Instruments of Operational Controlling and Management: EMA

Question 1

Why do companies measure environmental performance?

Answer 1

• Increase environmental awareness and employee skills
• Reduce environmental costs and risks
• Improve environmental management
• Increase company profitability and performance
• Assist management in environmental decision-making
  -Legal requirement (Corporate Sustainability Reporting Directive)

Question 2

What is EMA?

Answer 2

EMA is “the management of environmental and economic performance through the development and implementation of appropriate environment-related accounting systems and practices.”

• Focuses on:
  
  • Life-cycle costing
  • Full-cost accounting
  • Benefits assessment
  • Strategic environmental management planning

Question 3

What are the main differences between EMA and conventional accounting?

Answer 3

• EMA focuses on material & energy flow information and environmental cost information
• EMA focuses on reporting environmental liability costs and other significant environmental costs
• EMA focuses on natural resource stocks and flows, environmental costs and externality costs

Question 4

What type of data inputs needed for EMA?

Answer 4

EMA combines monetary and physical data:
–physical information on the use, flows and destinies of energy, water
and materials (including wastes) and
–monetary information on environment related costs, earnings and savings.

Question 5

What is EMA’s role within organization?

Answer 5

*Connection to decision
making
*Stakeholder information
*Material/Energy flows

Question 6

Name 3 tools for EMA?

Answer 6

-Environmental costs & cost accounting
–Environmental direct costing
–Environmental investment appraisal

Question 7

What are the objectives of Environmental Cost Accounting (ECA)?

Answer 7

• Identify annual environmental costs
• Define goals for continuous environmental performance improvement
• need to consider what costs incur (cost type), where the costs incur (cost center) and for what purpose the costs incur (cost carrier)
• results are useful for investment appraisal, benchmarking and external reporting

Question 8

Define what environmental costs and environmental proceeds are

Answer 8

Environmental costs are costs due to environmental activities, which are specific to a corporation.
Example: waste management costs, environmental management costs

Environmental proceeds are proceeds and/or benefits that occur due to a corporation’s environmental activities and active pursuit of an environmental policy.
Example: subsidies, proceeds from co-products and secondary raw materials

Question 9

What is environmental direct costing?

Answer 9

It is a decision-oriented approach;

Corporate costs are divided in
1. Operational or process-related costs
2. Environmental costs (Costs due to legal requirements: waste disposal charges; Voluntary environmental costs: Environmental management system; Externality related costs)

Question 10

What is environmental investment appraisal?

Answer 10

Extending the traditional
Investment appraisal, environmental investment appraisal considers a qualitative assessment of material and energy flows and further criteria that are essential to the environment.

Question 11

What are the 2 types of environmental costs?

Answer 11

Direct: Costs that can be directly
attributed to environmental
activities or products

Indirect: Costs that are shared
across multiple processes
or products and cannot be
traced directly to a process

Question 12

Name 3 benefits and challenges for environmental investment appraisal

Answer 12

Benefits: cost savings discovery, risk reduction, long term perspective

Challenges: data challenges, monetization difficulties, future uncertainty

Question 13

Define environmental performance evaluation (EPE)?

Answer 13

Supports management decisions on the environmental performance of an organization through selection of metrics, data collection and analysis, assessment of information against environmental performance criteria, reporting and communication, and periodic review and improvement of this process.

Question 14

Describe the different types of key performance indicators.
(EP- environmental performance)

Answer 14

1. EPIs:
   1.1 Management performance indicators (MPIs): information on management efforts to influence the EP (env. budget, % of env. targets achieved);
   1.2 Operational performance indicators (OPIs): information about the EP of the organization’s operations (water consumption, waste output etc)
2. Environmental Condition Indicators (ECIs): information about the condition of the environment which may be useful for the implementation of EP evaluation within an organization (Contaminant concentration in ambient air (µg/m 3, etc)

Question 15

Name 4 objectives of EPE?

Answer 15

–Better understanding of environmental impacts
–Basis for benchmarking management
–Identification of opportunities to improve energy and resource usage
–Determination of met objectives and targets

Question 16

Describe 2 examples of Environmental Direct
Costing

Answer 16

Activity Based Costing (ABC): This method allocates environment costs based on specific activities that consume resources.
Applicibality: Manufacturing process
involving different activities with different environmental impacts

MFCA: This method quantifies material losses at each production stage and assign their environmental costs.
Applicibality: For tracking material losses