Environmental Project, 1069 – Perspectives in the Development and Application of Environmental Management Accounting

Perspectives in the Development and Application of Environmental Management Accounting

4 Best practice experience

This part of the report gives a number of examples of international experience with EMA based on interviews with selected foreign enterprises that have worked with EMA for a number of years.

For each enterprise the following is described:

How EMA is used in the enterprise
How EMA has been implemented and any barriers during implementation
The results of the work with EMA

This chapter is intended for inspiration for the use of EMA as it provides an overview of very different types of enterprise and organisation that use EMA in very different manners.

The chapter also provides an insight into some of the barriers enterprises may meet when implementing EMA as well as examples of results of EMA work.

This chapter can also be seen as a status of how far enterprises have come in the use of EMA in practice as a comparison with the research described in the last chapter.

4.1 Methods

Seven enterprises have been selected as examples of best practice within EMA. This identification was carried out on the basis of a poll among the Environmental Management Accounting Network (EMAN) in 2004. Members were asked to identify those enterprises they viewed as representative of best practice within EMA. Among these enterprises, the final selection was carried out on the basis of a criterion of being able to gather as wide a range of experience as possible. Different countries and different business sectors were thus included, ranging from a local authority in Australia to a chemicals company in Germany. This also shows how many different types of enterprise work with EMA.

The concept `best practice' has not been defined as such and the members of EMAN were given the task of selecting the enterprises they thought fit the designation `best practice'. We assumed that because of their knowledge and commitment within EMA, EMAN members were able to point out the enterprises that use EMA and have a certain amount of experience with it. Thus, we cannot expect these enterprises to be representative for their business sector nor for their country. However, together they do provide an indication of what EMA can be used for.

The enterprises selected and interviewed were:

	Name	Sector	Country
1.	Ericsson	Telecommunications and equipment	Sweden
2.	Eurobodalla Shire Council	Local authority	Australia
3.	BAA	Airports	UK
4.	Wessex Water	Water management/sewerage services	UK
5.	AWG plc.	Retail/utility services	UK
6.	Schott	Production: Glass	Germany
7.	BASF	Production: Chemicals	Germany

The relevant contact persons (normally the head of environment) in the enterprises were interviewed over the telephone during the period December 2004 - January 2005 on the basis of a question guide that contained questions related to e.g. the use of EMA, which departments were involved in the implementation, the use of IT systems and the significance of EMA for the enterprise's financial and environmental performance.

All interviews were recorded on tape and a summary of the content was subsequently transcribed and used as a basis for the descriptions in the following sections of this report.

4.2 Ericsson - Sweden

Ericsson is the world's largest supplier of mobile systems and delivers complete solutions within mobile telephony, the Internet and multimedia as well as services within these areas. Other areas include defence systems and network technology, which represent a smaller part of the turnover. Through a joint venture with Sony established in 2001, the enterprise sells mobile telephones and other personal communications articles. Ericsson has around 50,000 employees throughout the world, but the majority work in Sweden. Ericsson's main markets are North America and China. Please go to www.ericsson.com for more information about Ericsson.

4.2.1 Use of EMA

As early as in 1992, Ericsson presented an environmental report and has done so ever since. In recent years, EMA has been placed on the agenda as a tool in the enterprise's environmental management on the same level as e.g. lifecycle analyses (LCA).

For Ericsson the work with EMA involves collection of environmental and financial data as well as a presentation of these to the relevant decision makers. This information is mainly used in the enterprise's production facilities, particularly in relation to waste management. Especially as regards waste management, Ericsson sees EMA as a powerful tool since it shows clear financial benefits from minimising waste.

Moreover, `Ecology Management' is mentioned in relation to financial calculations where the enterprise takes back used equipment (e.g. office equipment, industrial measuring apparatus, etc.) and recycles it. In addition to recycling benefiting the environment, the enterprise also saves administration and transport costs.

Benchmarking is another area where EMA is used and here different departments and facilities are being measured and compared both environmentally and financially. In this connection EMA is deemed to contribute to a number of improvements in relation to the enterprise's environment-related strategy and create motivation for improvement.

4.2.2 Implementation of EMA

Ericsson has not experienced any specific barriers in relation to the implementation and use of EMA. However, there were some areas where it was difficult to gather data, but this has not prevented the EMA initiatives.

Mainly engineers and employees with an environmental background work with EMA at Ericsson.

No changes have been made in relation to Ericsson's IT systems in connection with environmental management in general or EMA in particular. However Ericsson does use a tailored Stand-Alone Application for the preparation of LCA.

4.2.3 Results

Since 1992, when the first environmental report was published, Ericsson has improved its environmental performance, but it is hard to assess causal relations between the various initiatives and these improvements. It is thus also hard to assess the correlation between financial performance and the use of tools like EMA, since many variables are involved.

Ericsson believe that it is important to carry out measurements on the basis of the philosophy: `What gets measured gets done'. In this way, specific targets can be set and the measurements can be compared with these targets, and this helps the enterprise improve and develop. This may be one of the most important aspects of the use of EMA at Ericsson since EMA places the environment in a financial context.

4.3 Eurobodalla Shire Council - Australia

Eurobodalla Shire Council (ESC) has about 400 employees and is situated on the southern coast of New South Wales, close to Sydney and Canberra. It is a large tourist area with about 34,000 permanent residents and about 100,000 residents during the high season. The area has one of the highest population growth rates in New South Wales. Eurobodalla Shire has extensive industry that includes cheese factories and flower exports as well as tourism. Besides tourism, both the retail and the service industries are growing rapidly. Agriculture and fisheries are also important, but they are declining. Please go to www.esc.nsw.gov.au for further information about the shire.

4.3.1 Use of EMA

In Eurobodalla Shire Council, EMA is defined as an element of the Shire's Triple Bottom Line statements. Triple Bottom Line (TBL) entails a statement of environmental, social and financial conditions in connection with the assessment of ESC's sustainability strategy. Furthermore, EMA is part of ESC's overall `Management Plan' which contains a plan for the next four years for local authority areas such as conservation of nature, business development, transport, education, etc. Environmental protection plays an important role in the plan, especially in relation to water management, one of the Shire's main focus areas.

On the basis of the three dimensions of the sustainability concept, ESC wishes to improve its methods of valuing social and environmental resources in order to make better decisions. In addition to procuring information for internal decision-making, the Shire also wishes to provide its residents with credible information and to encourage and facilitate effective participation by the local community in the decision-making process. This was one of the contributing factors when ESC started using TBL.

An important concept in ESC's TBL method is the concept of capital. The concept is divided into human or infrastructural capital, natural capital and social capital. Within these types of capital, ESC defines a number of assets they have at their disposal or assets they influence through their actions/activities. Then the TBL method is applied to calculate the costs related to carrying out or not carrying out an action or activity. A separate report accounting for these costs is published together with ESC's annual report.

Today ESC prepares a `State of the Environment Report' (SoER), a Condition of Public Works Report (CoPW) and a Social Plan (SP). These reports describe the status of the natural, infrastructural and social capital and contain recommendations for actions to be carried out by the Shire.

The Shire's strategic goals are also based on TBL. Any report received by senior officials and politicians usually contains an assessment of the political, legislative, environmental, social and economic effects.

Every quarter, an Executive Information Report (EIR) is prepared for ESC analysing the organisation's performance and trends regarding customers, employees, the environment, assets and finance including proposals for continuing positive, or stopping negative, developments.

Special reporting forms are used on which expenses and income related to the different asset types as well as changes in asset values are to be registered. These forms are based on the classification proposed by the UN System of Integrated Environmental and Economic Accounting (SEEA) ^[1] and the Australian Bureau of Statistics (ABS). For example, the forms are used in connection with approval of expenses or investments in projects or activities.

4.3.2 Implementation of EMA

In connection with the implementation of EMA, the Shire encountered a few barriers which primarily originated in the political and administrative employees' insecurities about what EMA actually was. However, these insecurities have slowly diminished through, for example, the Management Plan.

Internally in ESC, the highest management levels, both administratively and politically, usually make use of the EMA information, but the information is also used by the general public through the environmental reporting which is also a part of the Shire's TBL accounting.

The implementation of EMA has resulted in a change as regards the data warehouse system with a view to making data easily accessible. Moreover, the implementation has caused the development of more in-house databases to support a number of areas. However, the implementation has not resulted in actual integration of systems or databases.

4.3.3 Results

According to ESC, EMA has meant that the Shire's environmental performance has improved, e.g. in connection with water treatment and waste management. According to the Shire, this has created a better reputation with both citizens and state authorities

Moreover ESC believes that EMA has had a positive influence on the general appreciation of the environment because the value of the environmental protection is measured in monetary terms. Recycling has also become more widespread in Australian society where previously it was limited to the smaller communities which had to recycle for financial reasons arising from the large distances to towns.

Furthermore EMA has led to a more formal registration and control of activities, budgets and expenses and thus acknowledgement of environmental policies and their related financial factors in relation to decision-making.

4.4 BAA, Heathrow - UK

BAA manages seven British airports: Heathrow, Gatwick, Stanstead, Glasgow, Edinburgh, Aberdeen and Southampton. In addition they have management contracts for a number of airports outside the UK. Management of the airports includes anything from passenger service and cargo to runways and security for aircraft and passengers.

There is also a number of subsidiary companies which manage restaurants and shops at the airports and are responsible for the development of airport buildings including offices, check-in desks, hangars, etc. as well as consultancy within airport activities. Please go to www.baa.com for more information about BAA.

Heathrow is the most important of all the airports. It is the world's busiest airport, serving approx. 64 million passengers every year, and it is the second most busy cargo airport, handling approx. 1.2 million tonnes cargo per year. Please go to www.baa.com/main/airports/heathrow for further information about Heathrow.

4.4.1 Use of EMA

EMA information is mainly used for external reporting and is only used to a limited extent internally, although there is focus on the internal aspect as a possible future area of special interest. BAA, Heathrow generally reports about environmental expenses, which are published in the annual report. There is a special focus on new areas and investments in new technology where EMA is used to make environmental costs visible, but this only includes direct costs. Investments have been made in flow meters to map where the largest energy consumption is so that the efforts to reduce energy consumption can be targeted. BAA expects to save between 10 and 20 per cent of the approximately GBP 1 million spent annually on electricity. Attempts are also made on a regular basis to increase the amount of waste being recycled. The amount of waste being recycled has increased substantially from 12 per cent in 2003 to 18 per cent in 2004.

For about 10 years, BAA has had an environmental management system and for the past three years the enterprise has participated in the so-called SIGMA project. SIGMA stands for Sustainability - Integrated Guidelines for Management and comprises guidelines for sustainability management developed by the British Standards Institute, the Forum for the Future, and AccountAbility and supported by the UK Department of Trade and Industry. Further information about the SIGMA project can be found at www.projectsigma.com. The SIGMA guidelines also include the financial aspect as they operate with different definitions of capital – i.e. economic capital, manufactured capital, environmental capital and social capital.

BAA has been using EMA for about three years. The use of EMA was started at the initiative of the managers of the environment department. The EMA process in mainly used to procure data for external reporting. However, part of the process deals with benchmarking of the enterprise against a number of indexes and standards within the environment and sustainability such as the Corporate Responsibility Index, the Environment Index, the Dow Jones Sustainability Indexes, the FTSE4Good Indices, the Global Reporters Survey, the PerCent Club Ethibel Investment Register and Sustainability Indices and the E. Capital Partners Ethical Index Euro.

4.4.2 Implementation of EMA

EMA has not resulted in changes to IT systems, stand-alone programs or in Enterprise Resource Planning (ERP) integration.

BAA would like to use EMA to a greater extent than today, but there are barriers to this in the form of time consumption in connection with developing the system and the need for expertise to understand the external costs and how the different types of cost are to be treated.

4.4.3 Results

EMA has had limited influence on financial performance, attitude/motivation and the environmental management system, since it is primarily used for external reporting. EMA has, however, helped systematise the enterprise's environmental costs and has thus made it easier to work with these costs. There is more focus on reducing environmental effects through the environmental management system, since environmental developments in the enterprise are mainly driven by stakeholders such as local authorities and the government.

4.5 Wessex Water - UK

Wessex Water is a water and sewerage enterprise in south-west UK. It is owned by YTL Power International from Kuala Lumpur. The enterprise treats and supplies drinking water for 1.2 million people from 95 water works and 11,000 km water pipelines and it provides sewerage services to 2.5 million people with nearly 15,000 km of sewers, 1,314 pumping stations and 392 wastewater treatment plants. Please go to www.wessexwater.co.uk for more information.

4.5.1 Use of EMA

Wessex Water has worked with environmental management in different forms during the past 30 years, but at a more detailed level for the past 15 years (after the enterprise was privatised). The enterprise has published annual environmental reports for the past four years. The work with EMA was initiated by the environment department in cooperation with the UK Environment Agency. The motivation for the introduction of EMA arose from the authorities' tightened requirements and a wish to examine the costs incurred by the enterprise because of these requirements.

EMA consists of several dimensions at Wessex Water. EMA is included in a supplementary environmental report in the annual report and it contains an overview of the social costs related to the pollution emitted and how much it would cost the enterprise to neutralise this. Moreover, EMA information is included in internal decision-making. Expenses, income and investments within environment are registered, and these items are monitored in the daily environmental work, since environmental costs represent a large part of the enterprise's total costs. This includes, for example, expenses for wastewater treatment plants and new environment-related projects.

A current project focuses on removing phosphates from the water discharged from wastewater treatment plants. This discharge represents a major extra cost and must be included in the EMA process. Moreover, a lot of money is spent on complying with authority requirements as regards pollution abatement, improvement of water quality, reduction of discharges into rivers and the sea as well as the occurrence of different substances in drinking water.

Top management and mid-level managers use EMA information in connection with assessments of environment-related projects such as improvement of sewers so they can live up to water quality requirements in rivers. In this connection, an analysis of the `life cost' or lifecycle costs is prepared in order to assess which type of filter should be used. This means that the costs related to the acquisition, exchange and maintenance of different filter types are calculated over the total life of the filter. Then the filters with the lowest total lifecycle costs are chosen. Another initiative concerns wastewater treatment plants where different chemicals are used, some of which are harmful to the environment. Wessex Water is trying to replace these with other chemicals that do not affect the environment to the same extent. A new initiative is to replace some chemicals with ultraviolet light and this includes a financial analysis of alternatives.

As mentioned, EMA is also used to certain extent in connection with reporting for external stakeholders. The enterprise's annual report contains a separate section about e.g. environment-related expenses and investments in the current year. The assessment is that this information does not have a great effect on external decision-making but helps maintain the enterprise's environmental profile.

4.5.2 Implementation of EMA

There were no great barriers to the implementation of EMA, but there was some concern that it would merely be an academic exercise and extra expense that would not yield any benefits. After EMA has been implemented, these concerns have been proved unfounded, however.

The educational background of those having worked with EMA is primarily engineering and economics. The environment department was the driving force for the introduction of EMA and the finance department became involved later on in the process.

The implementation of EMA has not caused changes to IT systems or integration of different systems.

4.5.3 Results

Wessex Water assesses that the EMA process itself has had limited influence on financial performance, environmental effects and the attitude towards the environment. The reason for this is that the enterprise would still achieve good results because of the existing focus on the environment. EMA is thus an important tool, but the effect of it cannot be separated from the other environment-related tools used at Wessex Water. The enterprise does, however, believe that EMA will be significant as an internal decision-making tool.

4.6 AWG Plc. – UK

AWG is a FTSE listed company with almost 10,000 employees throughout the UK. Through its subsidiary companies, which include Anglian Water and Morrison, the group provides a wide range of services. For example, the enterprise supplies water to almost 6 million customers in eastern UK, it has retail stores, maintains roads and buildings, performs construction tasks and supplies gas, electricity and telephone services. Please go to www.awg.com for more information about AWG.

4.6.1 Use of EMA

AWG uses an EMA method developed by Forum for the Future (www.forumforthefuture.org.uk), which calculates how much it would cost to avoid or restore the environmental impacts the enterprise causes and shows what would happen if these costs were internalised. In order to do this, income and cost accounts are made for the environment. This helps support investments and initiatives within the environment and creates a better understanding of how the environment and finances are related.

Anglian Water is the largest division in AWG and has worked with this method since 1999, and the AWG group as a whole began to use the method in 2003. The initiative to introduce EMA came from the sustainable development manager, with support from the head of the environment department. The project was initiated because AWG needed a better understanding of the financial aspects in environmental work and the financial effects of environmental impacts.

Top and middle managers use EMA information in the long-term planning process. To start with, managers assume that the future costs of the enterprise's environmental impacts will be internalised when they are realised, i.e. that they are no longer society's costs but that the enterprise has to pay for the environmental impacts it causes. Future internalisation of these costs is a direct financial incentive for the enterprise to reduce its environmental impacts. In this way, middle managers at AWG use EMA information in connection with preventive initiatives to reduce the costs for the enterprise of possible future internalisation.

EMA information is also used for internal evaluation where divisions and managers are benchmarked each year for their own results and performance. To some extent it is also used in communication with stakeholders to show these that the enterprise is taking account of future environmental risks.

4.6.2 Implementation of EMA

When EMA was to be implemented, primarily staff with a background in chemistry or natural sciences were responsible for the work. At this time the enterprise worked mainly with water management, and this was reflected in the choice of personnel to introduce EMA. However, economists were to be responsible for preparing the accounting part of EMA and therefore collaboration was established across the two groups. At the start there was some resistance to EMA work in the finance department. The department could not see the point of EMA and it involved a lot of extra work on data collection and processing. It took some persuasion to get them on board. Today the finance department have changed their perception and they are now more positive towards EMA. This is especially because the department has been able to use the EMA information in risk management, for example in assessing future risks and any financial liabilities.

EMA is not an integrated part of the IT systems at the enterprise. Excel is used to record environmental data and results for EMA.

4.6.3 Results

As it is still very new in the enterprise, EMA has not yet had any tangible effect on the financial results, but it is expected that these will come in time, especially because there is now focus on new, future financial risks. It has afforded greater awareness and understanding of the financial aspects in the environment. As management are focusing on what they can do today to reduce costs in the future, EMA is also helping improve the environmental results. At the same time EMA has helped internal control and it has provided opportunities to benchmark and compare performances. Apart from this, EMA has not affected the environmental management system at AWG, which concentrates on meeting requirements from the authorities. AWG has carried out analyses of stakeholders, for example of the authorities and NGOs, and these show great satisfaction that AWG has commenced the EMA work.

AWG is currently restructuring the organisation and there will be many changes. EMA has not been used for very long and therefore it does not yet cover all areas. In addition to water management, last year EMA focussed on energy. Once the restructuring has been completed EMA will be extended to more areas.

4.7 Schott - Germany

Schott manufacture a number of products such as fibre optics, flat-screen displays, light components, solar panels, windows, gas-burner systems, laboratory equipment, optical lenses and electronic gaskets. The group has production facilities and sales departments in 37 countries, and 18,500 employees with about 13,000 in Europe, of whom 8,450 work in Germany. Europe and North America are the largest markets, accounting for more than 80 per cent of revenues, and Germany alone accounts for about 25 per cent. More information is available at www.schott.com.

4.7.1 Use of EMA

A project supported by the German environment authorities in collaboration with the Fraunhofer Institute for Industrial Engineering (IAO) and the glass manufacturer Schott has developed a method of using the company's enterprise resource planning (ERP) system to collect and evaluate environment information, including EMA information. Environment information is often spread around different information systems and can often be difficult to trace to specific sources. As the ERP systems are integrated systems, where data is recorded in one database, this can ease collection and processing of environment-related data.

Previously, Schott had EMA data spread around different departments in different software databases, e.g. prepared in Excel and Access. Today they have gathered environment information in their ERP system, where it is built up in a common data structure and data-collection routines.

The project was originally initiated to provide homogenous information for the preparation of Environmental Performance Indicators (EPI). It was important that these were comparable and easily accessible from the system. This had not previously been the case and a lot of time was spent collecting and processing this data. Integrating this in the ERP system meant that the existing environment information had to be restructured and ordered, for example it had to be structured hierarchically by subject and geographic location before it could be recorded in the ERP system. The environment part was designed and implemented in the ERP system's Management Information System (MIS), where the necessary data structures for Key Performance Indicators (KPI) could be defined. Moreover, in the MIS it was possible to design reports across data, subject and function, and this was considered very important for internal environmental reporting. Experience shows that, because of data integration, the ERP system provides managers with better accessibility to precisely the right information in the system. The old systems and databases in Excel and Access are now redundant and have been phased out.

The environment-related reports taken out of the ERP system are used by top management, middle managers and senior staff responsible for environment and safety. The system allows reports to be adapted for the individual user, and this is a great advantage, especially compared with Excel, where reports are usually statistical and require a lot of work to change. EMA information is primarily used for internal evaluation of the results of the various cost centres, which include environmental costs. The system can also be used to support planning and decision-making processes in operational environmental protection, and in connection with industrial hygiene and safety when assessing investments and analysing costs.

4.7.2 Implementation of EMA

The greatest barrier to implementation or combination of the various databases in the ERP system was time. A lot of time was spent on structuring the data and reaching agreement with the different departments on the design of this structure. As such, this is no different from other implementation processes in ERP systems where much of the time consumed is spent on data definition, standardisation and systematisation. Particularly time consuming were structuring imported data and discussions with staff. Also, many resources were required to adjust the ERP system to manage environmental data. This adjustment meant exploiting the possibilities already built into the system. No new functionalities were programmed into the ERP system.

4.7.3 Results

It is easier to meet the requirements of the environmental management system, as the environmental data has now been gathered in one system. It seems that the more visible environmental results also provide more staff motivation and a better image for society. In the longer term, the project should also result in more efficient utilisation of raw materials, a reduction in pollution, and so less environmental impacts.

4.8 BASF - Germany

BASF is one of the world's leading chemical companies and comprises a number of business areas such as chemicals, plastics, agricultural and nutrition products, oil and gas. It has about 87,000 employees throughout the world, of which almost 49,000 work in Germany. Four years ago, BASF was listed on the Dow Jones Sustainability Indexes (www.dowjones.com). There is more information at www.basf.com.

4.8.1 Use of EMA

EMA at BASF is very much considered in relation to the company's products, as these give rise to most of the company's environmental impacts. In the mid 1990s BASF developed what they call Eco-Efficiency Analysis (EEA). EEA integrates a financial and environmental assessment of, for example, processes and products in a lifecycle perspective. Today, EEA is part of the company's environmental management system.

EEA work is centred in the company's eco-efficiency department under BASF's environment safety and energy division. The department carries out work for BASF's own production, marketing and sales divisions, which purchase services internally from the eco-efficiency department in order to meet their own obligations under the BASF vision on sustainable development. These divisions can also purchase services for their own customers to help them make the right decisions in their own product ranges or development. Finally, external organisations and enterprises can also buy services directly from the eco-efficiency department. In practice, however, most of the department's work is for internal customers.

The overall purpose of EEA is to compare similar products and processes and assess these in an environmental perspective throughout the product's lifecycle. So, a sort of financial LCA. Since 1995 about 250 analyses have been completed and at the moment about 35-40 analyses are being completed each year.

An EEA can be ordered by top managers and middle managers down to production supervisor level. At top management level EEA is often used as part of strategic planning. For example it is frequently used as part of market analysis when launching new products and for analysing products in a potential acquisition target enterprise. Middle managers use EEA most often in research and development projects into future products as well as in communication with the authorities. EEA is also deemed to be important for marketing and sales. The analyses create value-added for customers in that they can document that a product is more environmentally friendly that a competing product, and yet it costs the same.

4.8.2 Implementation of EMA

At the start there was a great deal of resistance to EMA from middle management. In order to overcome this resistance some pilot projects were completed in the business units which viewed the project positively. Today it has been accepted in more or less the entire group, but there are still some pockets of resistance. Staff knowledge about the company's environment work has increased significantly over recent years and it has been estimated that 20-30 per cent of all employees are aware of EEA. The eco-efficiency department has also experienced rising demand for consultancy and advice.

When the tool was being developed it was mostly used by chemists, biologists, toxicologists and engineers. At the moment, when the analyses are to be sold to the individual business units, the most important aspects are sales and marketing.

A stand-alone system is used to record and process data. The data is retrieved from BASF's own IT systems such as the financial system and production management. Furthermore, a database has been built up with information about processes and products. Data has also been retrieved from public databases.

4.8.3 Results

It seems that the financial results of the company have been improved, as environmentally friendly products perform better on the market than other products. In addition there are improvements resulting from a better company strategy via EEA, such as acquisitions of other companies. The total environmental impact of products has been reduced, but as the tool does not aim specifically at environmental impacts from the company's own production there have been no significant effects on energy consumption, air pollution etc. There is great focus on reducing the company's total environmental impacts, of which impacts from the products are important from a lifecycle perspective.

The eco-efficiency department is currently working on extending EEA to include social aspects so that all three columns in sustainable development (the environment, the economy and social conditions) can be analysed and compared.

4.9 Summary

On the basis of the best-practice descriptions, this section summarises a number of general trends in the application, implementation and results of EMA.

4.9.1 Application of EMA

As is apparent from the best-practice descriptions, EMA is not one single method or one single tool. EMA can be applied in many different ways by enterprises. For example, EMA is used by the enterprises described above as part of Triple Bottom Line statements, in lifecycle analyses, and as a process for setting priorities for different investments. Therefore, EMA can be considered as a generic term for different tools and a term for a specific philosophy.

EMA cannot stand alone. It is part of a collection of efforts in the environmental area and should be included in a package of tools and initiatives for environmental management in the enterprise. EMA is therefore a tool on an equal footing in both environmental management and management accounting.

EMA is used specifically to, for example assess environmental costs in connection with replacing a chemical, waste management and investment assessment. As a rule there are no general calculations of, for example, the enterprise's total environmental costs, but instead EMA produces assessments which can be used in specific situations. However, EMA draws on the same data as is used in connection with external reporting of environmental costs and environment-related investments. These two topics cannot, therefore, be entirely separated.

An area where EMA has an especially important function is waste management. One of the advantages of EMA techniques in this regard is that they reveal the waste-related costs. These are not just the costs of disposal and the costs of materials lost; EMA also reveals the various costs incurred by the waste on its journey through the enterprise such as machine hours, internal transport and administration. In this way EMA can be used to make visible the full costs of the enterprise's waste streams and these can be reported to both internal and external stakeholders.

Another interesting area of application for EMA is as part of lifecycle analyses (LCA). By using EMA in an LCA perspective, the enterprise can calculate environmental costs, for example, over the lifecycle of a product or a component and thereby attain a better overview of the costs which arise and must be minimised or managed.

4.9.2 Implementation of EMA

Separate IT systems to use EMA are not always necessary. For example, most use Excel or functionalities in their existing systems. However, Schott, who completed an ERP project focussing on environmental data management, which included EMA data, believe that the very use of IT and data integration has given rise to a number of advantages such as customised, flexible reports, the possibility of reporting indicators, uniform data structure and less overlapping work in recording, processing, converting and transferring data. However, there should be cohesion between the costs of these activities and the costs of developing a solution within the ERP system. If the enterprise makes many measurements and records a lot of data for different facilities and different processes, it will become more likely that there will be benefits in integrating and streamlining environmental data management.

Implementation and application of EMA involve cooperation between different departments and people with different educational backgrounds such as engineers, environmental specialists, and financial experts. This is often mentioned as one of the challenges of EMA, as environment experts have to learn the language of finance and financial experts must learn the language of the environment. However, when this happens both departments benefit from EMA.

In some cases there has been resistance to implementing EMA. In particular finance departments have not always been able to see the purpose of introducing EMA. However, this resistance usually disappears once EMA has been implemented.

4.9.3 Results

Naturally enough, the results of applying EMA depend on the focus of the application. For example BAA saw no internal results from using EMA, as their focus was directed externally.

Most enterprises believe that EMA has had a beneficial effect on their environmental and/or financial performance. On the other hand, all enterprises agree that it is difficult to separate the effects of EMA work from the effects of other environmental management. With this background it seems EMA methodology would benefit from further development with more focus on measurement of results.

4.9.4 Best practice at enterprises regarding research

As is apparent in the examples of best practice in this chapter, many enterprises are in the process of the same development and research. Several enterprises are already working on a more integrated type of EMA, based on the concept of sustainability rather than the environment alone, and at BASF, EMA has been integrated into the development of new products with a lifecycle perspective.

Foot notes

[1] http://unstats.un.org/unsd/envAccounting/seea.htm