developed a framework where several

227
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systems of control cooperate (Widener, 2007) and defined MCS as “[...] the formal,
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228 information-based routines and procedures managers use to maintain or alter patterns in

229 organizational activities.” (Simons, 1995, p. 5)

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230 The core of Simons’ (1995) MCS concept consists of four levers of control (LOC):
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231 beliefs systems, boundary systems, diagnostic control systems, and interactive control
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232 systems, which are linked to strategy to control different key figures or values. During the last

233 two decades, various scholars have analyzed and confirmed the LOC framework (e.g., Henri,
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234 2006; Kober et al., 2007; Tuomela, 2005; Widener, 2007). Widener (2007) highlights

235 strategic risks and uncertainties as driving forces for choosing and using control systems and
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236 investigates the idea that different types of control act complementarily and interdependently.
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237 Moreover, scholars consider the more active role of the LOC framework for strategy

238 formulation and implementation (Henri, 2006; Redda, 2007) and demonstrate the relationship

239 of diagnostic and interactive control systems with business strategy and organizational

240 performance (Kapu Arachchilage and Smith, 2013). In contrast, beliefs and boundary

241 systems were less recognized (Tessier and Otley, 2012).

242 This LOC framework represents the basis for our research approach and is therefore

243 explained in more detail. The first of the four levers, the beliefs systems with the related key

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244 variable core values, is used by managers to communicate and demonstrate commitment to

245 the purpose, basic values, and future orientation of the organization and to provide guidance

246 for organizational development and decision-making. The boundary systems, including the

247 key figure of risks to be avoided, contrast the positive approach of the beliefs systems by

248 setting clear rules, limits, or proscriptions. Examples for the beliefs systems are corporate

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249 mission and vision statements, and for the boundary systems, code of conducts (Widener,

250 2007). Both systems – beliefs and boundary systems – have to be assisted by control

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251 systems that guarantee the achievement of the goals. Diagnostic and interactive control

252 systems fulfill this target. In general, diagnostic control systems are regarded as traditional

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253 feedback systems for monitoring and ensuring predictable goals. For this purpose, diagnostic

254 control systems require the key figure of critical performance variables, which should

255
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represent the intended strategy. In contrast, interactive control systems contain the key figure
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256 of strategic uncertainties and are therefore designed as formal information systems to

257 support managers in participating personally in activities pursuing strategic objectives. Thus,
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258 they should be designed to enhance organizational development by stimulating innovation

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259 and correspondingly evaluate perceived opportunities and threats. (Simons, 1995)
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260 To provide management with the means to implement strategy effectively by having

261 only limited attention to unlimited opportunities, there are always two opposites in the form of
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262 the two primary directions of the four levers introduced above. Hence, this concept leads to

263 an efficient distribution of management attention. The first direction, represented by the
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264 beliefs systems and the interactive control systems, focuses on setting and expanding the
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265 opportunity space of the organizations, where the persons involved obtain the possibility of

266 contributing to the main objectives of the company. The second direction represents a more

267 constrained view, i.e., the boundary systems and the diagnostic control systems, which

268 create constraints for the actors within the organization. Hence, there are always two

269 opposites in the LOC to keep the balance between creativity and control, to implement

270 strategies effectively. (Simons, 1995)

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271 Reviews of MCS demonstrate continuous interest in MCS research and potential for

272 future research to improve strategy making (e.g., Berry et al., 2009; Chenhall and Smith,

273 2011; Chenhall, 2003; Langfield-Smith, 1997). First, outlooks delineate future research on

274 how new as well as traditional methods are applied or even combined and whether they are

275 integrated into strategic management (Chenhall and Smith, 2011). Second, scholars discuss

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276 the influence of contingency factors on MCS (Berry et al., 2009; Chenhall, 2003; Malmi and

277 Brown, 2008), e.g., the impact of an uncertain environment in general (Malmi and Brown,

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278 2008) or impacts of the natural environment in particular (Sampedro et al., 2010). In this

279 context, there is a need of considering further issues of sustainability in MCS (Berry et al.,

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280 2009). Third, Chenhall and Smith (2011) summarize that scholars of other disciplines

281 attribute only limited attention to research by management accountants. Even the two quite

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close disciplines of financial and management accounting provide a low level of
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283 communication (Euske et al., 2011). However, studies highlight that only interdisciplinary

284 communication and research will succeed in obtaining a comprehensive view of the complex
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285 reality and properly addressing and solving current problems, in particular issues of
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286 sustainable development (Schoot Uiterkamp and Vlek, 2007; Starik and Kanashiro, 2013).
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287 We aim to contribute to these three identified research streams. Before deriving our

288 research goal and research questions, we present the research fields that we wish to
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289 contribute to.

290 2.3 ...And Why Both Concepts Should Interrelate

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291 So far, we have demonstrated that MFCA represents a tool for enhancing corporate
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292 resource efficiency, and thus, contributing to a more sustainable development. Nevertheless,

293 MFCA has not found its way into conventional management control (Gond et al., 2012). We

294 have further shown that MCS fulfill the functions of corporate strategy formulation and

295 implementation. Moreover, the LOC framework with its focus on strategy is highlighted

296 because it considers the use-perspective and therefore asks how different types of control

297 are used. In the present chapter, we will show how far the above presented streams of MCS

298 have been initially considered in interdisciplinary research on integrating aspects of

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299 sustainability. We will further indicate the remaining fields of action to which we aim to

300 contribute by exemplarily using the method of MFCA within MCS to integrate the goal of

301 resource efficiency into strategy.

302 The journal Management Accounting Research (MAR) responded to the research

303 streams identified at the end of the previous chapter. For this purpose, a special issue on the

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304 topic “Sustainable development, management and accounting: Boundary crossing“ was

305 published. Basing on a citation analysis of articles published within this special issue, the

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306 editors conclude that the interdisciplinary research field of sustainable development and

307 management accounting still lacks a mutual basis (Bebbington and Thomson, 2013).

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308 Because there is no literature on the interrelation of MFCA and MCS, we retain the

309 more general perspective of sustainable development in MCS research. In this context, we

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summarize the existing literature concerning the identified streams presented above.
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311 Literature until now has provided interesting insights regarding the integration of various

312 issues of sustainable development into corporate strategy and, thus, MCS. For this purpose,
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313 scholars have already presented different solution approaches:

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314 Regarding the aspect of integrating social responsibility into MCS, Durden (2008)
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315 observes that goals for social responsibility as well as their linkages to stakeholder groups

316 represent a necessary prerequisite. Furthermore, goals of social responsibility require an

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317 anchoring in formal and, at the same time, informal management controls (Durden, 2008;

318 Riccaboni and Leone, 2010). These thoughts are further extended here. On the one hand,
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319 scholars highlight the integration in formal controls, in particular measurement (Perego and
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320 Hartmann, 2009; Riccaboni and Leone, 2010) because a ruling principle is the alignment of

321 corporate strategy and its performance measures as well as related measurement systems

322 (Perego and Hartmann, 2009). On the other hand, informal controls, e.g., social or self

323 controls, have a strong influence on managers’ decisions concerning social responsibility

324 (Norris and O'Dwyer, 2004). Crutzen et al. (2013) investigate that corporations focusing on

325 more distinct formal controls provide less developed informal control systems and the

326 reverse. Arjaliès & Mundy (2013) also investigate how organizations use MCS for enhancing

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327 their corporate social responsibility by applying the LOC framework. The study identifies

328 various ways in which corporations already use each LOC, e.g., by communicating values

329 via intranet, relying on codes of conduct for risks to be avoided, or using environmental

330 management systems to support diagnostic processes (Arjaliès and Mundy, 2013). The case

331 study of Riccaboni and Leone (2010) adds decentralized structures and collaboration across

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332 divisions to successfully implement strategies concerning sustainable development. The

333 authors further highlight the integration with more traditional control systems for planning and

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334 monitoring (Riccaboni and Leone, 2010).

335 The explicit integration of environmental aspects as part of sustainability management

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336 into MCS, so-called environmental management control systems (EMCS), was introduced by

337 Pondeville et al. (2013). They extend the LOC framework of Simons (1995) to environmental

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aspects and emphasize well-developed environmental information systems as a prerequisite
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339 for EMCS. Finally, they confirm the link of corporate strategy and MCS for the case of the

340 natural environment (Pondeville et al., 2013).

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341 In conclusion, our idea of enhancing corporate strategy concerning more resource
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342 efficient thinking in a narrower sense and, thus, concerning issues of sustainable
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343 development in a broader sense, by looking at the interrelation of environmental issues with

344 MCS, as well as by adopting the LOC framework in particular, is not new to research. Hence,
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345 management control increasingly moves into the focus to promote goals of sustainability

346 (Crutzen et al., 2013; Durden, 2008; Norris and O'Dwyer, 2004).
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347 However, more empirical studies on control practices are required to receive better
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348 insights on hurdles and enablers to bring issues of sustainability into strategy (Crutzen et al.,

349 2013; Gond et al., 2012). Gond et al. (2012) in particular argue why already developed

350 sustainability control systems (SCS) focusing exactly on this challenge, e.g., environmental

351 budgeting, sustainability balanced scorecard, or MFCA, are not yet considered as effective

352 tools of management control and therefore do not support sustainability strategy. Scholars

353 observe a lack of knowledge regarding the integration between SCS and MCS (Durden,

354 2008; Gond et al., 2012) and conclude that traditional MCS and SCS exist in two parallel, not

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355 related worlds (Gond et al., 2012). Therefore, they highlight the use-perspective as

356 presented in the LOC framework to move SCS from its currently autonomous use to an

357 integrated use within MCS (Gond et al., 2012).

358 This is precisely the point upon which we set our research goal: We aim to examine

359 how a particular sustainability control can be integrated into MCS to bring the underlying goal

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360 of the selected type of control into corporate strategy. Because decreasing stocks of natural

361 resources represent one of the most essential environmental megatrends, we focus on

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362 corporate resource efficiency improvements to tackle exactly this issue. For this purpose, we

363 will use the example of MFCA, one of the most promising approaches for enhancing

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364 corporate resource efficiency (ISO, 2011; Nakajima, 2008) within MCS (cf. Onishi et al.,

365 2008). This will bring new insights to strategically relevant questions such as more resource

366
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efficient production planning (Frings, 2003). As presented by Gond et al. (2012), the use-
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367 perspective of the LOC framework is suitable for our research goal. Moreover, the explicit

368 link of strategy and MCS presents a crucial characteristic within the LOC framework, where
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369 LOC is the most promising approach for our research aim.
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370 Taking this LOC perspective, we ask more precisely how far MFCA currently
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371 addresses the four LOC. As the first step, we therefore analyzed the ISO 14051: 2011 to

372 determine to which extent MFCA addresses LOC characteristics. We discovered that MFCA
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373 currently has, in particular, characteristics of diagnostic and interactive control systems;

374 however, the standard on MFCA only somewhat refers to characteristics of the beliefs and
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375 boundary systems. This highlights the fact that MFCA is currently a rather formal type of
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376 control focusing on diagnostic and interactive use; characteristics of informal types of

377 controls for the beliefs and boundary systems are not yet in the focus. General MCS

378 literature supports this finding (Crutzen et al., 2013).

379 We aim to contribute to literature by extending our attention to the whole body of

380 MFCA literature to find more evidence of a comprehensive use of MFCA for the four levers.

381 As still few MFCA publications exist, we extend our analysis to the two direct antecedents of

382 MFCA: RMCA and FCA. A valuable approach for our purpose is represented by the method

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383 of a systematic literature review (Fink, 2009; Tranfield et al., 2003). To guide future research,

384 we moreover ask, when systematically reviewing the literature, which further conceptual

385 developments of MFCA would increase the focus on LOC. To this end, we derive a

386 conceptual framework that will enable MFCA to address all LOC in a comprehensive manner

387 by detecting and ameliorating the current limited use of MFCA. In conclusion, our research

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388 questions are as follows:

389 1. How far does MFCA currently address the four LOC?

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390 2. What further conceptual developments of MFCA would increase the focus on

391 LOC?

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392 Answering both questions, we will contribute to literature by highlighting that methods

393 such as MFCA require continuous development towards an increased interrelation with the

394
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LOC and, thus, MCS, so that their underlying goals such as resource efficiency can become
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395 part of corporate strategy. We want to encourage connecting also other existing methods

396 with MCS to bring specific goals into corporate strategy. For instance, future research can
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397 focus on the megatrend of climate change mitigation and, thus, the connection of the method
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398 of carbon accounting (Stechemesser and Guenther, 2012) with MCS and in particular with
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399 the LOC framework.

400 3. Methodology
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401 In response to our research questions, we perform a systematic literature review to

402 describe current knowledge and guide professional practice (Fink, 2009; Tranfield et al.,
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403 2003). As of today, we are not aware of any study reviewing either the method of MFCA and
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404 its direct antecedent approaches, RMCA and FCA, or the relationship of these methods with

405 MCS. In addition, MCS scholars appreciate systematic reviews to further develop the

406 research field of MCS (e.g., Berry et al., 2009; Chenhall and Smith, 2011; Langfield-Smith,

407 1997). In this study, we therefore systematically review the existing literature on MFCA and

408 its antecedent approaches concerning their interrelation with the LOC framework to address

409 this research gap.

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410 The procedure as described by Fink (2009) and Tranfield et al. (2003) provides the

411 basis for our systematic literature review. We search ten databases for scholarly literature,

412 covering six broad databases (ScienceDirect, Emerald, Ebsco (Academic Search Complete,

413 Business Source Complete), Wiley, WISO, SpringerLink), three databases which also cover

414 academic theses (SSRN, Web of Science, Google Scholar), and due to the process view of

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415 the approach, one technology-oriented database (TEMA). To further narrow the focus, we

416 screen the hits in the databases by type of publication. We include journal articles, books,

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417 dissertations, guidelines, and reports, and select publications not solely in English but also in

418 German, as MFCA has its origins in Germany (Nakajima, 2003). Excluded from the sample

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419 are conference proceedings and generic studies such as editorials, introductions, abstract

420 summaries, columns, commentaries, or study notes. Moreover, duplicates within and

421
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between databases are eliminated. The publication date does not represent an exclusion
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422 criterion. Within the ten selected databases, we search with the following search terms

423 derived from our research questions: “material flow cost accounting”,
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424 “Materialflu*kostenrechnung”, “flow cost accounting”, “Flu*kostenrechnung”, “residual

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425 material cost accounting”, “recycling material cost accounting”, “Reststoffkostenrechnung”,

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426 “material* only costing”, “waste costing”, “material flow-based cost accounting”, and “material

427 and energy flow-based costing”.

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428 In a second content-based screening, two researchers search the titles, abstracts,

429 and keywords of the remaining studies to select those conceptual or empirical studies which
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430 primarily address MFCA and its antecedents. The remaining studies are reviewed in more
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431 detail based on a standardized protocol. The review protocol serves to search the studies

432 regarding our research questions to ensure that each study is reviewed for the same

433 information (Fink, 2009). First, we collect bibliographic data to explore the background of the

434 studies for an initial overview. Second, we deductively review literature on MFCA and its

435 antecedents based on MCS, in particular Simons’ (1995) LOC framework, i.e., beliefs

436 systems, boundary systems, diagnostic control systems, and interactive control systems.

437 Based on an in-depth content analysis, we then inductively review the current state of MFCA

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438 literature to assess how far these studies already describe the relation of MFCA to the four

439 LOC. From this systematic literature review, we first deduce salient issues that are relevant

440 to interrelate MFCA with LOC. We secondly identify in the literature future conceptual

441 developments and, thirdly, complement them with our own deliberations. Subsequently, we

442 develop a conceptual framework that summarizes these three aspects. Such an inductive

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443 approach is helpful for a qualitative research synthesis to further advance conceptual and

444 operational research (Short, 2009; Tranfield et al., 2003). During the performance of our

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445 study and the development of our conceptual framework, we repeatedly consulted scholars

446 in interdisciplinary research seminars and conferences for valuable feedback.

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447 4. Results and Discussion
448

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This section explores the background of the publications in subchapter 4.1, before we

449 analyze them in-depth to derive salient issues concerning existing interrelations between
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450 MFCA and its antecedents with the four LOC in chapter 4.2. Moreover, we consider future

451
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conceptual developments identified in literature that are required for MFCA to increase the

452 focus on LOC. We complement them with our own deliberations and subsequently develop a
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453 summarizing conceptual framework in chapter 4.3.

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454 4.1 Background of the Systematically Reviewed Publications

455 By applying the inclusion and exclusion criteria (see chapter 3), we obtain a sample of
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456 82 publications that were published between 1996 and early 2014 and cover at least one of

457 the three approaches (RMCA, FCA, and MFCA) included in the systematic literature review.
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458 Among these, 17.1 % of the publications refer to RMCA, 37.8 % to FCA, and 54.9 % to
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459 MFCA. The publications were compiled in particular by academics (50.0 %) and research

460 institutions (32.9 %), but there are also contributions from private organizations (9.8 %),

461 public institutions (6.1 %) and standardization organizations (1.2 %). The first authors are

462 primarily from German-speaking countries (68.3 %) and Japan (17.1 %). This holds for only

463 English publications as well. A focus on the empirical publications reveals that flow-based

464 cost assessments can be found in consumer-related industries such as healthcare products

465 and services (14.6 %), food and beverage products (11.0 %), and textiles/ apparel (8.5 %),

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466 as well as resource intense industries such as equipment (12.2 %), automotive (7.3 %), and

467 construction and construction materials (7.3 %).

468 4.2 Interrelation of MFCA with the LOC by…

469 Following our line of argument, the comprehensive integration of a tool such as

470 MFCA into MCS requires that all LOC are supported intentionally by the particular method.

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471 To this effect, we deductively review literature on MFCA and its antecedents basing on

472 Simons’ (1995) LOC framework. Next, we inductively deduce nine issues in literature, which

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473 are already salient for the interrelation of MFCA with the four LOC. In table 1, we assign

474 these issues to the four LOC and shortly summarize evidence found in literature on their

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475 interrelation, which is further described in the sub-chapters of 4.2. It becomes apparent that

476

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currently MFCA rarely refers to the beliefs and boundary systems, which is in line with what

477 we noticed when searching the ISO 14051: 2011. Furthermore, we see that a vast number of
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478 topics relate to the diagnostic control systems; for most of them, scholars also support their

479
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interactive use.

480
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481 Table 1: Synopsis: Interrelation of the Nine Salient Issues and the Four LOC
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482 ------------------

483 Insert Table 1 about here

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484 ------------------

485 To provide a general overview to the reader, table 2 highlights which publications of
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486 the sample refer to which flow-based cost approach and which of the nine salient issues.
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487

488 Table 2: Overview of Publications and their Relation to the Nine Salient Issues

489 ------------------

490 Insert Table 2 about here

491 ------------------

492 Each of these issues is presented in more detail below. The order of presentation

493 follows the degree of complexity, ranging from issues that address in particular the diagnostic

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494 use, such as the choice of the appropriate cost accounting system, to issues that enable

495 corporations to use all levers more broadly, e.g., by communication and integrative flow

496 management.

497 In the following sub-chapters, we look at the interrelation of MFCA with the LOC by…

498 4.2.1 ...Choosing the Cost Types

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499 The choice of cost types has a significant influence on the comparability and therefore

500 applicability of MFCA within MCS (Onishi et al., 2008). The ISO 14051: 2011 leaves this

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501 decision to the discretion of the organizations and suggests the exemplary use of standard

502 costs, average costs, or purchase costs, without further specification. Cost accounting

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503 literature distinguishes actual costs for real costs of the past period with the disadvantage

504

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that the costs cannot level out fluctuations, average costs (also called normal costs) for the

505 average of the real costs of several past periods to remedy the disadvantage stated above,
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506 and standard costs for comparing planned costs for future periods (Coenenberg et al., 2012).

507
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The adoption of actual costs is suitable for initial MFCA assessments; however, for a

508 regular use of MFCA within MCS for economic-environmental optimization purposes, it is
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509 advisable to regularly collect the relevant data to be able to apply average costs. Further
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510 fields of application are detection of deviations, product costing, and product pricing or

511 profitability (Bierer and Goetze, 2012; Fischer, 2001b, 1998a; Schrack, 2014). Furthermore,
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512 a comparison of actual or average costs with standard costs is suggested for decision-

513 support (Bierer and Goetze, 2012; Nakajima, 2011).

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514 It can be concluded that the fields of application given in existing literature provide, in
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515 particular, evidence for a diagnostic but also some evidence for an interactive use of MFCA

516 within MCS. Moreover, it should be taken into account that the variance between actual or

517 average costs with standard costs can be part of the material losses but also sources of error

518 (Nakajima, 2011). Therefore, the costs should be broken down sufficiently to distinguish the

519 variation sources, which leads to the level of detail of the different cost categories in MFCA

520 that is discussed in the following chapter.

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521 4.2.2 ...Considering Costs Adequately
522 MFCA provides MCS with a flow-oriented instrument that no longer requires a

523 separate calculation of environmental costs and, therefore, does not consider environmental

524 protection as a cost driver. It also enables integrated improvement potential of processes and

525 products, which can lead to both cost savings as well as reduced environmental impacts

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526 (Loew and Fichter, 1998), which indicates a diagnostic as well as interactive use of MFCA

527 within MCS. This subchapter summarizes the recommendations made in literature

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528 concerning the coverage of included costs (i.e., cost behavior) as well as cost categories.

529 With regard to the coverage of costs, MFCA differs from its antecedents. While

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530 RMCA and FCA aimed at including all costs on a full cost basis (e.g., Fichter et al., 1997;

531 Fischer et al., 2000), the ISO 14051: 2011 on MFCA states that, in particular, costs related to

532
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material flows should be covered, including generally variable costs (e.g., costs of material
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533 and energy use) but also fixed costs (e.g., costs of labor or depreciation). The extent of the

534 variable and fixed costs covered depends on the time horizon for decision-making: For short-
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535 term decisions, only variable costs are relevant, while for long-term decisions also fixed costs
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536 are alterable. However, organizations should ensure that the included fixed costs do not

537 distort the results. With regard to cost categories, ISO 14051: 2011 distinguishes material
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538 costs, system costs, and waste management costs. Organizations can choose to include
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539 energy costs within material costs or quantify them separately. It could also be interesting to

540 distinguish between predictable and non-predictable costs (Bautista-Lazo and Short, 2013;
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541 Gminder and Frehe, 2000). Moreover, the inclusion of external costs is at the discretion of
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542 organizations (ISO, 2011). Some scholars support a separate indication of energy costs to

543 better capture energy efficiency as well as fixed and variable price components (Bierer and

544 Goetze, 2012; Sygulla et al., 2014). Moreover, energy costs should also cover delivery,

545 internal transportation, and supply to points of use (Bierer and Goetze, 2012).

546 To conclude, the structure of cost accounting shall be adapted adequately (Fischer,

547 1998a; Wagner and Strobel, 1999) to allow a balanced presentation of variable and fixed

548 costs that are related to material flows, as well as a separate indication of cost categories.

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549 These suggested means enable organizations to support the planning and controlling of

550 costs as well as decisions and process evaluations and thereby relate to the diagnostic and

551 interactive control systems.

552 Although researched for decades, the inclusion of external costs remains a future

553 challenge. While it is generally argued that the internalization of external costs is the

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554 responsibility of regulatory bodies, it is suggested to consider them in specific cases of

555 decision support and risk assessment, e.g., for supplier evaluation or changing regulation

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556 that is likely to be internalized within the planning horizon (Federal Ministry for the

557 Environment, Nature Conservation, and Nuclear Safety and Federal Environmental Agency,

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558 2003; Jasch, 2006; Loew et al., 2003). Moreover, external costs could be calculated as part

559 of the environmental performance measurement, thereby providing a balanced view of

560
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positive externalities and avoided negative externalities (Loew et al., 2003; Papaspyropoulos
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561 et al., 2012).

562 Apart from that, scholars recommend assessing environmental and social impacts by
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563 other non-monetary approaches such as environmental or social life cycle assessment (LCA)
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564 (Loew and Fichter, 1998; Nakano and Hirao, 2011; Wagner et al., 2010).
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565 In addition to the balanced and separate indication of costs, a certain part of costs, in

566 particular energy, system, and waste management costs, are difficult to assign to a specific
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567 object, so they have to be attributed indirectly by using an appropriate apportionment basis,

568 which will be discussed in the following chapter.

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569 4.2.3 ...Applying Causal Allocation Principles

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570 While direct costs can be traced to a particular cost object, indirect costs are incurred

571 for several cost objects and need to be attributed to the relevant cost centers. In MFCA,

572 indirect costs are attributed basing on specific allocation criteria instead of overhead rates,

573 which gives a more precise picture of flow-related costs and thereby increases the

574 information value for a diagnostic use of MFCA within MCS.

575 Allocation is typically a two-step procedure: at the first step, costs are attributed to

576 different cost centers and, at the second step, to cost units, i.e., products, co-products, and

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577 material losses. (ISO, 2011) In ISO 14051: 2011, allocation is considered as a second-best

578 solution if costs cannot be attributed directly to a certain cost object. The determined

579 allocation criteria should best reflect the main cost driver and is at the discretion of

580 organizations (ISO, 2011). In general, physical properties are used for allocation. However,

581 different allocation criteria might be required for different cost categories, e.g., mass-related

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582 criteria are suggested for materials whereas energy-related criteria are suitable for energy

583 costs, which might reduce comparability (Bierer and Goetze, 2012; ISO, 2011; Sygulla et al.,

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584 2014).

585 The guiding principle behind allocation based on the main cost driver is a causal

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586 relationship between the cost and the cost object (e.g., Bode et al., 2012; Fischer, 1998a). It

587 should be as transparent, systematic, replicable, and conservative as possible to form

588
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acceptance among decision-makers (Bode et al., 2012; Fischer 2001b, 1998a). If a linear
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589 relationship between the cost driver and the cost object is assumed, it should be realistic

590 enough to enable adequate conclusions (Fischer 2001b, 1998a). However, the causal
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591 principle is only applicable to some extent because it is often difficult to clearly assign costs
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592 to products, co-products, and material losses; therefore, some simplifying assumptions have
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593 to be made for allocation (Bierer and Goetze, 2012). For costs for which no realistic causal

594 allocation is possible, allocation should not necessarily be performed; instead, these costs
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595 should be given separately in order not to reduce the validity of results (Fischer 2001b,

596 1998a). These challenges should be kept carefully in mind when determining the allocation
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597 criteria. Caution is also advised to avoid the risk of double counting of costs that are already
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598 covered by other cost categories (Fischer, 2001b, 1998a).

599 A further challenge results from the fact that MFCA in its current state is designed in

600 particular for producers. However, it has some disadvantages for companies dealing with

601 material loops, in particular reproducers and reducers (Schrack, 2014). In this case, MFCA

602 does not differ whether a material is directly incorporated into the product or whether it is

603 recycled various times as long as there is no material loss (Viere et al., 2011). Future

604 research could therefore focus on adapting the existing logic to the reality of material cycles.

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605 Finally, cost allocation increases the modeling complexity (Croenertz, 2011). However, as

606 allocation has a significant influence on the final results, decision-makers need to be well-

607 informed about the functionality of allocation to be able to draw adequate conclusions (Bode

608 et al., 2012, 2011). To gradually increase the corporate knowledge on the contribution of

609 indirect costs, it is suitable to apply a step-wise procedure. In a first separate calculation of

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610 MFCA, indirect costs could be allocated as one cost block; if they are significant enough to

611 be further specified in the information system, they could be allocated separately for material,

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612 energy, system, and waste management before being further allocated to products, co-

613 products, and material losses (adapted from Bierer and Goetze, 2012).

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614 To conclude, existing literature highlights a number of diagnostic and interactive fields

615 of application of MFCA within MCS. For instance, MFCA provides MCS with a flexible tool to

616
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analyze the allocated costs (Dold and Enzler, 1999). Moreover, allocation based on the
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617 causal principle gives decision-makers at all organizational levels more transparent insights

618 and incentives for better assigning responsibility to reduce flow costs, which is hindered by
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619 conventional full cost accounting systems on the basis of surcharges (e.g., Croenertz, 2011;
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620 Fischer, 1998b; Kuerzinger et al., 2001). In this way, planning, controlling, and monitoring, as
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621 well as process optimizations, production decisions, and product pricing, can be supported

622 (Bierer and Goetze, 2012; Bode et al., 2012; Fischer, 1998a).
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623 The allocation to different cost centers increases complexity and therefore requires

624 that costs are already attributed in existing information systems.

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625 4.2.4 ...Integrating MFCA with Existing Information Systems

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626 To achieve the full effects of MFCA as a regular, systematic and comprehensive

627 analysis tool of MCS, MFCA data collection must be linked to existing information systems

628 (e.g., Dold and Enzler, 1999; Heupel and Wendisch, 2003). However, as integration with the

629 existing information system poses some challenges, MFCA is often still performed uniquely

630 as a separate calculation in isolated applications on local computers. Alternatively, if an

631 information system is already available, organizations often have little motivation to expand it

632 to a flow-based information system because they consider already existing indicators as

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633 sufficient (Loew et al., 2004). However, for a regular use of MFCA within MCS, integration

634 with the information systems is indispensable.

635 For this purpose, literature suggests a step-wise deployment of MFCA to gradually

636 adapt the information system. First, unique MFCA assessments can be made in separate

637 calculations or within the corporate environmental information system for initial assessments

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638 to gain experience for the further development of MFCA and the information system (Fischer,

639 1998a; Sygulla et al., 2014). In case of complex product systems, the focus could initially be

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640 laid on processes with potentially significant environmental and economic impacts (e.g., Lang

641 et al., 2004; Loew and Strobel, 2000; Strobel and Wagner, 1999). Second, for the purpose of

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642 continuous economic-environmental improvements of processes or products, continuous

643 MFCA assessments are required to avoid duplicated data collection and the danger of

644
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isolated assessments (e.g., Fischer, 1998a; Lang et al., 2004). Here, literature suggests an
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645 integration of MFCA into existing information systems depending on the organizational size:

646 While small and medium sized organizations could integrate MFCA by using a database,
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647 large organizations are recommended to couple their information system, typically enterprise
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648 resource planning (ERP) software such as SAP R/3, with the corporate environmental
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649 information system to create synergies in data collection (e.g., Heupel and Wendisch, 2003;

650 Lang et al., 2004).

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651 An integration of ERP and corporate environmental information systems requires,

652 however, adaptations of data structure as well as accounting and diagnostic reporting
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653 functionalities to provide the information required for MFCA (Heupel and Wendisch, 2003;
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654 Lang et al., 2004; Loew and Strobel, 2000). On the basis of new booking directives, material

655 movements and losses should be reported individually and allocated to a specific cost center

656 to enable causal relations and define organizational responsibilities (Heupel and Wendisch,

657 2003; Schmid, 2001; Wagner and Strobel, 1999). The reported information should include

658 storage postings, production order data, materials quantity postings per cost center, and

659 process and machine data (Strobel and Redmann, 2002, Strobel and Wagner, 1999).

660 Moreover, material movements and losses should be reported whenever possible with mass

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661 in kg and standard costs (Schmid, 2001; Strobel and Wagner, 1999). While information on

662 predictable losses and co-products as well as non-predictable losses can be integrated into

663 ERP, non-predictable co-products require the manual reporting of costs e.g., on internal

664 orders (Fischer et al., 2000; Gminder and Frehe, 2000).

665 In addition to continuous control, monitoring, and identification of improvement

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666 potentials of processes and products, integration provides other opportunities for the

667 diagnostic support of MCS. Synergies in data collection and transparency can be increased

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668 by eliminating data inconsistencies resulting from input errors or concealment interests of

669 individual compartments (e.g., Enzler et al., 2003b; Schmid, 2001; Wagner and Strobel,

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670 1999). The integration could also form the basis for documenting process knowledge and

671 reducing knowledge losses caused by employee fluctuations (Kuerzinger et al., 2001). In

672
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addition, MFCA can also be the basis for an interactive use within MCS by further developing
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673 the network technology (Lang et al., 2004). This means in particular to extend the information

674 system to a flow-based network, which supports organization-wide and target-group specific
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675 communication (Lang et al., 2004).

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676 Building on the stepwise improvement of data collection via an integrated information
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677 system, a further opportunity lies in the integration of MFCA with traditional cost accounting

678 for data assessment.

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679 4.2.5 ...Integrating MFCA with Traditional Cost Accounting

680 An integration of MFCA with traditional cost accounting can improve the information
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681 value and thereby enhance the efficacy of MCS (Jasch, 2006; Schrack, 2014; Sygulla et al.,
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682 2014). However, organizations are faced with an increase in complexity (Fichter, 1996;

683 Fischer, 1998a), which is why MFCA is often perceived as a complement to traditional cost

684 accounting (Jasch, 2006). For this reason, scholars suggest short and long term solutions for

685 the refinement of traditional cost accounting based on MFCA (Fichter, 1996; Fischer, 1998a;

686 Sygulla et al., 2014).

687 In the short run, a refinement of conventional control instruments is suggested to

688 identify flow-based cost and impact drivers for a broad range of instruments of operational

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689 cost management for process optimization (Bode et al., 2012, 2011), as well as strategic cost

690 management, e.g., balance scorecard (Heupel and Wendisch, 2003), budgeting (Jasch,

691 2006), cost-benefit analysis (Kokubu and Tachikawa, 2013), breakeven analysis (Fichter,

692 1996), price forecasting (Bode et al., 2012), or product pricing (Nakajima, 2004). In the long

693 run, flow-based cost accounting is able to influence the value of material consumption and

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694 value added as well as the profit loss statement and some financial indicators (Kouřilová and

695 Plevková, 2013). It can be therefore considered as a valuable basis for a diagnostic and

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696 interactive use within MCS.

697 For this purpose, a harmonization of the system boundary and the time period in

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698 accounting and the different operational departments is required for a successfully integrated

699 assessment and calculation (e.g., Kokubu and Tachikawa, 2013; Schmidt et al., 2013).

700
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However, for an evaluation of future states of process chains, the limitation on a single time
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701 period is a general shortcoming; it is therefore suggested to complement MFCA with

702 methods of investment appraisal such as life cycle costing (Kokubu and Tachikawa, 2013;
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703 Schmidt et al., 2013; Sygulla et al., 2014).

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704 The integrated information and cost accounting systems described above are basic
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705 foundations for regularly reporting flow oriented data within MCS, which is described in the

706 following chapter.

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707 4.2.6 ...Enhancing Reporting

708 One main characteristic of MCS comprises the provision of information to support
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709 managerial decisions (Chenhall, 2003). In this context, MFCA data does not absolutely differ
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710 from other data from cost and environmental management accounting systems, but due to

711 the systematization approach obtained by a structure of material flows (Nakajima, 2008), the

712 provided detail of information and perspectives differ (Nakajima, 2008; Sygulla et al., 2014).

713 In this context, MFCA data supports the diagnostic as well as interactive use.

714 Along with gain in flow-oriented results from MFCA, flow cost based reports are

715 possible. A very popular reporting format is represented by the so-called Sankey diagram,

716 which visualizes the results of MFCA in terms of a material flow model (Lang et al., 2004,

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717 Schmidt and Keil, 2002, Schmidt et al., 2013) and includes additional monetary information

718 serving as a cause-effect-model (Fischer, 1998a). The visualization of flows indicates how

719 much of the material input at the beginning of the production process reaches the product,

720 and the organization can take into account in decision-making the amount of losses as well

721 as demonstrated hotspots for improvement (METI, 2002; Viere et al., 2009), e.g., by setting

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722 priorities and assessing more in-depth sensitivity or what-if analyses (Croenertz, 2011; Lang

723 et al., 2004; Schmidt and Keil, 2002; Wagner and Strobel, 1999). The aggregation of physical

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724 and monetary information into one single figure is extremely useful (METI, 2002) and

725 contains an additional information value in comparison to traditional cost accounting methods

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726 (Loew et al., 2003). Transparency even increases by additionally visualizing organizational

727 affiliations for a uniform overview (Strobel and Redmann, 2002).

728
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Within the second reporting format (Fischer et al., 2000, Strobel and Redmann, 2002,
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729 Strobel and Wagner, 1999), pie charts can illustrate the products in contrast with the co-

730 products and material losses (Fichter et al., 2000). Bautista-Lazo and Short (2013) discuss
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731 that this quite simple chart can already operate as a catalyst for considering environmental
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732 actions and more profitable operations.

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733 It is also possible to visualize the costs for products, co-products, and material losses

734 by the means of a more systematic and detailed flow cost matrix, the third possible reporting
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735 format (Fischer et al., 2000; Kokubu and Tachikawa, 2013; Strobel and Redmann, 2002;

736 Sygulla et al., 2014). The flow cost matrix indicates the material inputs and inventory
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737 changes that are assigned to outputs in terms of products, co-products, and material losses
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738 as well as their related costs by category (ISO, 2011). Hence, reporting forms of MFCA

739 contribute to the lever of diagnostic control systems.

740 Literature further argues for distinctive analytical features of flow-based tools, also

741 supporting the diagnostic use. They can be based on approved methods of other disciplines

742 (Schmidt and Keil, 2002), e.g., enabling static or time-dependent, qualitative or quantitative

743 perspectives (Bode et al., 2012), or distinguishing losses between predictable, non-

744 predictable, waste, or co-products (Bautista-Lazo and Short, 2013; Gminder and Frehe,

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745 2000). Frings (2003) even demonstrates that although systems of flow cost accounting are

746 often used for the operational level, they can particularly serve for strategy development

747 processes and thus for interactive control systems. These analytical features represent

748 further possibilities and opportunities of reporting and, therefore, transparency increases for

749 the flows and related costs (Hyršlová et al., 2011; ISO, 2011; Loew et al., 2003; METI, 2011;

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750 Nakajima, 2004). Because the organization can better analyze the existing conditions

751 concerning profitability and its environmental impacts (Nakajima, 2004), flow-oriented

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752 reporting should be part of the conventional corporate reporting system. First, it can be used

753 for internal reporting (cf. e.g., case study of Nitto Denko in METI, 2002). MFCA data can

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754 even be used for simple reports of the environmental management system. At a second

755 glance, it can also serve for external reporting (Jasch, 2006). However, it remains a future

756
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challenge to integrate environmental and financial reporting into one integrated report (Jasch,
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757 2006; Guenther and Schmiedchen, 2013), which has not yet been discussed in flow-related

758 literature.
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759 Nevertheless, flow-based reports and, thus, information gained by MFCA serve as a
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760 basis for effective instruments of communication (ISO, 2011; Lang et al., 2004), which form
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761 the starting point for generating ideas for improvement (Guenther and Prox, 2012; Loew et

762 al., 2003). The potential of MFCA and its antecedents concerning improvements and thus,
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763 the diagnostic use, through the integrated economic evaluation is broadly highlighted in

764 literature (e.g., Nakano and Hirao, 2011; Schmidt, 2012; Sygulla et al., 2014; Thurm, 1997)
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765 because the incentives to reduce material losses by new developments in product design,
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766 new technologies, or by changing certain organizational or technical production processes

767 (Strobel, 2002, Strobel and Mueller, 2012) are already indicated by the current costs of waste

768 (Jasch, 2009; METI, 2011). Literature further presents distinct focuses of actions for

769 improvement measures (Bode et al., 2012; METI, 2011; Onishi et al., 2008; Strobel and

770 Mueller, 2012). For instance, organizations can identify further improvement potential by

771 starting with the highest economic potential first (Bode et al., 2012; Nakajima, 2008; Viere et

772 al., 2011, 2010b; Sygulla et al., 2014).

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773 To summarize, the presented potential of improvements and reporting features by

774 flow-oriented data can be used diversely within MCS (Onishi et al., 2008), e.g., by deriving

775 indicators for performance measurement.

776 4.2.7 ...Deriving Indicators for Performance Measurement

777 Along with the presented opportunities of processing and reporting MFCA data,

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778 corporations can use them for continuous monitoring and environmental and financial

779 assessments as part of MCS, in particular for diagnostic and interactive control systems.

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780 Henri and Journeault (2010) introduce four ways for incorporating environmental aspects into

781 MCS: “(i) developing specific performance indicators (e.g., inputs of energy, outputs of solid

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782 waste, financial impact, etc.), (ii) frequently using those indicators to monitor compliance, to

783

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support decision-making, to motivate continuous improvement and for external reporting, (iii)

784 fixing specific goals in the budget for the environmental expenses, incomes and investment,
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785 and (iv) linking environmental goals and indicators to rewards.” (Henri and Journeault, 2010,

786
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p. 75) As presented below, these suggestions are already considered by MFCA and its

787 antecedents.
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788 For the first and second step proposed by Henri and Journeault (2010), literature
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789 presents various examples of performance indicators and whole indicator systems for

790 physical, monetary, or for both sets of information combined (e.g., Barankay et al., 2000;
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791 Burritt and Saka, 2006; Dold and Enzler, 1999; Lang-Koetz et al., 2006). MFCA therefore

792 allows conclusions about environmental impacts that can either be caused by the
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793 organization or even affect the organization (Burritt and Saka, 2006). The most important
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794 aspect about the usage of indicators is the proper identification of trends and weak points

795 (Loew and Juergens, 1999; Loew et al., 2002; Schrack, 2014). Thus, management control, in

796 particular interactive control systems, and decision-making can be enhanced (Jasch, 2009).

797 In addition to a facilitated measurement, MFCA may help the environmental department to

798 better communicate the importance of measures for resource efficiency (Viere et al., 2011).

799 Literature further indicates that MFCA data and indicators can be used for the external

800 communication to stakeholders (ISO, 2011; Loew et al., 2002). Schrack (2014) therefore

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801 argues for an integrated system of MFCA indicators with three levels of aggregation

802 (process, organization, and supply chain) to better cooperate with the supply chain.

803 However, this requires trust (Schmidt and Nakajima, 2013) and an over-arching vision

804 including norms and values that should be set first (Schrack, 2014). In comparison to the

805 method of carbon accounting, where the Greenhouse Gas Protocol already enables

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806 reporting on scope 3 activities along the value chain, e.g., indirect emissions caused by the

807 extraction of purchased material (World Resources Institute and World Business Council for

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808 Sustainable Development, 2011), this remains a future challenge for the method of MFCA. A

809 further development in gaining management’s attention is the idea of benchmarking

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810 (Bautista-Lazo and Short, 2013; Papaspyropoulos et al., 2012), which can function as an

811 “early warning system” (Jasch, 2009, p. 49) and, therefore, also supports decision-making

812
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(Nakajima, 2008) and learning processes (Loew et al., 2002). Hence, MFCA as a basis for
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813 benchmarking serves for the diagnostic as well as interactive use within MCS.

814 Literature also provides examples concerning the third and fourth suggestions
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815 proposed by Henri and Journeault (2010). Management can internally report the trends of
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816 environmental indicators to staff by postings or reports. Based on these indicators, target
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817 values can be pronounced and become part of management control (Loew et al., 2003; Loew

818 and Juergens, 1999; Onishi et al., 2008). The integration to corporate target and incentive
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819 systems further enables improvements and innovations (Strobel, 2002; Strobel and Mueller,

820 2012), which provides a good basis for the beliefs systems. The performance evaluation
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821 system can also measure how management regulations and rules are improved (Burritt and
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822 Saka, 2006), which may serve as the basis for integrating MFCA results into the beliefs and

823 boundary systems: Managers could derive critical threshold values for specific performance

824 variables and transform these thresholds, on the one hand, into no-go criteria for the

825 boundary systems and, on the other hand, managers could formulate inspiring targets out of

826 these thresholds for the beliefs systems, e.g., for the waste rate. In conclusion, Onishi et al.

827 (2008) regard the possible application of MFCA as a performance evaluation system as the

828 key issue for using MFCA continuously in an organization and therefore contributing to the

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829 overall organizational goal. The additional possibility of budgeting as presented by METI,

830 2011, 2002 further supports the incorporation of environmental aspects into MCS.

831 However, to regard MFCA as a “key approach for sustainability” (Kokubu and

832 Tachikawa, 2013, p. 351) and thus for a MCS towards sustainable development, e.g., soft

833 factors such as corporate image or ethics, social issues also need to be considered, which is

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834 still not acknowledged in literature on MFCA and its antecedents. In addition to the first

835 approaches presented by Burritt and Saka (2006), this remains a future challenge. The

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836 assessment of labor costs concerning their social sustainability as presented in the ISO

837 26000: 2010 on labor practices could represent one example for future research.

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838 Based on indicators for performance measurement, organizations can introduce an

839 integrative flow management.

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840 4.2.8 ...Introducing an Integrative Flow Management
841 We have already indicated that MFCA differs from other systems of management

842
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control because it focuses on the flow of materials and their related costs. The increased

843 transparency derived from the analysis of the economic loss of wasted materials represents
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844 a different approach and therefore complements management thinking by conventional

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845 means (Kouřilová and Plevková, 2013). The general concept of flow (cost) management

846 (Enzler and Strobel, 2001; Federal Ministry for the Environment, Nature Conservation, and
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847 Nuclear Safety and Federal Environmental Agency, 2003; Hyršlová et al., 2008; Loew and

848 Strobel, 2000) serves, e.g., to identify possible measures of improvement (e.g., Bode et al.,
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849 2012; Loew and Juergens, 1999; Loew et al., 2003; Nakano and Hirao, 2011) or “any
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850 problems that may exist” (METI, 2002, p. 31). More precisely, literature discusses how

851 organizations can reconsider their structures as well as procedures when taking a flow

852 perspective (Gminder and Frehe, 2000; Nakajima, 2008; Schmid, 2001; Sygulla et al., 2014).

853 This concept differs from other MCS when reviewing all corporate processes according to

854 their fit to achieve organizational goals. Nevertheless, it supports diagnostic and interactive

855 control systems: Decision-makers who take a flow perspective need to analyze whether the

856 process is properly linked to target values. On the other hand, corporations should also

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857 check whether enough processes are available to achieve the set targets (Enzler and

858 Strobel, 2001; Loew et al., 2003; Schmid, 2001). This continuous reconciliation therefore

859 includes the development of a flow organization (Enzler and Strobel, 2001; Lang-Koetz et al.,

860 2006) and is called integrative flow management (Schmid, 2001).

861 For the purpose of establishing an integrative flow management within a flow

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862 organization, two requirements have to be met: it demands top management’s involvement

863 (ISO, 2011; Onishi et al., 2008; Schmidt et al., 2013) and flow-based decision-making (Loew

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864 and Strobel, 2000) at all levels of management (Nakajima, 2011; Sygulla et al., 2014).

865 Although it might not be evident at first sight, Loew and Strobel (2000) indicate that the

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866 introduction of flow-oriented methods builds the basis for establishing flow-thinking

867 throughout the whole corporation, and not the other way around. The review already

868
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revealed positive implications of a flow organization and, thus, of MFCA to decision-making
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869 (e.g., Hyršlová et al., 2011, 2008; Kokubu and Tachikawa, 2013; Nakajima, 2008, 2006) by

870 extensively analyzing the issues of enhanced data, reporting, and performance
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871 measurement discussed in the previous chapters. Hence, the development of an integrative
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872 flow management relates to all four levers of control.

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873 Thought through to its logical conclusion, integrative flow management and, thus,

874 flow-thinking, extends the focus of analysis to the supply chain (Schrack, 2014). This further
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875 development of flow-thinking leads to an extended MFCA with the potential to identify

876 hotspots along the whole supply chain (e.g., Inooka, 2011; Papaspyropoulos et al., 2012;
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877 Schrack, 2014; Viere et al., 2010). It can be further supplemented by environmental and
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878 social LCA (e.g., Nakano and Hirao, 2011; Sygulla et al., 2014; Viere et al., 2011; Wagner et

879 al., 2010). Both developments, however, increase the number of actors involved and

880 decision criteria to be considered, which poses a further challenge: Corporations no longer

881 form their decisions based on single criteria, e.g., overall production costs, but have to level

882 out different targets based on multiple decision criteria, e.g., differentiated flow-based costs

883 and environmental as well as social impacts for products, co-products, and material losses.

884 To this end, it could be valuable to apply multi-criteria decision support methods (cf.

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885 Gaudreault et al., 2009; Hoejer et al., 2008; Miettinen and Haemaelaeinen, 1997) within

886 MCS. Nevertheless, both methodological extensions, which need much more testing in the

887 near future, will rely on the organizational embeddedness (Enzler et al., 2003b; Strobel and

888 Mueller, 2012) as well as effective flow-oriented communication (Strobel and Redmann,

889 2002). The next chapter argues for both aspects.

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890 4.2.9 ...Communicating Across Departments
891 Among the issues of interrelating MFCA with MCS as presented in the previous

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892 subchapters, the issue of communication is one of the few relating to all four levers of

893 control. Nakajima (2003) states that “MFCA contributes not only to the reduction of costs and

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894 environmental burden but also the creation of a new corporate culture that emphasizes

895

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communication.” (p. 50) In consideration of the analyzed literature, MFCA and its

896 antecedents are highlighted as means for inter-departmental communication and cooperation
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897 (e.g., Jasch, 2010; Sygulla et al., 2014; Wagner and Strobel, 1999).

898
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To overcome organizational barriers for establishing and encouraging the concept of

899 flow management, communication represents a major issue (Strobel and Redmann, 2002).
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900 Instead of separate working environments for, e.g., engineers, environmental officers, and
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901 managers (Jasch, 2010) facing cross-departmental communication problems and the

902 isolated consideration of different cost centers (Jasch, 2009), the aforementioned
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903 opportunities of flow management systems such as MFCA bring departments together – the

904 starting point for discussing exactly the same issues with a realistic picture about material
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905 (in)efficiency (Wagner and Strobel, 1999). In addition to joined expertise, communication also
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906 serves to elucidate organizational changes (Kokubu and Tachikawa, 2013) such as crucial

907 changes of mindsets (Fichter et al., 2000; Viere et al., 2013). As the common data of flow-

908 oriented tools can encourage independent work and higher awareness concerning

909 environmental considerations and responsible action (Jasch, 2001; Loew et al., 2002;

910 Nakajima, 2009), it can serve for the diagnostic as well as interactive use. Because it can

911 also be applied to increase employee motivation (Faißt, 2013; Fischer, 1998b; Hyršlová et

912 al., 2008; Jasch, 2009; Kuerzinger et al., 2001; Loew et al., 2002; Nakajima, 2009; Sygulla et

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913 al., 2014) and innovation (Nakajima, 2009), the lever beliefs systems is supported, too.

914 Moreover, the potential in terms of cost savings further enhances motivation (Bode et al.,

915 2012) and, thus, the beliefs systems. In Japan, many corporations regard the characteristics

916 of MFCA as a new form of the continuous improvement process (better known as Kaizen)

917 (Schmidt and Nakajima, 2013), which is closely linked to the learning organization. The

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918 approach of organizational learning as discussed by Kuerzinger et al. (2001), Loew and

919 Juergens (1999), Lang et al. (2004), and Schrack (2014) is especially important for a

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920 continuous and successful implementation of MFCA. However, it requires the penetration of

921 organizational structure and culture, including its norms and values (Lang et al., 2004).

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922 Particularly with regard to the organizational culture, flow oriented methods give relatively

923 sparse attention to the direct communication of core values or risks to be avoided for now.

924
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Despite a few exceptions (i.e., Nakajima, 2011; Schrack, 2014), a recent deficit in the
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925 consideration of the beliefs and boundary systems has emerged. Both may not be directly

926 imparted via a mission statement or code of conduct, but they are needed for the long-term
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927 integration (Lang et al., 2004). Hence, future research needs to take up the idea of
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928 organizational learning, i.e., in terms of penetrating organizational culture and, thus, the
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929 beliefs and boundary systems.

930 4.3 Towards a Conceptual Framework for the Integration of MFCA into MCS
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931 In response to our first research question of the extent to which MFCA and its

932 antecedents currently address the four LOC, our systematic literature review revealed nine
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933 salient issues. The current knowledge concerning each issue was then discussed in more
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934 detail in the subchapters of 4.2 above. Table 1 provides a synopsis of their relation to the

935 four levers. Moreover, the goal of our research was to guide professional practice and

936 identify future research needs. Thus, we also asked when systematically reviewing the

937 literature: What further conceptual developments of MFCA would increase the focus on

938 LOC? We complemented the future conceptual developments identified in literature with our

939 own deliberations.

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940 Subsequently, we summarize our findings in a conceptual framework, which is

941 illustrated in Figure 1 and described in more detail below. First of all, the presented salient

942 issues for integrating MFCA into MCS represent the main part of our framework and are

943 illustrated in Figure 1 in small boxes. As presented in the sub-chapters of 4.2, the nine issues

944 also include research needs identified for the further development of MFCA and its

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945 integration to MCS. To give just one example for such a future research need: in sub-chapter

946 4.2.2 we identified that, when adequately considering the issue of cost, some aspects cannot

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947 be easily internalized with a monetary approach such as MFCA. It is therefore

948 recommendable to integrate MFCA with other non-monetary approaches such as

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949 environmental or social LCA in the future.

950 Out of these various research needs identified in chapter 4.2, we consider three

951
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future research challenges as particularly significant, which is why we highlight them in
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952 Figure 1 as separate issues in three boxes with dotted lines. The first future challenge of

953 integrating the supply chain will enable organizations to broaden strategy formulation and
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954 implementation also to suppliers and customers. To address the second future challenge,
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955 organizations will require a deeper focus on their MCS by explicitly considering core values
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956 and risks to be avoided based on MFCA. The third future challenge of a learning organization

957 will support organizations in using all LOC in a comprehensive manner, the goal of Simons’
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958 (1995) LOC framework.

959 Bringing all this together, we arrange the nine salient issues as well as the three
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960 particularly significant future challenges by their level of addressing the four LOC (horizontal
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961 axis) as well as their level of the integration of MFCA within MCS (vertical axis). In total, five

962 stages for the gradual integration of MFCA into MCS ensue from this. To this end, Onishi et

963 al. (2008) also propose a gradual implementation of MFCA into MCS. Step by step,

964 corporations can fulfill the stages that will bring MFCA to a closer interrelation with the LOC

965 and, thus, MCS. In the end, every stage also supports the realization of resource efficiency

966 goals as part of corporate strategy and thereby leads the way towards a more sustainable

967 development. These five stages of Enabling, Integrating, Communicating, Flow-thinking, and

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968 Learning are described in more detail below. Regarding the level of addressing the four LOC,

969 two groups can be identified: the first group provides a limited focus on diagnostic and

970 interactive control systems, and the second group represents an extended focus on

971 addressing all LOC.

972

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973 Figure 1: Five Stages for Interrelating MFCA to MCS

974 ------------------

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975 Insert Figure 1 about here

976 ------------------

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977 Enabling represents a first basic stage for the use of MFCA within MCS. This stage

978 enables a regular data collection for a transparent and flexible assessment of flow costs to

979
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set incentives related to a better assignment of responsibilities. For this purpose, data should
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980 be collected in the format required by the conventional cost accounting system. In this

981 context, we highlighted that the collection of average and standard costs provides a basis to
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982 level out fluctuations and support further strategy functions. In addition to direct flow based
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983 costs, indirect costs can be included based on causal allocation, which increases the
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984 information value of the assessment for the use within MCS. By distinguishing the costs

985 categorized by material, energy, system, and waste management, the focus of attention can
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986 shift from environmental protection as a cost driver to an integrated economic-environmental

987 assessment.
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988 The second stage, Integrating, consists of integrating data collection and assessment
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989 to overcome isolated thinking in single cost centers. The fundamental basis for integration is

990 to adapt the existing information system to manage the data required for MFCA.

991 Furthermore, the conventional cost accounting system should be gradually enhanced to a

992 flow based cost accounting system and complemented with methods of investment appraisal

993 such as life cycle costing to also evaluate future states in MCS. In addition, results of MFCA

994 can form the basis to derive performance indicators within MCS. Synthesized to a

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995 comprehensive performance indicator system, they can be further used as possible

996 performance measurement tools, in particular for continuous monitoring and assessment.

997 Within the third stage, Communicating, reporting can be enhanced through particular

998 MFCA reporting forms, improving the communication of analytical results. Nevertheless, the

999 aspect of integrated reporting remains open. Enhanced reporting forms the basis for

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1000 communication across departments, representing the second issue at this stage. Third,

1001 communication also requires the consideration of core values and risks to be avoided. Both

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1002 aspects refer to the two levers, beliefs and boundary systems, which have rarely been

1003 addressed thus far, but are relevant for comprehensively addressing all LOC. It therefore

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1004 represents the first of our three main future challenges. In this context, external costs are

1005 also relevant for specific cases of decision support and risk assessment. On the other hand,

1006
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we argued for aspects that cannot be easily internalized to combine MFCA with other non-
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1007 monetary approaches, such as environmental or social LCA, to provide information

1008 especially for the beliefs and boundary systems in the future.
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1009 The fourth stage, Flow-thinking, builds upon communication and especially focuses
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1010 on the issue of introducing integrative flow management. Integrated flow management aims
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1011 at complementing conventional management thinking and MCS by focusing on flows

1012 regarding corporate communication, thinking, and structure. For this purpose, it is
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1013 indispensable to integrate flow-based thinking across all management levels.

1014 Consequentially, flow-based thinking should lead to the involvement of the whole supply
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1015 chain, which represents the second future challenge. In particular, at this stage, potential
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1016 conflicts of targets become apparent due to the increased number of actors and decision

1017 criteria. Hence, multi-criteria decision-making methods are required. By applying integrated

1018 assessments including the consideration of the whole supply chain and reporting in one

1019 integrated report, MCS could be further enhanced in the future.

1020 To summarize stages one to four, if the proposed steps are gradually implemented,

1021 the main functions of MCS will be well-covered (cf. chapter 2.2). For a further gradual

1022 improvement of our integration purpose, the fifth stage, Learning, contains the last issue of a

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1023 learning organization, which is in fact the most significant future challenge. Building on flow-

1024 based information from MFCA, organizational learning can help to obtain a clear picture

1025 about oneself and to adapt to new requirements.

1026 In conclusion, our proposed issues and future challenges lead to a more intertwined

1027 relationship between MFCA and the four LOC and therefore MCS. This relationship will

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1028 introduce resource efficiency, an issue of sustainable development, to corporate strategy.

1029 Regarding the prior research on infusing the goals of sustainable development to

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1030 management control and thus strategy, we added a new research approach by interrelating a

1031 particular method with MCS. Furthermore, combining a systematic literature review with the

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1032 development of a conceptual framework will advance this research field. We focused on the

1033 challenging fact that particular methods of sustainability control are not yet considered as

1034
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core tools of management control and therefore do not support strategy (Gond et al. 2012).
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1035 In the case of MFCA, we highlighted the use-perspective as presented in the LOC framework

1036 to move MFCA from its currently autonomous use to an integrated use within MCS. Nine
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1037 salient issues identified in literature already point out the currently intertwined relationship.
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1038 However, every issue also contains challenges that have to be tackled in the future. Looking
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1039 ahead, our presented research approach requires descriptive studies analyzing how this can

1040 be done in further detail. However, research in this field perhaps simply requires more time
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1041 (Crutzen et al., 2013).

1042 We are convinced that our research approach of examining how a particular method
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1043 of sustainability control can be integrated into MCS in order to bring the underlying goal of
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1044 the selected type of control into corporate strategy can be transferred to other particular

1045 methods. By expanding the focus to other environmental megatrends such as climate

1046 change (European Environment Agency, 2011), e.g., integrating the method of carbon

1047 accounting (Stechemesser and Guenther, 2012) into the LOC, future research can construct

1048 an EMCS that comprehensively targets environmental challenges. Moreover, through the

1049 addition of social issues, e.g., by following guidelines of the ISO 26000: 2010, scholars are

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1050 able to construct MCS while taking into consideration all the three issues of sustainable

1051 development.

1052 The research approach also reveals some shortcomings. First, chosen search strings

1053 usually constrain a systematic review. However, we complemented our systematic review of

1054 MFCA by searching for its direct methodological antecedents. Moreover, we searched ten

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1055 databases for scholarly literature, covering six broad databases (three of which also cover

1056 academic theses) and one technology-oriented database. In addition to these attempts to

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1057 avoid errors, we included books, dissertations, guidelines and reports in addition to journal

1058 articles. Finally, we added interesting literature to our sample through the selection of

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1059 publications not only in English but also in German. This selection represents a further

1060 benefit because the origins of MFCA are in Germany (Nakajima, 2003). Critics could also

1061
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refer to our combined deductive-inductive approach; while it is not new to research, it
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1062 nonetheless has generated fruitful research results. In addition, critics might reason for an

1063 incompleteness of the nine issues and the complementation of future research needs with
M

1064 our own deliberations. However, throughout the research process we intensively discussed
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1065 our research approach at interdisciplinary research seminars as well as international

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1066 conferences. Thus, we are convinced that the identified literature clearly focuses on the nine

1067 presented issues regarding the interrelation aspect; however, we are aware of the inherent
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1068 subjectivity in qualitative research approaches. Content-wise, a lack of consideration for a

1069 definite time-perspective of future research needs could represent a limitation. We hope that
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1070 the research field thrives and prospers, but current knowledge provides only limited
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1071 indications for naming definite time-perspectives. Our sole focus on resource efficiency and

1072 thus on an environmental megatrend represents the last possible shortcoming; we therefore

1073 aimed to demonstrate how other megatrends can be tackled by transferring our research

1074 approach to other particular methods.

1075 5. Conclusions
1076 Challenged by decreasing natural resources, corporations need to significantly

1077 improve their resource efficiency. For the purpose of a more efficient and sustainable use of

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1078 natural resources, the internationally standardized approach of MFCA is a promising tool.

1079 However, goals such as resource efficiency can only be achieved if corporations commit

1080 themselves to these targets on a strategic level and transfer them to all corporate levels by

1081 using MCS. Thus, MFCA requires an increased interrelation with MCS, which can drive

1082 corporate strategy towards resource efficiency. Our research commenced at exactly this

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1083 point, and we have taken a broad look at the interrelation of MFCA and its direct antecedents

1084 with the four LOC. In our systematic literature review, we aimed to understand how MFCA

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1085 currently addresses the four LOC. To guide future research, we also asked what further

1086 conceptual developments of MFCA would increase the focus on LOC? We have identified

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1087 nine salient issues that are relevant to the interrelation of MFCA and MCS, as well as areas

1088 for future research. Subsequently, we developed a summarizing conceptual framework

1089
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consisting of five stages. For the case of MFCA and its goal of resource efficiency, we
AN
1090 examined how a particular method of sustainability control can be integrated into MCS in

1091 order to bring the underlying goal of the selected type of control into corporate strategy.
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1092 Because this research approach can also be transferred to other types of control that focus
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1093 on further important economic, environmental, and social megatrends, we therefore

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1094 highlighted a pathway towards sustainable development.

1095
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49

Levers of Beliefs Systems
Control (LOC)
Issues
for the Inter-
relation of MFCA
with the LOC by…
1 ...Choosing the Cost Types
2 ...Considering Costs
Adequately
3 ...Applying Causal
Allocation Principles
4 ...Integrating MFCA with
Existing Information
Systems
Inductively Derived Categories
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5 ...Integrating MFCA with
C
Traditional Cost
Accounting
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6 ...Enhancing Reporting
ACCEPTED MANUSCRIPT
Deductively Derived Categories
Boundary Systems Diagnostic Control Interactive Control
Systems Systems
- - application e.g. for optimization purposes, detection
of deviations, product costing, product pricing, or
profitability
comparison of actual or average costs with standard
costs suggested for decision-support
PT
- - enable organizations to support the planning and
control of costs as well as decisions and process
evaluations in MCS
identify integrated
RI
improvement potentials of
processes and products
- - support planning, controlling, and monitoring as well
SC
as process optimizations, production decisions, and
product pricing
provision of MFCA as a well-informed decision-
flexible tool to analyze the makers on allocation
allocated costs within required in order to be
U
MCS able to draw adequate
conclusions
AN
inclusion of indirect costs more transparent insights
in MFCA to increase the and incentives for
information value of the decision-makers at all
assessment organizational levels to
better assign
M
responsibility to reduce
flow costs
- - reporting funcitonalities supported organization-
D
for MFCA (individually wide and target-group
and allocated to cost specific communication
centers) basing on network
TE
technology
synergies in data
collection and
transparency
documented process
knowledge and reduced
knowledge losses
- - operational cost management for process
optimization
strategic cost management, e.g. balanced
scorecard, budgeting, cost-benefit analysis,
breakeven analysis, price forecasting, product
pricing
- - MFCA data provides additional information value by
a different flow-oriented systematization approach
new forms for internal approaches of the FCA
and external reporting, family can serve
e.g. Sankey-diagram particularly for strategy
development processes
distinctive analytical
features, e.g. for
considering
environmental impacts
starting point for
improvement measures
7 ...Deriving Indicators for ACCEPTED
communicate target MANUSCRIPT
performance evaluation incorporate enviromental and financial considera-
Performance Measurement values based on MFCA system can also measure tions into MCS by MFCA-based performance
driven performance how management indicators, e.g. integrated material flow cost
indicators, also to regulations and rules are indicators with the process, organization, and supply
stakeholders improved chain level
link environmental goals basis for benchmarking
and indicators to rewards creation of a MFCA
driven performance
evaluation system for
enhanced decision-
making
8 ...Introducing an Integrative development of an integrative flow management
Flow Management reconsideration of corporate structures as well as

9 ...Communicating Across
Departments
PT
procedures when referring to the system of flows
creation of a corporate culture which emphasizes communication
development of organizational learning
increase of employee common data of flow oriented tools encourages

RI
motivation and innovation independent work and higher awareness concerning
environmental considerations and responsible action

U SC
AN
M
D
TE
C EP
AC
 ACCEPTED MANUSCRIPT

Flow-based Cost Approach Nine Salient Issues concerning Existing Interrelations between MFCA and its Antecedents with the Four LOC

Residual ...Integrating ...Integrating

Material ...Applying ...Deriving ...Introducing
Flow Cost Material ...Considering MFCA with MFCA with ...Communicati
Publications within the Flow Cost ...Choosing Causal ...Enhancing Indicators for an Integrative
Accountin Cost Costs Existing Traditional ng Across
Sample Accountin the Cost Types Allocation Reporting Performance Flow
g Accountin Adequately Information Cost Departments
g Principles Measurement Management

PT
g Systems Accounting
Barankay et al., 2000 1 1 1
Bautista-Lazo and Short, 2013 1 1 1

RI
Bierer and Goetze, 2012 1 1 1 1 1
Bode et al., 2012 1 1 1 1 1 1 1
Bode et al., 2011 1 1 1 1

Burritt and Saka, 2006
Croenertz, 2011
Dold and Enzler, 1999
Enzler et al., 2005
SC
1 1 1
1 1 1 1 1 1 1 1
1 1 1 1 1 1
1 1 1 1

U
Enzler et al., 2003a 1 1 1

AN
Enzler et al., 2003b 1 1 1
Enzler and Strobel, 2001 1 1 1
Faißt, 2013 1
Fakoya and van der Poll, 2013 1 1

M
Federal Ministry for the
Environ-ment, Nature
Conservation, and Nuclear 1 1 1 1 1 1 1 1 1

D
Safety and Federal
Environmental Agency,
Fichter, 1996 1 1 1

TE
Fichter et al., 2000 1 1 1 1 1 1
Fichter et al., 1997 1 1 1
Fischer, 2001a 1 1 1 1 1
EP
Fischer, 2001b 1 1 1 1 1 1 1
Fischer, 1998a 1 1 1 1 1 1
Fischer, 1998b 1 1 1 1
Fischer et al., 2000 1 1 1 1 1 1
C

Frings, 2003 1 1 1 1
Germann and Strobel, 2003 1 1 1 1 1 1
AC

Gminder and Frehe, 2000 1 1 1 1 1

Guenther, 2008
Guenther and Prox, 2012
Guenther et al., 2014
Heupel and Wendisch, 2003
Hyršlová et al., 2011
Hyršlová et al., 2008
Inooka, 2011
1 1 1
1 1 1
1 1 1
1 1 1 1 1 1 1
1 1 1 1
1 1 1 1 1 1
1 1 1
 ACCEPTED MANUSCRIPT

ISO, 2011 1 1 1 1 1 1 1
Jasch, 2010 1 1 1 1 1
Jasch, 2009 1 1 1 1 1 1 1 1
Jasch, 2006 1 1 1 1 1 1
Jasch, 2001 1 1 1 1 1 1
Kokubu and Tachikawa, 2013 1 1 1 1 1 1

PT
Kouřilová and Plevková, 2013 1 1 1
Kuerzinger et al., 2001 1 1 1 1 1
Lang et al., 2004 1 1 1 1 1 1
Lang-Koetz et al., 2006 1 1

RI
Loew and Fichter, 1998 1 1 1 1 1
Loew and Juergens, 1999 1 1

SC
Loew and Strobel, 2000 1 1 1 1 1 1 1
Loew et al., 2004 1 1 1
Loew et al., 2003 1 1 1 1 1 1 1
Loew et al., 2002 1 1 1 1 1

U
METI, 2011 1 1 1 1 1 1 1
METI, 2002 1 1 1

AN
Moeller, 2010 1 1
Nakajima, 2011 1 1 1 1 1 1
Nakajima, 2010 1 1 1 1

M
Nakajima, 2009 1 1 1
Nakajima, 2008 1 1 1
Nakajima, 2006 1 1

D
Nakajima, 2004 1 1 1
Nakano and Hirao, 2011 1 1 1 1

TE
Onishi et al., 2008 1 1 1 1 1
Papaspyropoulos et al., 2012 1 1 1
Schmid, 2001 1 1 1 1 1 1 1
Schmidt, 2012 1 1 1 1 1
EP
Schmidt, 2011 1 1
Schmidt and Keil, 2002 1 1 1
Schmidt and Nakajima, 2013 1 1 1 1
C

Schmidt et al., 2013 1 1 1 1 1

Schrack, 2014 1 1 1 1 1 1 1 1 1
AC

Strobel, 2002 1 1 1 1
Strobel and Mueller, 2012 1 1 1 1
Strobel and Redmann, 2002 1 1 1 1 1 1 1 1
Strobel and Wagner, 1999 1 1 1 1 1
Sygulla et al., 2014 1 1 1 1 1 1 1
Thurm, 1997 1 1 1 1 1
Ulhasanah and Goto, 2012 1
Viere et al., 2013 1 1
Viere et al., 2011 1 1 1
 ACCEPTED MANUSCRIPT

Viere et al., 2010 1 1

Viere et al., 2009 1 1 1
Wagner and Strobel, 1999 1 1 1 1 1 1
Wagner et al., 2010 1
Zhao, 2012 1
Total 31 45 14 10 33 43 39 25 47 23 24 29

PT
RI
U SC
AN
M
D
TE
C EP
AC
 ACCEPTED MANUSCRIPT

Level of integration of
MFCA within MCS

Learning
Create a learning

Resource efficiency as part of corporate strategy

organization

PT

Towards sustainable development

thinking

RI
Introduce

Flow-
Involve the
integrative flow
supply chain
management

SC
Commu-
nicating

U
Communicate Consider core
Enhance
across values and risks

AN
reporting
departments to be avoided

M
Integrating

Integrate MFCA Integrate MFCA Derive indicators

with information with traditional for performance

D
system cost accounting measurement

TE
Enabling

Choose cost Consider costs Apply causal

EP
types adequately allocation
C

Level of addressing
AC

the four LOC

Limited focus on diagnostic and Extended focus on all four LOC

interactive control systems
Legend:
Issues for the
Main Future
interrelated use of
Challenges
MFCA within MCS