Chemical management services:

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International Activities and Trends in
Environmental Management Accounting (EMA)
Deborah Savage, Ph.D. Director EMA Research
Information Center (EMARIC) dsavage_at_emaric.org
www.EMAwebsite.org

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What is EMA?

• There are many alternative definitions, but
  broadly defined
• EMA is the identification, collection, analysis,
  and use of two types of information for internal
  decision-making
• Physical information on the use, flows, and fates
  of energy, water, and materials (including
  wastes)
• Monetary information on environment-related
  costs, earnings, and savings
• EMA Expert Working Group of the
• United Nations Division for Sustainable
  Development

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Why was EMA Developed?

• EMA was conceived in recognition of some of the
  limitations of conventional practices for
  informing environmental management decisions
• insufficient tracking of energy, materials, and
  wastes
• hiding of costs in overhead accounts and
  elsewhere in the accounting records
• lack of data on future and less tangible costs in
  the accounting records at all
• Insufficient communications between the
  accounting and other departments/staff, e.g.,
  production, environmental, research

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Potential Benefits of EMA
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The Globalization of EMA

• 1992 US Environmental Protection Agency was
  first national government agency to establish a
  formal EMA program
• 1998 EMA Networks (EMAN) in Europe,
  Asia-Pacific, the Americas
• 1999 Expert Working Group on EMA convened by
  the United Nations Division for Sustainable
  Development (UNDSD)
• 2002 International EMA Website
• 2004 EMA activities in over 30 countries
• 2005 International Guidance Document

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EMA Around the World
EUROPE Austria Czech Rep. Finland Germany
Italy Netherlands Portugal Spain Slovak
Rep. Sweden UK
THE AMERICAS Argentina Brazil Canada Colombia Guat
emala Nicaragua Peru USA
ASIA-PACIFIC Australia Japan Philippines Rep. of
Korea Singapore Taiwan Thailand Vietnam
AFRICA Egypt South Africa Tanzania Zimbabwe
These lists are not comprehensive
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Example from North America

• United States
• EMA for Supply Chain Management
• Chemical Management Services (CMS) model
• EMA used to track flow of chemicals chemical
  wastes within the company, and estimate all
  associated costs
• Information used to design and implement
  contracts with suppliers of chemical management
  services
• Model is spreading in the US
• 50 - 80 of the auto industry
• 35 of the electronics industry
• 20 of the metalworking industry
• 10 of the aerospace industry

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Example from Asia-Pacific

• Philippines
• EMA for Cleaner Production (CP)
• EMARIC Philippine Institute of
• CPAs (PICPA) other partners
• Training course on Cleaner Production
• and Environmental Cost Assessment
• For practicing accountants their
• non-accounting colleagues
• Course popularity led to incorporation
• of EMA into the academic accounting
• curriculum requirements

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Example from Europe

• Germany
• Materials Flow Cost Accounting
• University of Augsburg and the
• Institute of Management Environment
• Map materials flows and
• information flows in an organization
• Attach quantitative data on materials
• amounts and costs
• Look for information mismatches, missing
  materials, opportunities to save money, etc.
• Make information system improvements

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UNDSD Expert Working Group on EMA

• UNDSD United Nations Division
• for Sustainable Development
• EMA Working Group established in 1999
• Core members are government representatives from
  30 countries
• Other members include invited representatives of
  accounting associations, academia, business, etc.
• Group has met 8 times, each time in a different
  country
• Group has discussed many international topics of
  debate surrounding EMA

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International Consensus (1)
What kind of information does EMA include?
Only monetary information? Physical information
also?
Growing international consensus both It
is difficult to do good cost accounting without
doing good materials accounting first
(especially in manufacturing)
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International Consensus (2)
Which environment-related costs?
Growing international consensus be
comprehensive Do not leave out any potentially
significant costs, earnings, or savings
especially the costs associated with wasted raw
materials
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International Consensus (3)
How can or should EMA information be used?
Primarily for internal management? For external
reporting also?

• Growing international consensus both
• EMA information can/does inform
• Internal management decision-making (e.g., CP,
  SCEM, EMS, etc.)
• External reporting (e.g., financial,
  environmental, sustainability, statistical)

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International Consensus (4)
What are the best EMA implementation
methodologies?
Growing international consensus will vary
from case to case, but some best practices can
probably be identified
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EMA Guidance Document for the International
Accounting Community

• Facilitator UNDSD Expert Working Group
• Funders UNDSD as well as governments of US, UK,
  Japan, Germany, Austria
• Authors EMARIC (USA) and IOEW (Austria)
• Reviewers nominated experts, the UNDSD group,
  the public
• Organizer of Public Review Process and
  Publication International Federation of
  Accountants (IFAC) Board of Directors
• Published Aug 24, 2005

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Why More Guidance Now?

• Some of the existing guidance is
• Focused on a particular national audience (with
  national case studies)
• Focused on a particular end-use of EMA
  information (e.g., solid waste management, P2/CP,
  external reporting, supply chain management)
• Outdated (because the field is evolving so
  quickly)
• Still considerable confusion on definitions and
  language
• There are no international standards or guidance
  endorsed by an international accounting
  organization

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Important to note

• An introductory guidance document, not a
  day-to-day implementation manual
• Primary audience is accountants, but because EMA
  is so interdisciplinary, document was also
  written with other audiences in mind, e.g.,
  technical experts, environmental managers,
  production supervisors, etc.
• Manufacturing focus, because the most EMA
  experience to date available there, but also
  relevant to other sectors (e.g., service sector,
  government)
• Written for an international audience (with
  varying practices and language)

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Chapters 1 2

• CHAPTER 1 INTRODUCTION CONTEXT
• Why Care about Environmental Issues?
• Accounting Concepts and Language
• Environmental Accounting Context, Concepts, and
  Language
• CHAPTER 2 EMA DEFINITION(S), USES, BENEFITS,
  AND CHALLENGES
• What is EMA?
• Types of Information included under EMA
• Uses and Benefits of EMA
• EMA Challenges - Current Accounting Practices

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Chapter 3

• PHYSICAL INFORMATION FLOW OF ENERGY, WATER,
  MATERIALS, AND WASTES
• Physical Information
• Materials Inputs
• Product Outputs
• Non-Product Outputs (Waste and Emissions)
• Materials/Mass Balances
• Physical Environmental Performance Indicators

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Chapter 4

• MONETARY INFORMATION ENVIRONMENT-RELATED COSTS
  AND EARNINGS
• Cost Categories
• Waste Emission Control Costs
• Prevention Other Environmental Management Costs
• Research Development Costs
• Materials Costs of Non-Product Outputs
• Materials Costs of Product Outputs
• Less Tangible Costs
• Monetary Environmental Performance Indicators
• Environment-related Earnings and Savings
• Distribution of Costs by Environmental Domain

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Chapter 5

• SELECTED EXAMPLES OF EMA APPLICATIONS FOR
  INTERNAL MANAGEMENT
• Examples of Applications at
• The Site Organization Level
• The Materials Level
• The Project Level
• Examples from Argentina, Austria, Germany, Japan,
  the Netherlands, the UK, and the USA.
• Illustrate the use of EMA to support supply chain
  management, logistics management, investment
  appraisal, development of environmental
  performance indicators, environmental cost
  tracking, etc.
• Illustrate the efficiency benefits of EMA for
  both business and government, and the links
  between physical and monetary information

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Chapter 6

• SELECTED EXAMPLES OF EMA APPLICATIONS AND LINKS
  TO OTHER TYPES OF ACCOUNTING AND REPORTING
• Examples of Links to
• National Accounting Reporting
• Financial Accounting Reporting
• Corporate Environmental Performance Reporting
• Examples from Australia, Denmark, Japan, the UK,
  the European Commission, and the United Nations
• Illustrate similarities and differences between
  the types of information collected under these
  schemes compared to EMA
• illustrate the potential for EMA to inform these
  schemes, and vice-versa

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For More Information

• The International Guidance Document on EMA is
  available on the IFAC website
• http//www.ifac.org/News/LastestReleases.tmpl?NID
  1124902574170148
• Introductory Brochures on EMA for business or
  government are available on the UN website
• http//www.un.org/esa/sustdev/publications/EMABusi
  ness.pdf
• http//www.un.org/esa/sustdev/publications/EMAGove
  rnment.pdf
• Many other resources are available on the
  International EMA website
• http//www.EMAWebsite.org