Measurement and accounting for wastes and emissions is necessary
for Cleaner Production. In fact, most organizations do not know how much they
actually spend to produce waste and to manage it. Therefore they do not know how
much money they can save with Cleaner Production tools. Getting the data right is
the first step in CP.
However it is also important to know just what to account for.
Indicators for performance have to be established, then the measurement process can
begin. There are several systems for establishing indicators for business
performance. One of the best is the Baldridge Quality System, which creates measures
for seven major areas of organizational performance. A more simple but more popular
system is the Balanced Scorecard, which is used by many organizations around the world.
Both systems are useful for creating environmental performance indicators and
should be considered as the basis for a measurement system for Cleaner Production.
The Topic Hub for
Environmental Measurement is the top site for links to a wide variety of resources for
environmental measurement, with a focus on CP and pollution prevention.
These reports provide a solid foundation for establishing indictors and
measures:
Measuring Environmental
Performance: A Primer and Survey of Metrics In Use is a report from the Global
Environmental Management Initiative. It describes different types of metrics used to
account for environmental performance and shows the important difference between leading
and lagging indicators. It includes case studies and examples from leading companies.
Continuity,
Credibility and Comparability: Key challenges for corporate environmental performance
measurement and communication (PDF format) discusses the relationships between
environmental management tools based on accounting: Environmental / Full Cost,
Environmental Performance, Environmental Reporting, and Ranking Corporate Environmental
Performance. It provides the framework for the use of environmental accounting data, which
is to provide indicators of performance that can be used for management and also can be
used by investors.
Measuring Eco-efficiency:
A Guide to Reporting Company Performance sets out a framework which can be used by any
business to measure progress toward economic and environmental sustainability. The
framework defines the generally applicable indicators and provides guidelines for
companies to select their own business specific indicators. It also offers guidance on
implementation and communication.
Environmental
Shareholder Value describes how environmental management can increase shareholder
value as described on the balance sheet of the company. Important for understanding how
environmental accounting is relevant to financial reporting.
Environmental Management Accounting
Environmental Management Accounting (EA), or more accurately, management
accounting and capital investment analysis for environmental improvement, is the approach
that firms need to use to capture the true costs of waste and pollution in current
processes, compare them to the true costs of CP alternatives, and make accurate financial
decisions using appropriate analysis tools.
The leading website for EMA is the EMA
Project, supported by the US EPA. It includes a database of over 200
publications on EMA, many available for direct download. It also includes links to
other organizations and current events in EMA.
One of the best training tools for EMA is the UN project on Financing CP. The site has a number of
Powerpoint slide shows for accounting and investment professionals that explain how to
account for wastes and to analyze a CP project.
An Introduction to
Environmental Accounting As A Business Management Tool: Key Concepts And Terms
provides a good introduction to the concepts and terminology of Environmental Management
Accounting.
Environmental
Management Accounting Procedures and Principles is an important primary reference,
developed by an international working group. Extensive technical details and
procedures. It has a rather strong focus on compliance costs but still is useful
internationally.
Environmental Cost Analysis Methodology
includes discussion of process mapping for cost identification, cost measurement,
financial analysis and qualitative issues.
Total Cost Assessment
Methodology is a comprehensive guide to cost analysis for waste minimization with a
focus on chemical industries.
The Green Accounting
Greenboard is an interesting academic look at multiple perspectives on the topic.
The Pollution
Prevention and Accounting resource compendium was designed for faculty who are
incorporating pollution prevention concepts and tools into their courses. Numerous case studies in EA and in Environmental Finance can be ordered
from the Management Institute for Environment and Business, which also can help identify
business school faculty interested in EA.
AccountingEducation.Com has a
search engine that finds many journal articles, news items, and reports on EA. It is
also a generally excellent portal to everything about accounting on the web.
Books on EA are available from this site.
Financial Analysis for Cleaner Production
Financial analysis for CP differs in several ways from typical
project analysis:
It uses a significantly larger cost inventory, including costs of
waste and emissions and regulatory compliance.
The time horizon is typically longer because new and pending
environmental regulations need to be considered.
Because CP almost always reduces risk, a lower discount rate
should be used for estimating the net present value of future cash flows. This means that
the future savings will be worth more.
Many of the manuals described above have
Improving
Your Competitive Position: Strategic and Financial Assessment of Pollution Prevention
Investments is an excellent training manual with a good case study.
A good introduction to CP project analysis is available from this
site on Total Cost Assessment. It
includes a tutorial and free software for relatively simple analysis of projects.
A more advanced tool for CP project financial analysis is called P2
Finance. It is a Microsoft Excel spreadsheet that allows comparison of a base case
with two alternatives. It calculates cash flows, tax rates, and project financial
indicators. The newest version of P2 Finance is called E2 Finance - it includes many more
energy costs. Both programs are available from the Tellus Institute.
