SEEA Revision Issues from a corporate
accounting perspective
13th London Group –meeting
on Environmental-Economic Accounting
Brüssel, September 30th 2008
Dr. Christine Jasch
Institute for environmental management and economics,
IÖW, Vienna, Austria
www.ioew.at
EMA challenges
Preventive environmental protection is often hampered by the
lack of systematic recording of environmental data and
costs, limiting the scope and comparability of environmental
management of production, distribution and consumption at
the corporate level, across industries, at national and
international level.
At the same time industry representatives are pressing to
reduce data collecting burden to a relevant set of available
information.
For an economist and accountant, consistent data, that can be
aggregated, benchmarked and verified is of core interest.
This can only be achieved, if company internal standards
and definitions are being implemented, that confirm to
international accounting and statistic standards.
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EMA Micro Macro Link Project
• Comparison of definitions and disclosure requirements on
a national and corporate level
• Participation in the revision process of the London Group
on Environmental Accounting which has accepted the
request by the UN Committee of Experts on
Environmental-Economic Accounting to take a leading role
in the revision of the SEEA-2003, the worldwide handbook
of national environmental-economic accounting (UN SEEA
2003)
• Funded by the Austrian Ministry of Transport, Innovation
and Technology within the research framework „Factory of
Tomorrow“
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Project goals
Improve consistency of data requirements for statistical
purposes with the structure of financial accounting systems
and the UN DSD and IFAC guidance documents, the
guideline on Sustainability Performance Indicators by the
Global Reporting Initiative and the upcoming ISO standard
on Material Flow Cost Accounting.
Improve relevance of this data set for internal corporate and
external policy decision making, thus raising acceptance by
industry and industry representatives for data collection.
This will significantly support the design of harmonised
corporate information systems and help provide consistent
and comparable data on a micro and macro level and along
supply chains (product life cycle assessments).
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The UN DSD EMA Workinggroup
The Expert Working Group on ”Improving the Role
of Government in the Promotion of Environmental
Management Accounting (EMA)” was set up in
1999 by the United Nations Division for
Sustainable Development (UN DSD) in
cooperation with a number of government
agencies and non-governmental experts to
promote Environmental Management Accounting
(EMA) through publications, pilot projects and by
establishing an international forum for discussion
on the role of governments in the promotion of
EMA.
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Jasch Ch., EMA, Procedures and Principles,
United Nations, New York, 2001
The book was prepared for the UN DSD, EMA WG. It
was commissioned by the Austrian Ministry for
Transport, Innovation and Technology, the Austrian
Ministry for Agriculture, Forestry, Environmental
Protection and Water Management and the Austrian
Chamber of Commerce.
Translations available into German, Spanish,
Portuguese, Japanese, Korean, Chinese, Czech,
Lithuanian, Estonian, etc
You can also find the excel tool and case studies under
www.ioew.at
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Board
Of
Directors
Deborah Savage, Ph.D.
Director, EMARIC
Arlington, MA USA
Tel 617-848-8305
Fax 617-848-4193
dsavage@emaric.org
www.EMAwebsite.org
INTERNATIONAL GUIDANCE DOCUMENT
ON
ENVIRONMENTAL
MANAGEMENT
ACCOUNTING
(EMA)
Christine Jasch, Ph.D.
Director, IOEW
Vienna, Austria
Tel 43-1-5872189
Fax 43-1-585-616868
jasch.christine@ioew.at
www.ioew.at
EMA Definition from UN DSD EMA WG
Environmental Management Accounting
(EMA) is broadly defined to be the
identification, collection, analysis, and use
of two types of information for internal
decision-making:
• physical information on the use, flows,
and fates of energy, water, and materials
(including wastes) and
• monetary information on environmentrelated costs, earnings, and savings.
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System boundaries for mass balances
INPUT
Materials
Energy
Water
System boundaries
Nations
Regions


Corporations


Processes


Products
OUTPUT
Products
Waste
Emissions
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Physical Mass Balance:
Input and Output Types
Materials Inputs
Product Outputs
Raw and Auxiliary Materials
Products (including Packaging)
Packaging Materials
By-products
Packaging)
Merchandise
Non-Product Outputs
(Waste and Emissions)
Operating Materials
Solid Waste
Water
Hazardous Waste
Energy
Wastewater
Air Emissions
(including
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Physical Flow Accounts SEEA
INPUTS
OUTPUTS
Products
Products
Natural Ressources
Residuals
Ecosystem Inputs
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Recommendations related to material flow accounting
• Apply a distinction between material inputs and product
outputs throughout the document.
• Definition of materials (= inputted goods, but not services
and products) and consistent application throughout SEEA.
• Classification of material inputs into raw and auxiliary
materials, which become products, as well as packaging in
opposition to operating materials.
• Clarification, if and when energy and water inputs are part of
material inputs.
• Clarification of related disclosure requirements in statistical
assessments.
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Only environmental industries or products have related
environmental expenditure?
Ideally what SEEA wants to measure are “expenditures
connected with the designated environmental purposes”.
The “practical” approach taken by SEEA in identifying
environmental activity is to subdivide products and industries
into those which are typical, or characteristic, of
environmental activity and those which are not.
But this neglects the fact that nowadays practically in all
sectors environmental management systems have been
installed and within them initiatives are being taken to reduce
the environmental impact of production and products and in
addition develop more sustainable products.
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Recommendations related to sector classification
• Separate recording of NACE code inputs of materials,
water and energy.
• Separate recording of NACE code outputs of products and
services.
• Reconsider the concept of “environmental industries” and
“environmental products”. In all sectors some companies are
taking measures to reduce environmental impact of
production and products.
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Cost categories in the IFAC Document:
• Materials Costs of Product Outputs
• Materials Costs of Non-Product Outputs
• Waste and Emission Control Costs
• Prevention and other Environmental
•
Management Costs
Research and Development Costs
• Less Tangible Costs
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Recommendations related to the assessment templates
• Separation of costs for treatment and costs for
prevention as a general structure for all environmental
costs.
• Classification of sub-categories of environmental
expenditure according to accounting terminology.
• Assessment of data from management and financial
accounting (costs and/or expenditures), but not relating
to potential savings or actual cash flow.
• Top down approach from total costs by financial
accounts to the distribution by environmental domain
effected. (This requires changing the CEPA
classification into a format that first distinguishes
between costs for treatment and prevention, then lists
the accounting categories and only lastly classifies them
by environmental domain effected.)
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SEEA environmental expenditure criteria
A) The pure purpose criterion: Activities and expenditure where the main
objective is protecting the environment are included in full. This criterion
works best where the main objective of protecting the environment is
clear and unambiguous, for example end-of-pipe capital expenditure.
B) The extra-cost criterion: is used to identify the portion of the cost of
more environmentally friendly technologies and changes in processes
and products to be attributed to environmental protection. The investment
and operating expenditure are compared to those of a “standard” or less
environmentally beneficial alternative, if there is one, or the estimated
additional cost of incorporating the environmentally beneficial feature.
Only the extra expenditure is included.
C) The net-cost criterion: Only expenditure undertaken for environmental
protection purposes which leads to a net increase in cost (that is where
spending exceeds any savings or income arising before the net cost was
actually incurred) is included. When expenditure is recorded, this
criterion only applies to operating expenditure.
D) The compliance criterion: Expenditure undertaken with the main
objective of protecting the environment but specifically in order to comply
with environmental protection legislation, conventions and voluntary
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agreements.
Efficiency gains and cost savings
The SEEA approach to environmental expenditure explicitly only
“concentrates on steps taken to deal with residuals and does not
consider explicitly protection of the environment through means of
water and energy conservation or the effects of recycling” (p. 215).
In effect, this means that the SEEA approach only focuses on the
output of waste and emissions and neglects all activities to reduce
the inputs of materials, water and energy.
It is thus in complete contrast to the approach of cleaner
production and pollution prevention. It is also in complete contrast
with the focus of the work of corporate environmental managers
.
“Excluded are measures undertaken for cost saving reasons. (e.g.
energy saving).”
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Designated environmental purpose
The solution taken by SEEA not to include the energy
(and material) efficient equipment, is not really
understandable also from an environmental point of
view.
This has e.g. let to a strong decline in environmental
investments since 1990 (Statistisches Bundesamt,
2006) which is not at all related to a degradation in the
state of environment, as companies at the same time
have invested in integrated pollution prevention
techniques and management systems and actually
improved environmental performance in relation to
production.
It has also let to a strong decline of acceptance of the
relevance of the collected data.
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Recommendations related to the purpose of
environmental costs
•Reconsider the concept of environmental protection as a “satellite
system” to general production and establish a more integrated
environmental management approach.
•Reconsideration of the definition of environmental protection
activities.
•Get rid of the net-cost and extra-cost criterion
•Allow for the inclusion of measures which result in cost savings (e.g.
energy efficiency measures), measures related to reduction of the
input of materials, water and energy, improving resource efficiency
and resource management activities (e.g. measures related with
improving material, energy and water efficiency).
•Clarification, if water withdrawal costs are part of environmental
expenditure.
•Inclusion of a criterion of “actual environmental impact reduction” in
addition to the “environmental purpose criterion” for the classification
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of environmental protection activities.
Recommendations related to data assessment
• Apply the term “costs” to allow for more flexibility and
not requiring the application of strict accounting rules.
Many of the requested data have to be estimated and
are thus not “expenditure” in the strict sense of financial
accounting.
• Enable cost assessments by cost centres, e.g. for
environmental management and percentage distribution
to environmental media effected
• Avoid the need to further disaggregate accounts and
cost centre reports by tracing invoices to the extend
possible
• All this would significantly facilitate data gathering and
increase acceptance by companies.
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IFAC Classification of technologies
End of pipe equipment – emission control
traditional focus of reporting requirements, comparatively easy to trace,
as stand alone equipment not related to production – additional burden,
expensive
Cleaner technologies
much more effective from an environmental protection point of view,
much more cost efficient, as integrated into production processes, but difficult to
estimate the „environmental share“. Inconsistent reporting requirements by
statistical agencies, awareness problems.
Product oriented prevention measures
reducing the environmental impact of products, e.g. desulphurisation of
petrol, part of integrated prevention
NPO equipment
relating material loss percentages to the responsible inefficient
production equipment, most relevant for internal cost accounting
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Pollution Prevention Technologies
In opposition to IFAC, SEEA:
•Does not include measures to reduce the input of materials,
energy and water and increase resource efficiency
•Does not include measures for energy efficiency and
renewable resources as they would qualify under “resource
management”
•Does not allow for measures which have a positive pay
back (without defining pay back cycles and interest rates)
•Does not allow for measures, where the primary purpose is
not environmental protection but resource and production
efficiency, even if they result in significant reductions of
environmental burden.
•Does not allow for measures related to reduction of the
environmental impact of products.
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Recommendations related to the classification of
environmental investment
•Redraft the definition for integrated pollution prevention
technologies and include profitable efficiency measures,
input substitutions and product improvements.
•Reconsider the criteria and allow for estimates for an
environmental share of costs based on environmental impact
reduction.
•Record investments at the point of put in function when
depreciation starts and not during the project development
phase.
•Clarification, that depreciation should not be recorded as
part of annual costs.
•Linking of investments grants to the definition of
environmental relevant equipment. That means, if an
equipment has been considered as 40 % environment, than
40 % of a related investment grant should be recorded at the
time when the grant is being granted, regardless of who is
granting it and why. The annual depreciation of the grant
should not be considered.
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Final remarks
Environmental protection shifted from End-of-pipe and clean up of
contaminated sites to EMS, Integrated Prevention, Cleaner
Production, Ecodesign and –labbeling, Emission Trading,
Rising prices for materials and energy and legislation requests
 Pollution Prevention Pays!
But is not reflected in national statistics!
Reconsider actual information needs for policy makers and
corporate environmental management
Reconsider the SEEA definitions, which make corporate data
collection so cumbersome
Thus improve relevance and acceptance of the data set!
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