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The use of Environmental Management

Accounting (EMA) for identifying
environmental costs
Article in Journal of Cleaner Production September 2003
DOI: 10.1016/S0959-6526(02)00107-5

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Journal of Cleaner Production 11 (2003) 667676

www.cleanerproduction.net

The use of Environmental Management Accounting (EMA) for

identifying environmental costs
Christine Jasch
W, Rechte Wienzeile 1915, A-1040 Vienna, Austria
Institute for Environmental Management and Economics, IO
Received 28 August 2001; accepted 27 June 2002

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

1. The United Nations Initiative

The Expert Working Group on Improving Governments Role in the Promotion of Environmental Management Accounting (EMA) was organized as a follow-up
to informal discussions on the issue at the 1998 session
of the United Nations Commission on Sustainable

Tel.: +43-1-587-2189; fax: +43-1-587-6109.

E-mail address: [email protected] (C. Jasch).

Development (CSD 6) in the context of negotiations on

environmentally sound technologies. Those discussions
indicated that a number of governments were involved
or interested in promoting EMA, but that there had been
little or no communication among the agencies concerned. The participants in the Expert Working Group
are from national environmental agencies and ministries,
international organizations, industry, accounting firms,
academia, and United Nations agencies.
The publication, entitled Environmental Management AccountingProcedures and Principles [1], is the

0959-6526/03/$ - see front matter 2002 Elsevier Science Ltd. All rights reserved.
doi:10.1016/S0959-6526(02)00107-5

668

C. Jasch / Journal of Cleaner Production 11 (2003) 667676

first of a series of publications by the Expert Working

Group. It presents the terminology and techniques as
agreed to by members of the group in order to establish
a common understanding of the basic concepts of EMA
and provide a set of principles and procedures to guide
those interested in its application.1
The publication is intended to minimize the cost of
introducing EMA systems by offering a set of principles
and procedures for EMA based on commonly used and
internationally accepted financial accounting methods.
While the approach to EMA presented in this publication
is not the only way, it is one which the members of the
Group, after extensive consultation, agree to be sound
and cost-effective.
The following text presents the core definitions and
generic assessment tables (including figures) from the
EMA workbook.

2. What is EMAEnvironmental Management

Accounting?
Cost (or management) accounting constitutes the
central tool for internal management decisions such as
product pricing and is not regulated by law. This internal
information system deals with the following questions:
What are the production costs for different products and
what should be the selling price of these products? The
main stakeholders in cost accounting are members of different management positions (e.g. executive, site, product and production managers).
In practice, many companies do not have a separate
cost accounting system, but calculate on the basis of the
financial accounting data from bookkeeping instead.
Financial accounting, in contrast, is mainly designed to
satisfy the information needs of external shareholders
and financial authorities, both of whom have a strong
economic interest in standardized comparable data and
in receiving true and fair information about the actual
economic performance of the company. Therefore, fin-

The book was prepared for the United Nations Division for Sustainable Development UN DSD, Expert working group on Improving
the Role of Government in the Promotion of Environmental Management Accounting. It was commissioned by the Austrian Ministry for
Transport, Innovation and Technology, the Austrian Ministry for
Agriculture, Forestry, Environmental Protection and Water Management and the Austrian Chamber of Commerce. It is available for free
for download in English under www.un.org/esa/sustdev/estema1.htm
and has also been published in German by the Austrian Ministry of
Transport, Innovation and Technology (available under www.ioew.at).
W is currently conducting 12 case studies applying the methodThe IO
ology. Also the members of the UN DSD working group are in the
midst of case studies. Further references on EMA can be found at
www.EMAwebsite.org, and Reference of the Global Reporting Initiative: www.globalreporting.org.

ancial accounting and reporting are being dealt with in

national laws and international accounting standards.
The core part of environmental information systems
are material flow balances in physical units of material,
water and energy flows within a defined system boundary. This can be done at the corporate level, but can
also be taken further to directly address cost centers and
production processes or even down to specific machinery
and products. It would then become the task of process
technicians and not necessarily accountants to tackle and
trace the necessary data.
EMA, Environmental management accounting represents a combined approach which provides for the
transition of data from financial accounting, cost
accounting and material flow balances to increase
material efficiency, reduce environmental impact and
risk and reduce costs of environmental protection. EMA
is performed by private or public corporations, but not
nations, and has a financial as well as physical component.
EMA metrics for internal decision-making include
both: physical metrics for material and energy consumption, flows, and final disposal, and monetarised
metrics for costs, savings, and revenues related to activities with a potential environmental impact.
Key application fields for the use of EMA data are:
Assessment
of
annual
environmental
costs/expenditures;
Product pricing;
Budgeting;
Investment appraisal, calculating investment options;
Calculating costs and savings of environmental projects;
Design and implementation of environmental management systems;
Environmental performance evaluation, indicators
and benchmarking;
Setting quantified performance targets;
Cleaner production and Ecodesign projects;
External disclosure of environmental expenditures,
investments and liabilities;
External environmental or sustainability reporting;
Other reporting of environmental data to statistical
agencies and local authorities.

3. What are environmental costs?

The main problem of environmental management
accounting is that we lack a standard definition of
environmental costs. Depending on various interests,
they include a variety of costs, e.g. disposal costs or
investment costs and, sometimes, also external costs (i.e.
costs incurred outside the company, mostly to the general public). Of course, this is also true for profits of

C. Jasch / Journal of Cleaner Production 11 (2003) 667676

669

corporate environmental activities (environmental cost

savings). In addition, most of these costs are usually not
traced systematically and attributed to the responsible
processes and products, but simply summed up in general overheads.
The fact that environmental costs are not fully
recorded often leads to distorted calculations for
improvement options and achieved savings. Environment protection projects, aiming to prevent emissions
and waste at the source (avoidance option) by better utilizing raw and auxiliary materials and requiring less
(harmful) operating materials are not recognized and
implemented. The economic and ecological advantages
to be derived from such measures are not used. The
people in charge are often not aware that producing
waste and emissions is usually more expensive than disposing of them.
Experience shows that the environmental manager
rarely has access to the actual cost accounting documents
of the company and is only aware of a tiny fraction of
the aggregate environmental costs. On the other hand,
the controller has most of the information but is unable
to separate the environmental part without further guidance. In addition, he or she is limited to thinking within
the framework of existing accounts. Thus, the two
departments tend to have a severe communication
problem.
In conventional cost accounting, the aggregation of
environmental and non-environmental costs in overhead
accounts results in their being hidden from management. There is substantial evidence that management
tends to underestimate the extent and growth of such
costs. By identifying, assessing and allocating environmental costs, EMA allows management to identify
opportunities for cost savings and to actually calculate
cost savings of performed projects and investments.
Prime examples are the savings that can result by replacing toxic organic solvents by non-toxic substitutes, thus
eliminating the high and growing costs of regulatory
reporting, hazardous waste handling and other costs
associated with the use of toxic materials. Many other
examples deal with more efficient material use, highlighting the fact that waste is expensive not because of
disposal fees but because of the wasted material purchase value.
Environmental costs comprise both internal and
external costs and relate to all costs incurred in relation
to environmental damage and protection. Environmental protection costs include costs for prevention, disposal, planning, control, shifting actions and damage
repair that can occur in companies, governments or
people (VDI, 20002). The book only deals with corporate

environmental costs. In this analysis external costs,

which result from corporate activities but are not
internalized via regulations and prices, are not considered. It is the role of governments to apply political
instruments such as eco-taxes and emission control regulations in order to enforce the polluter pays principle
and thus to integrate external costs into corporate calculations.
What then are corporate environmental costs? Costs
incurred to deal with contaminated sites, effluent control
technologies and waste disposal may first come to mind.
Measures for environmental protection comprise all
activities taken for legal compliance, compliance with
own commitments or voluntary initiatives. Economic
effects are not used as criteria, but the effect on prevention or reduction of environmental impacts is (VDI,
2000).
Corporate environmental protection expenditure
includes all expenditures for measures for environmental
protection of a company or on its behalf to prevent,
reduce, control and document environmental aspects,
impacts and hazards, as well as disposal, treatment, sanitation and clean-up expenditure (see Table 1). The
amount of corporate environmental protection expenditure is not directly related to the environmental performance of a company (VDI, 2000).
For company internal calculation of environmental
costs, expenditures for environmental protection are only
one side of the coin. The costs of waste and emissions
include much more than the respective pollution prevention or treatment facilities.
The concept of waste has a double meaning. Waste
is a material which has been purchased and paid for but
which has not been turned into a marketable product.
Waste is therefore indicative of production inefficiency.
Thus, the costs of wasted materials, capital and labor
have to be added to arrive at total corporate environmental costs and a sound basis for further calculations and
decisions. Waste in this context is used as a general term
for solid waste, waste water and air emissions, and thus
comprises all non-product output. Materials include
water and energy.

2
VDI, the German Association of Technicians, together with German Industry representatives, have developed a guidance document

on the definition of environmental protection costs and other terms of

pollution prevention, VDI, 2000.

Table 1
Total corporate environmental expenditure
Environmental Protection Expenditure (Waste Disposal and
Emission Treatment, Environmental Management and Pollution
Prevention)
+
+
=

Costs of wasted material

Costs of wasted capital and labor
Total corporate environmental costs

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C. Jasch / Journal of Cleaner Production 11 (2003) 667676

The approach taken is based on the underlying

assumption that all purchased materials must by physical
necessity leave the company either as product or waste
and emissions. Waste is thus a sign of inefficient production. Therefore when calculating environmental
costs, not only disposal fees are regarded, but the wasted
material purchase value and the production costs of
waste and emissions are added.
Adding the purchase value of non-material output
(waste, waste water) to the environmental costs, makes
the share of environmental costs higher in relation to
other costs. However, it is not the goal of this paper to
show that environmental protection is expensive. It is
also not the most important task to devote a lot of space
to defining exactly which costs are environmental or
which costs are not, or what percentage of something is
environmental or not.
The most important goal of using EMA is to make
sure that all relevant, significant costs are considered
when making business decisions. In other words,
environmental costs are just a subset of the bigger cost
universe that is necessary for good decision making.
Environmental costs are part of an integrated system
of material and money flows throughout a corporation,
and not a separate type of cost altogether. Doing
environmental management accounting is simply doing
better, more comprehensive management accounting,
while wearing an environmental hat, that opens the
eyes for hidden costs. Therefore, the focus of material
flow cost accounting is no longer on assessing the total
environmental costs, but on a revised calculation of
production costs on the basis of material flows.
In the methodology presented, the environmental cost
assessment scheme is first used for the assessment of
annual corporate environmental expenditures including
wasted materials of the previous year. Subsequently, a
breakdown to cost centers and processes can be performed. The focus of EMA is not on disclosure of annual
environmental costs, but for further internal calculation,
annual expenditure is the first step in a topdown
approach of environmental cost management. Annual
expenses are the best available data source, a further
distinction into cost centers, processes, products and
material flow balances should be done in a step by step
procedure while gradually improving the information
system. Calculating savings, investment options or estimating future price changes requires consideration of
future costs and is dealt with separately. Social costs
need to be assessed by using a completely different
approach, as most of the costs besides wages, social
security, taxes and voluntary benefits, which are
recorded in the books, occur outside the company and
external effects and need to be estimated.

4. Environmental cost categories

The first category of environmental costs comprises
conventional waste disposal and emission treatment
costs including related labor and maintenance materials
(materials only, if they are recorded on related cost
centers). Insurance and provisions for environmental
liabilities also reflect the spirit of treatment instead of
prevention. The first section corresponds to the conventional definition of environmental costs comprising all
treatment, disposal and clean-up costs of existing waste
and emissions.
The second block is termed prevention and environmental management and adds the labor costs and external services for good housekeeping as well as the
environmental share of integrated technologies and the
scrap share of operational plants, if significant. The
main focus of the second block is on annual costs for
prevention of waste and emissions, but without calculated cost savings. The other focus is on higher pro-rata
costs for low-emission process technologies and the
efficiency loss of production equipment determined by
scrap percentages. From the thus defined production
facilities the scrap percentage of depreciation is added
to the environmental costs. Thirdly, the costs related to
the environmental management system are determined.
Conventionally, three production factors are distinguished: materials, capital (investments, related
annual depreciation and financing cost) and labor. The
next two blocks consider the costs of wasted material,
capital and labor due to inefficient production and condense the core information for material flow cost
accounting.
In the third block, the wasted material purchase
value is added. From the material flow balance sheet,
all material inputs (including energy and water) are
assessed for their share of non-product output (scrap percentage, efficiency losses). Wasted materials are evaluated with their material purchase value or materials consumed value in case of stock management.
Lastly, the production costs of non-product output
are added with the respective production cost charges,
which include labor hours, depreciation of machinery
and operating materials. Care has to be taken to avoid
double counting with costs already taken care of under
other cost categories. This mainly depends on the quality
of data availability and information systems. In activity
based costing and flow cost accounting the flows of
residual materials are more precisely determined and
allocated to cost centers and cost carriers.
Environmental revenues derived from sales of waste
or grants of subsidies are accounted for in a separate
block.
Costs that are incurred outside the company and borne
by the general public (external costs) or that are relevant
to suppliers and consumers (life cycle costs) or social

C. Jasch / Journal of Cleaner Production 11 (2003) 667676

costs are not dealt with, as they dont show up in the

companys accounts and need a completely separate
assessment methodology.
Table 2 shows the environmental cost assessment
scheme developed for the UN-DSD EMA working
group. The workbook provides more information on the
different cost categories. The media follow the distinction of the Environmental Protection and Resource Management Accounts of the System of integrated Environmental and Economic Accounting (SEEA) developed by
the United Nations Statistics Division.

5. Why does EMA not include social costs and

externalities?

Environmental management accountingEMAhas

been developed coming from conventional expenditure
for waste treatment facilities, disposal fees, environmental protection and management costs and related issues.
EMA adds a significant further cost factor, that is vital
for internal calculation, as a decision basis for investment projects and for correct product pricing: the purchase value and production costs of all non-product output. It is calculated by multiplying the input side of the
material flow analysis in tons, that is normally set up for
environmental management projects and reporting, with
the respective scrap (or efficiency loss) percentages of
each material input. Waste is thus expensive not because
of disposal fees, but because of wasted material purchase costs.
All these costs actually occur in the company, only
they are normally not traced and transparent. Therefore,
they are neglected for decision making. It is the focus
of the UN EMA methodology to make them visible.
Externalities, in contrast, occur outside the company
and dont show up in its accounts. Environmental and
social costs to the general public are also evaluated by
completely different methodologies, there is no purchase value in the books, but damage costs and availability values are estimated.
EMA in its current approach has been developed for
company internal decision making and therefore focuses
on tracing all real environmental and material efficiency
loss expenditure for a given year. The focus is on
improving a companys information system and decision
basis. The focus is not on estimating external effects and
soft factors, such as image, credibility, ethics, as from
an accountants perspective they will sooner or later be
reflected in the annual accounts, but should not distort
the cost basis of a previous year. For the calculation of
investment projects and savings, however, these factors
are considered.

671

6. Example of the pulp and paper company SCA

Laakirchen
Within the Swedish pulp and paper company SCA,
quantification and interpretation of environmental costs
related to investment decisions and their effects on
waste, emissions and long term profits is an important
issue. SCA Graphic Laakirchen, Austria, has been
assessing environmental costs for years. Since 1999,
they participated in the pilot testing for the EMA scheme
for UN DSD and published the results in their environmental statement for 2000.3 The explanations and Table
3 are taken from there.
Table 3 shows the percent distribution of environmental costs for SCA Laakirchen in the year 2000. The total
environmental costs for 2000 were to Euro 23,758.510,
and are 30% above the costs for 1999. This strong
increase is due to raised prices for raw and operating
materials and natural gas.
The distribution by environmental media shows that
the column water/waste water is responsible for 44% of
all environmental costs. Annual operating costs for the
waste water treatment plant count for 13%, but the purchase costs of the paper chemicals going down with
waste water account for 32% of the costs. A reduction of
paper chemicals is therefore much more important when
searching for potential for cost reduction.
Wasted materials account for 30% of all environmental costs. Disposal fees are only 3.6%, but the major
share is raw materials in the waste fraction (26.6%
including processing costs).
Under the category air and climate the efficiency
losses of the sites gas combustion are assessed. The
sharp increase in the price for gas has raised the share
of this cost category from 19.9% in 1999 to 24.6% in
2000. The costs of external electricity purchase have not
been added, as it is mainly used for administration, not
production, and the efficiency loss could not be estimated seriously in the cost assessment.
Analysing the environmental costs by cost categories
makes obvious that the highest share is the material purchase value of non-product output (80.4%), which is calculated from all raw, auxiliary and operating materials
in the mass balance that dont leave the company within
the product.
The earnings in the waste and waste water columns
arise from selling of recyclable materials and from providing treatment capacity of the waste water plant to
other companies nearby. The research project on electrochemical waste water treatment, which is also included
under costs for research and development, was partly

3
SCA Graphic Laakirchen AG, Environmental Report 2000,
EMAS statement, www.sca.at.

Air+climate

Waste
water

1. Waste and emission treatment

1.1. Depreciation for related
equipment
1.2. Maintenance and operating
materials (if not included under
section 3.4.) and services
1.3. Related personnel
1.4. Fees, taxes, charges
1.5. Fines and penalties
1.6. Insurance for environmental
liabilities
1.7. Provisions for clean-up
costs, remediation
2. Prevention and environmental management
2.1. External services for
environmental management
2.2. Personnel for general
environmental management
activities
2.3. Research and Development
2.4. Extra expenditure for
cleaner technologies and scrap
percentage of operational plants
2.5. Other environmental
management costs
3. Material purchase value of non-product output
3.1. Raw materials
3.2. Packaging
3.3. Auxiliary materials
3.4. Operating materials
3.5. Energy
3.6. Water
4. Processing costs of nonproduct output
Environmental expenditure
5. Environmental revenues
5.1. Subsidies, awards
5.2. Other earnings
Environmental revenues

Environmental media
Environmental cost/expenditure
categories

Table 2
Environmental Cost Assessment scheme

Waste

Soil+ground
water

Noise+vibration

Biodiversity+landscape

Radiation

Other

Total

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C. Jasch / Journal of Cleaner Production 11 (2003) 667676

C. Jasch / Journal of Cleaner Production 11 (2003) 667676

673

Table 3
SCA Laakirchen: percent distribution of environmental costs for 2000
Environmental mediaa

Air and
climate

Waste water

waste

3.2%
5.0%

0.5%

1.6%
1.3%

0.7%
3.6%

Soil and
groundwater

other

Total

Environmental costs categories

1. Waste and emission treatment
1.1. Depreciation for related equipment
0.2%
1.2. Maintenance, operating materials and
services
1.3. Related personnel
0.8%
1.4. Fees, taxes, charges
0.7%
1.5. Fines and penalties
1.6. Insurance for environmental liabilities
1.7. Provisions for clean-up costs, remediation
2. Prevention and environmental management
2.1. External services for environmental
management
2.2. Personnel for general environmental
0.1%
management activities
2.3. Research and development
2.4. Extra expenditure for cleaner technologies
2.5. Other environmental management costs
3. Material purchase value of non product output
3.1. Raw materials
3.2. Packaging
3.3. Auxiliary materials
3.4. Operating materials
0.1%
3.5. Energy
22.6%
3.6. Water
4. Processing costs of non product output
Total environmental costs
24.6%
5. Environmental earnings
5.1. Subsidies, awards
5.2. Other earnings
Total environmental earnings
Balance costs/earnings
a

24.6%

3.9%
5.1%

0.1%

3.1%
5.7%

0.1%

0.1%

0.9%

1.0%

1.5%

1.5%

32.0%

23.0%
0.1%
2.1%
0.5%

0.1%
0.2%
44.9%

0.9%
31.3%

0.8%
0.2%
1.0%

0.9%
0.9%

44.0%

30.3%

0.1%

1.0%

23.0%
0.1%
2.1%
32.5%
22.6%
0.1%
1.0%
101.9%
0.8%
1.1%
1.9%

0.0%

1.0%

100.0%

Without the categories noise and vibration, biodiversity and landscaping and radiation.

funded by the Austrian Industrial Research Promotion

Funds (FFF).

7. Material flow balance

The basis of environmental performance improvements and for assessing the amounts and costs of nonproduct output (NPO) is the recording of material flows
in kilograms by an InputOutput analysis. The system
boundaries can be on the corporate level, or further split
up to sites, cost centers, processes and product levels.
The material flow balance is an equation based on the
idea that what comes in must go outor be stored. In
a material flow balance, information on both the
materials used and the resulting amounts of product,
waste and emissions are stated. Materials include energy
and water. All items are measured in physical units in
terms of mass (kg, t) or energy (MJ, kWh). The pur-

chased input is cross-checked with the amounts produced and sold as well as the resulting waste and emissions. The goal is to improve efficiency of material
management both economically and environmentally.
A material flow balance can be made for a few selected materials or processes, or for all materials and wastes
of an organization. The purpose of working to quantify
the process balances is to track materials on their way
through the company. The starting point is often at the
corporate level, since much information is available on
this system boundary. Also, this level is used for disclosure in environmental reports.
During their first environmental review, companies
mostly draw up a screening material flow balance and
do not go into much detail. On this basis, knowledge is
gained on where to focus to achieve improvements in
performance and information gathering. By improving
the quality of the information available and the consistency of information systems, a regular monitoring sys-

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C. Jasch / Journal of Cleaner Production 11 (2003) 667676

tem can be established. This monitoring system shows

resource input and production and waste output on a
monthly basis. As a next step, the material flows can be
subdivided further according to processes and cost centers, and they can then also be subjected to monetary
evaluation.
Table 4 shows the generally applicable structure of
the inputoutput balance at corporate level, which could
also be used for environmental reporting. Specific subcategories will be needed for different sectors, but it should
be possible to aggregate them in a standardized manner,
in order to be able to compare them. For EMA, the input
side is evaluated for the material loss percentage of each
material input, based on scrap percentages, efficiency
conversions, etc. and then multiplied with the respective
purchase value.
The inputoutput balance at the corporate level is
drawn up on an annual or a monthly basis and should
be linked to the bookkeeping, cost accounting, storage
and purchase systems. All material flows should be listed
with their values and amounts per year. The assessment
scheme for the material flow balance should therefore
record the amounts in kilograms, the values and the corresponding accounts. In addition, it should indicate
whether materials are registered by material stock number and whether there is inventory management. It
should also indicate whether there is consumption based
stock withdrawal according to cost centers. As the first
step in setting up the materials inputoutput statement
at the corporate level, quantitative data are collected
from the accounting and stock-keeping systems. The
accounting system offers annual data on input into the
company as a whole, as well as some of the output (if
Table 4
General inputoutput chart of accounts
Input in kg/kWh

Output in kg

Raw materials
Auxiliary materials
Packaging
Operating materials
Merchandise
Energy
Gas
Coal
Fuel oil
Other fuels
District heat
Renewables (biomass, wood)
Solar, wind, water
Externally produced electricity
Internally produced electricity
Water
Municipal water
Ground water
Spring water
Rain/surface water

Product
Main product
By-products
Waste
Municipal waste
Recycled waste
Hazardous waste
Waste water
Amount
Heavy metals
COD
BOD
Air-Emissions
CO2
CO
NOx
SO2
Dust
FCKWs, NH4, VOCs
Ozone depleting substances

it is paid for). All materials purchased during a year must

either leave the company as a product, as waste or emission, or are stored on site.
Table 5 shows the assessment scheme for the
materials inputoutput flow balances. The sign indicates the likely source of the data or which records are
likely to be available. The objective should be to gradually improve the recording of material flows on a step by
step procedure. The goal is not to have full and complete
information in the first year but to gradually trace
materials as completely and consistently as possible, in
storage administration, cost centers and in production
planning. The starting point are the raw materials, then
auxiliary and packaging, lastly operating materials.
Improvement options on that way relate to the system
of material stock numbers and control procedures, but
also to the estimates and control of scrap percentages
and other points of measurement in the company.
8. Process flow charts and stock management
The next step after environmental cost assessment and
material flow balances have been done on a corporate
level is to allocate the data from the system boundary
of the company fence to internal processes.
Process flow charts, which trace the inputs and outputs
of material flows on a technical process level, give
insights into company-specific processes and allow the
determination of losses, leakages and waste streams at
the originating source. This requires a detailed examination of individual steps in productionagain in the
form of an inputoutput analysis, but sometimes linked
to technical Sankey diagrams. The process flow charts
combine technical information with cost accounting
data. They are not done on a yearly basis but for a specified production unit, machinery or cost center. In total,
they should aggregate to the annual amount (Fig. 1).
This level of material flow analysis will be the
responsibility of technicians, but the data gathered
should be cross-checked to ensure consistency with the
cost accounting system. Usually a harmonization of
technical data with data from financial bookkeeping is
not undertaken due to lack of inter-departmental communication. Experience has shown that such a consistency check provides great optimization potentials, and
has thus become a major tool in environmental accounting. Therefore it is desirable for the technical and financial bookkeeping to be conducted in a compatible way.
Splitting up the corporate flows into cost centers, or
even down to specific production equipment, allows for
more detailed investigation of technical improvement
options, but also for tracing the sources of costs. Special
attention should be drawn to the quantitative recording
of materials on a consistent kilogram basis. The key
questions answered by the approaches of activity based
costing and cost flow accounting are:

Raw materials

Auxiliary
materials

Packaging

Operating
materials

Energy

Water

Product

Waste

Waste water

Airemissions

Account
number

Amount in Purchase
kg. kWh, l value

Assessment
scheme for
material flow
balances

Table 5
Assessment scheme for material flow balances

Material
stock
number

Stock
keeping

Production
planning
system

Direct
costs

Overhead

Assigned to Other records/measurements Calculation/estimates

cost center

C. Jasch / Journal of Cleaner Production 11 (2003) 667676

675

676

C. Jasch / Journal of Cleaner Production 11 (2003) 667676

Fig. 1.

Process flow charts: opening of the Black Box.

What cost center have processed how much of the

materials?
Can material input be further divided into production
lines or specific equipment?
How large were the resulting emissions, scrap and
waste, preferably recorded separately for each cost
center, production line and machinery?
What is the correct allocation of costs to products,
thus, reducing the amount of costs hidden in overhead
cost categories?

9. Future developments
The book on EMA for UN DSD focuses on the basics
of different accounting procedures and opportunities for
their improvement by determination of annual environmental expenditure, cost of non-product output, cost
accounting for material flows and decreased allocation
to overhead cost categories. The application of the principles focuses on indicator development and investment appraisal.
Another area of application is reporting. There is a
trend from separate financial and environmental
reporting towards combined sustainability reports. There
is little merit in the long term in the development of
environmental verification principles and financial statement audit principles on separate tracks, as in principle
they should be the same.
The European Commission has firmly rejected a regulatory approach to corporate social responsibility or
environmental reporting, but invites companies to voluntarily disclose their efforts. Thus, most companies refer
to the guideline by the Global Reporting Initiative, GRI,
which lists indicators in the triple bottom line areas. The
performance indicators are grouped into environmental,

economic, social and integrated indicators. The last type

links a companys performance to the macro-level
(termed systemic indicator) or tries to bring together
two or more dimensions of sustainability (termed crosscutting indicators).
Although companies find it difficult to assess external
costs and benefits (systemic indicators), what they do
often disclose still are data on the environmental investments and annual operating costs. These indicators can
be seen as examples of cross-cutting indicators between
the environmental and the economic sustainability
dimension. As most of these figures are derived from the
cost accounting system, their reliability can be traced
with standard methods, but emphasis has to be on a clear
definition of what is included under environmental
costs so that the data are compatible with next years disclosure.
It makes a significant difference, when companies
report about how much they spent on environmental protection, whether this spending incurred for traditional
end of pipe technologies and fines for polluting, or for
staff training on EMS and nature conservation sponsorship or whether the costs of non-product output have
been included. Thats why the cost categories are distinctly separated and should be disclosed separately. In
some countries like Japan and Germany, the statistical
agencies require this sort of information, distinguished
into environmental media, so the columns of the
environmental costs assessment scheme follow the distinction proposed by SEEA 2000.
Most important, there is little merit in two separate
information systems in an organization, one for financial
and cost accounting, the other for process technicians,
when in principle these information systems should
be the same or at least consistent, following the
material flows through the company.

Reference
[1] Jasch C. Environmental Management AccountingProcedures
and Principles. New York: United Nations, 2001.
Christine Jasch is founder and manager of the Vienna Institute for
W. She studied Political
Environmental Management and Economics, IO
Economy, Business Administration and Agriculture and works as an independent Tax Advisor and Certified Public Accountant in Vienna. Her
scientific emphasis at the Institute lies in the linkage of business and political economic instruments with environmentally relevant criteria and
methodologies as well as their further development as a decision tool for
environmental management. She is the Austrian delegate to ISO TC 207
Environmental Management, and to the Sustainability Working Party of
the Federation des Experts Comptables Europe ens (FEE) in Brussels. She
was accredited as lead verifier under the EMAS regulation in December
1995.