Aplinkos tyrimai, ininerija ir vadyba, 2005.Nr.4(34), P.77-88 ISSN 1392-1649 Environmental research, engineering and management, 2005.No.4(34), P.77-88

From Environmental Management Accounting to Sustainability Management Accounting Christine Jasch1, aneta Stasikien2 1Institute for Environmental Management and Economics 2 Kaunas University of Technology, Institute of Environmental Engineering

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

Over the past decade sustainability was involved into policy statements of many companies. Environmental and in recent years increasingly social management systems are implemented by companies as a means to manage and control their environmental and social performance. However, as the most of performed researches show, the real impact of such tools is rather low. Also the researches revealed that environmental and social responsibility remains separated from the traditional core business strategies and management systems, which are geared nearly solely towards financial performance indicators and ecological issues are left aside. Therefore sound management tools are needed that help to overcome this gap between Environmental and business management systems, to integrate the financial, environmental and social management systems and to improve environmental performance of companies.

This article shows the concept of Environmental Management Accounting (EMA) developed for the United Nations Division of Sustainable Development and for the International Federation of Accountants (IFAC). It has been applied on case studies in the Austrian automobile sector and further developed into a tool for sustainability management accounting. The article ends with current experiences and trends for sustainability management accounting in Lithuanian companies.

Keywords: environmental management accounting, sustainability management accounting, sustainability accounting, environmental costs, health and safety costs, external costs, intangible items.

1. Introduction

Conventionally, sustainable development is described in three dimensions: social, environment and economic. However, these dimensions are not separate, but strongly influence each other. For most companies to have an interest in sustainable development there needs to be a financial benefit as well. But often organisations are not able precisely identify their environmental or social costs and even less - the benefits and savings from improved environmental and social performance.

As companies become more complex, decentralized and at the same time exposed to increased demands for environmental protection and corporate social responsibility, the need for effective managerial accounting systems considering the company's environmental and social impacts increases. Accountants and environmental managers need guidance for answering the questions like: What

are environmental and social costs? How much money are we costing and saving? How can environmental risks be evaluated? What financial information should be disclosed? How can the environmental accounting system be integrated into the financial accounting systems?

For many years sustainability has been more seen in more in environmental perspective, but presently more and more the social side of sustainability is gaining importance. This shows even more the necessity of defining clearer concepts and appropriate strategies for sustainability.

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2. What is Sustainability Management Accounting

Sustainability accounting and reporting can be

defined as a subset of accounting and reporting that deals with activities, methods and systems to record, analyse and report, firstly, environmentally and socially induced financial impacts and secondly, ecological and social impacts of a defined economic system (e.g. a company, production site, nation, etc.) Thirdly, sustainability accounting and reporting deals with the measurement, analysis and communication of interactions and links between social, environmental and economic issues constituting the three dimensions of sustainability [12].

While sustainability reporting has seen an impressive upswing in recent years, partly due to the Guidelines published by the Global Reporting Initiative [7], sustainability accounting is in a very early stage of development.

The concept of sustainable development asks for an integrated reflection of financial, social and environmental aspects. Sustainability management accounting is a tool that assists organisations in becoming more sustainable by highlighting costs, risks and benefits. It extends traditional financial and cost accounting to take account of sustainability impacts at the organisational level. As sustainability is based on a broad stakeholder approach, also the external effects of the organisation and its products are considered. The focus is on extending the range of monetised information (covering environmental, social and economic impacts) on which decisions are made. We still talk of management accounting, as external effects are considered for internal decision making and there are no reporting requirements [10].

The model for sustainability accounting of the SIGMA project [14] distinguishes between stocks at a particular point in time (like in a balance sheet) and resource flows in a period (like the Profit and Loss Account), however highlighting, that in addition to sustainability accounting being in its infancy, the stock part of the model being the least developed.

According to the Sigma project, sustainability accounting seeks to explore all three dimensions by: 1. disaggregating the internal accounts to show

costs and benefits relating to economic, social and environmental performance; and

2. extending the accounting boundary to consider the monetary value of external economic, social and environmental impacts.

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

the UN DSD EMA Workbook [9] and the Guidelines for Sustainability Reporting developed by the Global Reporting Initiative [7] were taken as a starting point as the companies originally had also planned to go for sustainability reporting. It could be seen from discussions with companies that the interest for sustainability accounting is closely related to sustainability reporting and the attempt to integrate the related requirements with existing information-, accounting- and management systems. Another related tool are sustainability balanced scorecards [6, 11]. While the GRI Guidelines focus on sustainability reporting and performance indicators, the focus of this project was on related sustainability management costs. The related tool deals with monetised (or potentially monetised) information only, which in the environmental dimension is based on a material flow balance. Fig. 1. Sustainability Accounting in three dimensions [14]

The general structure for the Sustainability Cost Assessment can be seen in Table 1. The detailed structure with examples for the different environmental and social cost categories is presented in Table. In the following the columns and lines of Table 1 are explained shortly, while the later sections provide more detail on specific cost categories.

The Sustainability cost assessment scheme in Table 1 clearly distinguishes between costs internal to the organisation, which can be partly taken from the profit and loss account and the cost centre reports and other cost categories, which refer to costs that cant be taken from the company records, like externalities, intangibles and risk aspects, but which have financial implications as well. The costs assessment scheme does not imply adding up the columns and rows in Table 1, but rather gives an overview on the relation between the different cost categories. For each column, a separate cost assessment scheme in excel-format has been provided in the pilot projects. Table 2 shows them for the environmental and social dimension [13].

Stock Flow

Economic

Social

Environmental

Internal

External

Timing of impact

Type

of i

mpa

ct

Location of impact

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Table 1. General structure for sustainability cost assessment

Internal costs Environmental costs Social performance costs

Air

& C

limat

e (E

nerg

y)

Was

te W

ater

W

aste

So

il &

Gro

und

Wat

er

Noi

se

Land

scap

e En

viro

nmen

tal M

anag

. H

ealth

Safe

ty

Trai

ning

& E

duca

tion

Soci

ety

Prod

uct R

espo

nsib

ility

Oth

er C

osts

Value added accounting derived from the profit & loss account

External effects

1. Treatment of undesired effects

e.g.: depreciation of end-of-pipe equipment, waste treatment and disposal costs

e.g.: costs resulting from unimplemented protection measures (accidents, sick leave.)

2. Prevention e.g.: R&D for emission prevention, personnel for environmental management, external consultants and verification

e.g.: facilities for health care, safety training, fire protection representative, cost of health and safety personnel

3. Material flows e.g.: purchase value of non-product-output

e.g.: life cycle costing, negative effects of emissions

4. Earnings e.g.: sale of waste materials, subsidies for environmental protection measures

e.g.: revenue from recreational facilities for employees, subsidies for employee related issues

Formation of value added and Distribution of value added between stakeholders Positive external

effects, e.g.: value added in the region

5. Intangible items e.g.: environmental quality of the site

e.g.: human capital e.g.: business relations, brand name

6. Risk aspects e.g.: risk of hazardous accidents

e.g.: accident risks e.g.: operational risks

The scheme has been developed to assess total

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

The internal environmental costs are the best developed part of sustainability accounting. The columns refer to the different environmental media effected. In the social dimension the columns relate to the most significant cost carriers based on the GRI social indicators and the costs actually found in the pilot companies.

In many companies of previous pilot projects the environmental department is also responsible for health and safety issues. Therefore these two responsibilities were sometimes added as columns to the environmental costs assessment already in previous projects. This makes sense also, as some environmental effects are closely related to health and safety considerations.

Costs for treatment of undesired effects and prevention. The distinction between costs for treatment of produced emissions and costs for prevention has been very helpful in structuring the environmental cost categories. So the attempt was taken to use the same division between treatment of undesired effects and prevention also for the social dimension.

It has been shown in many pilot projects that while costs in the category treatment do not add to productivity and are simply costly, costs in the category prevention help to reduce treatment costs and cost of lost materials, thus improving eco-efficiency.

The IFAC Guidance document on EMA [8] also draws that distinction between waste and emission control costs and prevention and other environmental management costs, which, together with R&D projects, help to reduce the material costs of non-product output and thus increase eco-efficiency. The IFAC cost categories are: 1. Material Costs of Product Outputs; 2. Material Costs of Non-Product Outputs; 3. Waste and Emission Control Costs; 4. Prevention and other Environmental

Management Costs; 5. Research and Development Costs; 6. Less Tangible Costs.

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Table 2. Detailed structure for the environmental and social management costs

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

protection measures Costs resulting from unimplemented protection measures

1. Depreciation End-of-pipe equipment and proportion of equipment producing waste and emissions

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

2. Maintenance, operation materials and external services

from cost center reports of equipment defined above

Protective gas, equipment for fire department

3. Personnel from cost center reports of equipment defined above

overtime resulting from sick leave of employees, costs of staff away sick or injured

4. Taxes, fees, charges for waste disposal and sewage for additional payments for exhausting and/or dirty work5. Fines, penalties, costs of authority proceedings

for non compliance in the environmental dimension

for non compliance in the social/ethical dimension

6. Insurances for increased environmental risks for increased safety and other risks in the social dimension

7. Recultivations and compensations

Compensations, e.g.: to fishermen; recultivation, clean-up of contaminated sites

Compensations e.g.: damages for pain and suffering

2. Prevention Emission prevention Accident prevention and risk reduction 1. External services for environmental management and

certifications for training and security measures, e.g.: trainers, other consultants and auditors

2. Internal personnel for environmental management and emission prevention

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

3. Research and Development for emission prevention for the reduction of accidents or other risk aspects 4. Equipment for integrated prevention

Proportionate share of integrated pollution prevention equipment, additional costs of green electricity

Equipment for health care e.g.: fitness area for employees, ergonometric chairs, safety equipment, e.g.: for employee protective clothing, additional costs associated with environmentally sound air-conditioning systems

5. Other prevention costs Environmental communication and publications, donations for environmental protection

Social/ethical communication and publications, donations for social initiatives including infrastructure outside the operation site e.g.: schools in the neighbourhood; voluntary social expenses, voluntary employee benefits

3. Material Flows Costs of non-product output, valued by purchase price

1. Raw Materials Input x loss-% 2. Auxiliary Materials Input x loss-% 3. Packaging Materials Input x loss-% 4. Operating Materials Essential operating materials by 100%,

administration is not considered 5. Merchandise Not considered (unless there is a significant

loss percentage) 6. Energy Input x loss-% for own production, external

procurement by 100% 7. Water Costs of external procurement and extraction8. Product Product scrap x production costs

4. Earnings Internal earnings Internal earnings 1. Product 2. Other Earnings e.g.: earnings from the sale of residual

materials or excess cleaning capacity of the wastewater treatment plant, subsidies for equipment investments, insurance benefits for environmental accidents, recourse receivables in connection with accidents of other firms

e.g.: earnings from recreational facilities for employees, contributions to staff canteen, subsidies for employee qualification measures, insurance benefits for employee accidents, recourse receivables in connection with accidents of other firms

5. Intangible Values Intangible environmental values Intangible social/ethical values e.g.: environmental quality at the company

site, relations with authorities and neighbourse.g.: know-how, human capital, employee motivation, attractiveness as employer, reputation, creativity

6. Risk aspects Environmental risks Social/ethical risks Imputed risks Decontamination risks, accident risks, risks

of legal developments, e.g.: emission tradingLiability risks, risks of legal developments, e.g.: working conditions, Image risks, e.g. involvement in child labour accusation

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A problem found during the case studies was, that such win-win situations are more likely in the environmental dimension. When the same amount of products can be produced with less natural resource inputs and less waste and emission output than before, the eco-efficiency has increased and this is good from an environmental as well as from an ecological viewpoint. But, in the social dimensions such win-win situations are harder to find. The companies in the pilot projects were very sceptical about the positive effect of clearly showing voluntary benefits to employees and society, as these are the first ones to be cut down for saving efforts. The only clear win-win situation relates to the costs of staff away for sick-leave and due to accidents. While it is clear, that not all sick-leave can be contributed to company internal reasons, it is also accepted, that there is a relation between good health and safety systems, employee motivation and the average days of staff sick-leave.

Material flows. With regard to material flows (the 3rd cost category), the non productive material input as well as the costs for non productive material output (waste and emissions) are considered a cost aspect in the environmental dimension. In addition, they have external effects due to material extraction and waste and emission impact. The material flows in the social dimension are comparatively minor and were captured in the treatment and prevention categories.

Earnings. The business activity as such not only results in earnings, which may partly come from environmental and social activities, but may also result in positive external effects , such as creation of jobs in a region with a lot of unemployment or other stimulation of regional economy, e.g. by preferring regional suppliers.

Value added. The basis for the assessments was the profit and loss accounts and specific cost centre reports. The GRI guidelines and other references propose to arrange those into a value added statement. This column is therefore not structured like the other dimensions.

Intangible items and risk aspects. Until now all recorded data was based on real expenditure or costs and could therefore be extracted (with more or less effort depending on the quality of the operational information systems) from the data supplied by the accounting system. But the value of an organisation is influenced and constituted of more than the book value. During purchase transaction, this additional value of intangible assets becomes more concrete. Corporate social responsibility and a good environmental, health and safety management system contribute significantly to these values.

Intangible items comprise e.g. trade marks,

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

placed below the line of the internal costs and have been described qualitatively.

For companies listed on stock exchange this value gap is visible. There is a significant difference between the book value of an organisation as reflected in the value of assets and liabilities in the balance sheet and the equity market value as determined by demand and supply of their equity on the stock market. This gap reflects the shareholders valuation of intangible assets not represented in the balance sheet and relates to an organisations capabilities and competencies based on its human and social capital.

An intangible asset is an identifiable non-monetary asset without physical substance, which is controlled by an enterprise and from which future economic benefits are expected to flow to the enterprise. In acquisition transactions, these items form part of good will that exceeds the book value in the balance sheet and in accordance with IAS 38 [5] may be recognised as an asset.

Intangible items and/or risks of an enterprise can comprise the following: Environmental dimension: environmental quality

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

Social dimension: special know-how, human capital, employee motivation, attractive employer, liability risks, dangerous working conditions

Economic dimension: business relations, supplier and customer structure, market position, brand name

Ideally, all these aspects should be identified and given a value at the end of the business year. However, methods therefore are in its infancy and the companies in the case studies were hardly able to precisely name these aspect and far away from quantifying them. But they do provide arguments for improved sustainability management. So in the workshops, they were discussed in depth and merely reported in the tool, but without a monetised value.

External effects. The other category - beyond the books and hard to quantify - covers all negative and positive external effects arising from the organisations activities. Externalities are also included in the Sigma framework [14] and in the GRI economic performance indictors [7] and in the IFAC EMA guidance document [8]. The main argument therefore is the extended stakeholder view when it comes to sustainability. Another argument is, that the monetarised external impact of an organisation should as well influence its decision making as well as point into direction of future requirements, as these negative effects tend to become internalised via legal frameworks, if significant. 4. Social performance costs

It was one of the attempts of the project to calculate the financial impact of the social

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performance indicators in addition to the already well developed environmental performance costs.

The social performance indicators of the GRI Guidelines [7] are structured as: Labour Practices and decent work (employment,

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

Human rights (strategy and management, non discrimination, freedom of association and collective bargaining, child labour, forced and compulsory labour, disciplinary practices, security practices, indigenous rights)

Society (community, bribery and corruption, political contributions, competition and pricing)

Product Responsibility (customer health and safety, products and services, advertising, respect for privacy)

Labour practices and decent work comprise the breakdown of the workforce by region and employment type. The only cost related GRI indicator is Employee benefits beyond those legally mandated. Most companies have voluntary contributions to lunch buffets or voluntary annual staff celebrations. These voluntary benefits were included in the category Other costs. We decided not to take the total costs of wages, as they are already included in the value added accounting column for the economic performance. Also mandatory social security or pension funds and dismissal pay reserves are not included but only the costs resulting from the social commitment of the company beyond paying wages and social security.

Health and Safety are two very important costs aspects in Austrian companies. They were separated into two columns, as most of the costs in the social performance category relate to these two aspects.

The category Health costs for Treatment of undesired effects includes the costs for staff away sick, one of the most significant cost aspect. Under Prevention the costs for the company medical officer as well as occupational medicine and vaccinations against flue and ticks (both quite common in Austria) are recorded. Revenues may come from owned recreational facilities for employees. In Austria, some larger corporations have their own hotels and sport centres, which are available for employees at a very low rate. Also subsidies or insurance payments for labour related events would be recorded here.

Safety in the section on Treatment includes costs resulting from unimplemented protection measures, e.g. for staff away because of working accidents, invalidity payments and costs for overtime of other staff to make up for the lost working days. This category again proved to be a significant cost category, which can be reduced by increased spending in the prevention category. The prevention part contains external services, e.g. for safety training, which is carried out by external consultants, the company medical officer and internal personnel costs that result from efforts to increase the safety of

workers, i.e. the cost of the members of the safety team, safety representatives, fire protection representatives and dangerous goods agents. Equipment or clothing that is solely or mainly used to increase employee safety is also included.

Training and education was also defined as a separate column, as it constitutes a significant social cost factor. However, there are several overlaps to training in specific areas like environment, health and safety.

Human rights as well as Diversity and opportunity do not make up any significant costs in Austrian SMEs. This is also true for most of the issues addressed in Society and Product Responsibility.

The column Society mostly consists of donations to non-profit organisations and other voluntary spending. Costs qualifying as voluntary social benefits and social sponsoring are integrated here as well. In the USA, several organisations have made a commitment of spending 1 % of profit before taxes for donations to non profit organisations and projects for the community, e.g. AMD, a company in the electronics sector, reports in its sustainability report of having spent 6,3 Mio USD, equalling 1 % of profit, in the year 2003 [1]. Other organisations go even further. AVON, a corporation dealing with cosmetic products, reports of spending 10 % of the profit of 2002 or 46 Mio USD for charity [2]. However, suppliers in the automobile sector in Austria face a very severe price pressure which conflicts with voluntary initiatives for corporate social responsibility. Therefore donation are limited to the local fire brigade and school projects. A more common Austrian approach is to allow staff to participate in emergency activities as part of their working hours, e.g. clean up activities after a flooding or rescue teams after avalanches.

Product Responsibility has cost aspects mostly relating to customer health and safety research activities and implemented design adjustments.

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

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

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6. External effects

In the area of external costs it is attempted to monetise the external effects (externalities) of an organisation and at least to discuss and record them qualitatively. The Global Reporting Initiative lists indirect economic impacts as indicator in the economic section and asks organisations to identify major externalities associated with the reporting organisations` products and services [7]. However, no more guidance is provided and based on a survey of the entries to the European Sustainability Reporting Awards 2002 and 2003 it can be stated that external costs are hardly found in sustainability reports.

External effects are by definition not included in the financial accounts, but they do effect the organisation in the light of stakeholder relations, image and possible future requirements. Full costs accounting refers to the external dimension of an organisations impacts on its stakeholders. Common external effects of production sites relate to waste and emissions, but may also relate to the products [3]. However for small suppliers of e.g. carpet tiles, mechanical components, isolating materials, paint shops, pressure die casting, their share of the negative impact of the whole car or the transport sector in a country is impossible to quantify. Those small companies are never the sole contributor to a negative effect, which is typically recorded on a regional system boundary. There is an ongoing discussion in environmental and ecological economics on contingent valuation methods of willingness to pay (WTP) or willingness to accept (WTA) [4], both approaches very difficult to apply by single companies.

But, negative external effects from waste and emissions can also be estimated by calculating the costs of the best possible treatment with respect to available technology. This approach, using avoidance and restoration values, is also less controversial as the WTP and WTA methods, as it is based on actual costs that would be occurred by the organisation in order to prevent or reduce its external footprint [14] and may become a future requirement. The interesting thing about this approach of estimating external effects based on investment costs and trading prices, is that these costs are as well important internal (future) costs information and as well act as an estimate for external costs, thereby linking the micro and macro perspective.

Positive external effects may arise from production as well and companies have shown a great interest in having those discussed and reported as well. A company site can have multiple positive external effects on a region. It can increase the value added of the region if it chooses its suppliers in the close vicinity and can increase the stability and growth of a region by providing safe working places. For the Austrian automobile sector, these job creating effects are highly valuable, which is also seen by the subsidies and other benefits granted to these companies.

Positive and negative external effects can arise of the product and research and development: There are positive effects if the product is especially environmentally friendly or promotes the use of environmentally friendly products but also, if research makes the product more safe to use or reduces its life-cycle environmental impact, e.g. by increasing the recyclability or by introducing new production processes utilising renewable materials. Sometimes, the products themselves reduce environmental or social impact compared to other applied technology or procedures. Negative effects relate to environmental and social impacts of the product or its components during the life cycle stages of material extraction, transport, customer use and final disposal. However, quantification of these effects is still in its infancy.

The external effects of the companies were not recorded quantitatively as the relevant data was not available in any of the firms, but rather discussed qualitatively in a brainstorming workshop. The most important mentioned negative external effect was noise and emissions from transport of raw materials and finished products. A positive external effect always highlighted was the provision of work places in a region with high unemployment. 7. Analysis of drivers for Lithuanian enterprises

to implement Sustainability Accounting

Number of industrial enterprises in Lithuania implementing sustainable industrial development measures is increasing (see Fig. 1.). However, most of implemented measures are in the areas of cleaner production and environmental/ quality management systems. In other areas such as product oriented measures of sustainable industrial development and sustainability reporting; activities are in the phase of initiation.

0

20

40

60

80

100

120

140

160

180

200

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Fig. 1. Number of enterprises in Lithuania implementing sustainable industrial development measures in 1993-2003 [17]

In January 2005, there were 156 companies in

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

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all formal requirements of the standards and use certificates only for improving their market position. APINI experts apply EMS development methodology based on preventive approach, i.e. on CP concept. Therefore 33 Lithuanian companies have EMS based on CP principles (Fig. 2.).

16

1118

2533

110

21

33

73

160

0

20

40

60

80

100

120

140

160

180

1999 2000 2001 2002 2003 2004

APINITotal

Fig. 2. Diagram of EMS implementation progress in

Lithuania [20]

This kind of concepts integration, i.e. integration of CP and EMS, provided a possibility to demonstrate effectiveness of implemented management systems in improving performance of companies.

In September 2004 EMA methodology developed by IOW, Institute for Environmental Management and economics, Vienna, Austria [9] was introduced to representatives of industrial companies. The pilot testing was performed in 18 economically significant Lithuanian industrial companies.

Experience of the companies related to Cleaner Production investment project development and implementation was very important driver for increased awareness of their environmental responsibility and also contributes for a great interest in modern economically and environmentally sustainable solutions and positive corporate culture [15, 18].

For introduction of the EMA methodology conceptual approach was used, which includes following main steps: training materials and training seminars company case studies further dissemination of EMA.

The seminars were attended by mixed audiences of financial and technical experts from companies, some with an environmental background, some without. The financial experts learned some basic concepts of material flows identification and evaluation and the technical experts learned some basic concepts of cost accounting.

The results of the seminars led to visiting companies mostly interested in EMA implementation, examining their environmental problems and gathering data at the first hand.

Analysis of the results shows that in all cases the environmental costs were significantly higher than those, which company declares in official reports (Table 3).

Table 3. Environmental costs of the analysed companies

No. Type of company Traditional accounting system (EUR) EMA methodology (EUR) 1. Food production company 75 3 740 2. Food production company 250 6400 3. Publishing company 540 6250 4. Asphalt production company 6300 44600 5. Cement production company 32450 16305600 6. Textile company 348000 1800000 7. Furniture production company 5400 27100 8. Electronics 7800 39100

According the results the areas of most intensive

cost can be clearly identified. Also majority of company representatives stated that the revealed hidden costs strengthen pollution prevention and cleaner production initiatives.

After interviews with the companies, which participated in the testing of EMA methodology, it can be concluded that they will be very active in implementing the methodology, because they rapidly catch-up advantages and got unique ideas about how to use the developed data.

However, effectiveness of the measures identified applying EMA and efficiency of their implementation largely depend on integration level of these measures in the overall strategy of enterprises and everyday activities. It means that adequate changes are needed in the management system of a

company, e.g. new policy, new methods and new procedures (Fig. 3.) [20].

In addition to production process management, the overall management system should be modified in such way that effective communication with all stakeholders is ensured. It is obvious that such changes relate to the enterprises informational and reporting system. Any changes in management system or implementation of technical improvements require adequate human and financial resources. Integrated implementation of the key sustainable industrial development measures could enable more efficient use of human resources and could result in significant savings.

Moreover systematic and integrated application of these measures would enable to increase their effectiveness and would lead to additional cost savings associated with more efficient use of natural

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resources, reduced waste generation, more effective operational procedures, etc. [16, 19]. Fig. 3. System for sustainable measures implementation in industry 8. Results and outlook

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

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

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

EMA accordingly influences internal companys objectives to optimise production process, learning and finance perspectives

Therefore we see EMA as a toll that provides a good chance to integrate environmental objectives into existing common business systems.

The two major cost drivers are the purchase costs of non product output and the costs related to

lost working days because of sick leave and accidents and the overtime pay to make up for these lost working days. The work of the EHS department helps to reduce these costs. The cost assessment scheme allows to see the relation between costs for treatment of undesired effects due to unimplemented protection measures and lost material purchase value in comparison to the prevention costs, which mainly consist of the internal management departments and related external consultants.

Several questions arose on where precisely to draw the boundary line between normal operating costs and sustainability costs that go beyond. If all personal costs are considered part of economic costs, than one possibility would be to only include voluntary costs exceeding mandatory expenditure for wages, social security etc. But this raises several other problems. One is, that if all voluntary expenses for employees are clearly listed, top management under price pressure might be willing to cut them down. In addition, the distinction between mandatory and voluntary has not been helpful in the environmental category. For internal decision making, it is clearly relevant to have knowledge on all cost aspects, regardless if they are voluntary or mandatory.

If on the other hand we include all personal costs under social, than the additional information of the tool would not be significant. We could end up arguing, that as sustainable development implies a harmonised approach including all activities within a company, actually all expenditures in the profit and loss account are relevant. This is definitely so for the economic dimension, but our goal was to define a border line between the economic dimension and the other environmental and social dimensions.

If we take this idea further, the profit and loss account, that is normally split up to different cost centres reflecting the production steps and administrative departments, would simply be slightly reorganised. And in effect, this was the pragmatic

Planning - Work group establishment - Policy development - Identification of actual requirements - Setting performance indicators,

objectives and targets - Development of material and energy

balances - Application of EMA - Identification of significant

environmental aspects - Development of CP innovations

(environmental, economic and technical assessment of proposals)

- Development of action programmes

Implementation - Allocation of responsibilities - Training of employees - Communication (internal

and external) - Operation control - Document control - Preparations for emergency

Monitoring - Monitoring and

measurements - Preventive and correction

actions - Internal and external audits

Improvement- Management

control

Top management commitment

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decision taken. We took the departments for health and safety, risk management, research and education and added voluntary social expenditures and some other issues addressed in the GRI guidelines.

In effect, this is also the way, that environmental management accounting has been taken, from seeing the environment as something quite separate from production to an integrated approach for material flow management. Also technological development has shifted from end-of-pipe technologies to integrated equipment, that doesnt produce waste and emissions during production. So in a couple of years from now, corporate social responsibility may have become so integrated into all operational departments that it may no longer be necessary to separate sustainability management accounting from operational management accounting in order to show its costs, benefits and risks, if not implemented. References 1. AMD (2005), Sustainability Report 2003,

http://www.amd.com 2. AVON (2005), Sustainability Report 2002,

http://www.avoninvestors.com 3. Bebbington J, Gray R, Hibbitt C and Kirk E (2001)

Full Cost Accounting: An Agenda for Action, ACCA (Association of Chartered Certified Accountants) Research Report No. 73.

4. Constanza R., et.al., (1998) The value of the worlds ecosystem services and natural capital, Ecological Economics, 26:3-16

5. European Union (2003) Journal of the European Union L261/336-361, International Accounting Standard IAS 38: Intangible Assets.

6. Figge F, Hahn T, Schaltegger S and Wagner M (2003) The sustainability balanced scorecard as a framework to link environmental management accounting with strategic management, in Bennet M., Rikhardson P. Schaltegger St. (Eds.), Environmental Management Accounting Purpose and Progress, Kluwer Academic Publishers, Dordrecht.

7. Global Reporting Initiative (2002) Sustainability Reporting Guidelines, [online][cited 21 May 2004] Available from Internet URL:http://www.globalreporting.org/guidelines/2002/GRI_guidelines_print.pdf

8. IFAC (2004) International Federation of Accountants, International Guidance on Environmental Management Accounting (EMA), August 2005, Available from Internet URL: http://www.ifac.org

9. Jasch C (2001) Environmental Management Accounting: Procedures and Principles, United Nations Division for sustainable Development, Department of Economic and Social Affairs (United Nations publication, Sales No. 01.II.A.3) Available from Internet URL: http://www.un.org/esa/sustdev/sdissues/technology/proceduresandprinciples.pdf

10. Jasch C , Schnitzer H (2002) Environmental Management Accounting How to profit from environmental protection Vienna, Austrian Ministry of Technology and Innovation. Available from Internet URL: http://www.ioew.at/ioew/download/ema-theory-english.pdf

11. Schaltegger S ,Dyllick T (Eds.) (2002) Nachhaltig managen mit der Balanced Scorecard, Gabler, Wiesbaden. Available only in German.

12. Schaltegger S., (2004) Editorial of the CSM Newsletter 02/2004, Available from Internet URL: http.//www.uni-lueneburg.de/csm

13. Schaltegger S., Hahn T., Burrit R., UN DSD (United Nations Division for Sustainable Development) (2002) Environmental Management Accounting: EMA and the links between different levels of decision making, United Nations Publications, New York and Geneva. Available from Internet URL: http://www.un.org/esa/sustdev/sdissues/technology/estema1.htm

14. SIGMA Project, (2003) The SIGMA Guidelines Toolkit, Sustainability Accounting Guide, London

15. Staniskis J. K., Stasiskiene Z Cleaner Production Financing: possibilities and barrier // Clean Technologies and Environmental Policy, 2003, Vol.5, No.2, pp.142 - 147.

16. Staniskis J. K., Stasiskiene Z Environmental management accounting in Lithuania: exploratory study of current practices, possibilities and strategic intents // 9th European Roundtable on Sustainable Consumption and Production, Bilbao, Spain, 2004, http://www.erscp2004.net/downloads/papers.

17. Staniskis J. K., Stasiskiene Z. Environmental Management Accounting for CP Investment Project Development // Environmental research, engineering and management. Nr. 1 (23) Kaunas, Technologija, 2003. pp. 60-69.

18. Stasiskiene Z. Environmental Accounting in Lithuanian industry: analysis of necessity, possibilities and perspectives // Environmental research, engineering and management. Nr. 2 (16) Kaunas, Technologija, 2001. pp. 5664.

19. Stasiskiene Z., Staniskis J. K. Environmental Management Accounting: An Essential Component of Sustainable Development Strategy for Lithuanian industry // Proceedings of 11th Annual International Sustainable Development Research Conference 2005, Helsinki, Finland [1-19 p.]

20. Stasiskiene Z., Staniskis J. K. Integration of Environmental Management Accounting into Companys Environmental Performance Improvement System: Case Study of Lithuanian Industry // Proceedings of 10th European Roundtable on Sustainable Consumption and Production, Antwerp, Belgium, 2005. [1-9 p].

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Assoc. Prof. Dr. aneta Stasikien, senior researcher at the Institute of Environmental Engineering (APINI), Kaunas University of Technology. The main research areas: Cleaner Production, Cleaner production financing, Environmental Management Accounting. Address: K. Donelaiio str. 20,

LT-44239 Kaunas, Lithuania. Tel. +370 37 300763 Fax +370 37 209372; E-mail zaneta.stasiskiene@ktu.lt

Assoc. Prof. Dr. Christine JASCH is founder and manager of the Vienna Institute for Environmental Economics and Management (IW). Current working areas include environmental performance evaluation and sustainability indicators, integrated management systems, environmental and sustainability accounting, ethical investment, sustainability reporting, sustainable (home) services and product service systems. Address: Rechte Wienzeile 19/10,

A1040 Vienna, Austria Tel. +43 1 587 21 89 Fax +43 1 585 61 68-68 E-mail Jasch.Christine@ioew.at

Aplinkos vadybos kat vertinimas: subalansuoto vadybos kat vertinimo link Christine Jasch1, aneta Stasikien2 1Aplinkos vadybos ir ekonomikos institutas, Viena Austrija 2 Kauno technologijos universitetas, Aplinkos ininerijos institutas

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

Per pastarj deimtmet subalansuotos pltros koncepcija tapo daugelio pramons moni aplinkos apsaugos politikos pareikim pagrindu. Siekdamos valdyti ir kontroliuoti savo aplinkos apsaugos ir socialin veiksmingum, vis daugiau moni diegia aplinkos apsaugos vadybos sistemas, o pastaruoju metu pradtos diegti ir socialins vadybos sistemos. Taiau dauguma toki sistem efektyvumo tyrimo studij parod, kad jis gana maas. Nustatyta, kad aplinkos apsaugos ir socialin atsakomyb lieka atskirta nuo prastos verslo strategijos ir vadybos sistem, t. y. jos remiasi ikirtinai tik finansiniais veiksmingumo indikatoriais, o aplinkos apsaugos indikatoriai paliekami nuoalyje

Tuo tarpu sisteminis rizikos valdymas galina mones palyginti alternatyvas, sistemikai vertinti ilaidas ir gaunam naud ir nusprsti, kurios priemons yra geriausios, sudaromas pagrindas rengti veiksm planus, kurie leist diegti rizikos prevencijos ir mainimo priemones, atitikt mons tikslus ir prioritetus.

Daugeliu atveju moni vadovai, priimdami sprendimus dl investicij aplinkos apsaug, susiduria su dilema: viena vertus, reglament reikalavimai, savanoriki standartai ir rinkos spaudimas reikalauja nuolat didinti ilaidas aplinkos apsaugos veiksmingumui gerinti, kita vertus, informacijos, kurios reikia norint priimti ekonomikai nauding sprendim, negalima gauti laiku, ne visada ji isami ir tinkamai pateikta. Priimti sprendimai nra gerai sistemikai vertinti atsivelgiant naudojamas mediagas ir galim j pasirinkim, gaminio kainos nustatym ir pan. Taip pat monms kyla sunkum vertinant aplinkos vadybos sistem bei kitos aplinkos apsaugos veiklos naud. Paprastai ie skaiiavimai apima tik ma dal bendrosios ekonomijos, kuri susidaro dl aplinkos vadybos ar investicij. Taip atsitinka todl, kad daniausiai iuos skaiiavimus atlieka aplinkos apsaugos vadybininkas, o ne ekonomistas ir neatsivelgiama bendruosius taros valymo, taros prevencijos ir mediag naudojimo efektyvumo katus.

Kaip parod sukaupta patirtis, norint tinkamai vertinti aplinkos vadybos katus ir priimti sprendimus dl investicij, ypa svarbu atkreipti dmes ekonomini ir fizikini duomen bei

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atitinkam mons skyri veiklos derinim, mediag sraut apskait, tinkam atsitiktini kat vertinim.

iuo metu plaiai taikomi tradiciniai kat vertinimo metodai teikia ribot informacij apie ekonomin aplinkos apsaugos ir su ja susijusi priemoni vertinim. Todl mons arba korporacijos vadovybei jos nepakanka, kad galt priimti subalansuoto verslo sprendimus.

Kadangi trksta informacijos, sprendimus priimantys asmenys nevertina ekonomins gamtos itekli verts kaip turto ir finansins aplinkos vadybos naudos. Dl i prieasi ir siekiant subalansuotos pltros atsiranda poreikis tobulinti spendim primimo procedras ir pradti vertinti informacij apie aliav srautus ir su jais susijusius katus.

Remiantis iais rezultatais, btina sukurti efektyvias vadybos priemones, kurios panaikint atotrk tarp aplinkos apsaugos ir verslo vadybos sistem, integruot finans, aplinkos apsaugos ir socialin vadybos sistemas ir itaip pagerint mons aplinkos apsaugos veiksmingum.

iame straipsnyje pristatoma Jungtini Taut Subalansuotos pltros departamento ir Tarptautins finansinink federacijos sukurta Aplinkos apsaugos vadybos kat vadybos koncepcija. i koncepcija aktyviai ir efektyviai diegiama vairiose pasaulio alyse. Jos pagrindu kuriama subalansuotumo kat vertinimo sistema. Pirmieji tokios sistemos diegimo bandymai atlikti Austrijos automobili gamybos pramonje. Straipsnyje taip pat pristatomi aplinkos vadybos kat ir subalansuotumo kat vertinimo rezultatai Lietuvos pramonje ir i sistem taikymo perspektyvos ir poreikis.