Making sense of environmental accounting

Much as Total Quality Management (TQM) has helped companies decrease waste and enhance value, environmental accounting offers an approach and a suite of tools that can help organizations improve both environmental quality and bottom-line business performance. Its focus is to bridge the world of finance and economics with the world of environmental management. Companies in all sectors have discovered that they can increase profits by meeting and even surpassing environmental regulations. Through environmental accounting, companies can discover more of these opportunities and, ideally, bring environmental concerns earlier into planning, decision making, and operations. This article introduces environmental accounting and some basic principles that should guide organizations' thinking on environmental accounting and environmental accounting systems. It also describes several different objectives for environmental accounting that imply different requirements and orientations. Although the focus of this article is on environmental accounting as an aspect of forward-looking management and decision making in companies, much of the discussion applies to nonprofits and government units as well.     

EcoMetrics: Integrating direct and indirect environmental costs and benefits into management information systems

This article suggests a set of metrics that may impact both profitability and environmental quality, capture and quantify eco-efficiency costs and benefits, and help managers understand and focus on tangible, yet difficult-to-quantify benefits (such as improved morale, innovation, etc.). In order to do this, it will frame the issues pertinent to developing eco-efficiency metrics; identify criteria for effective metrics to enable companies/consultants/etc. to discuss, evaluate, and select program metrics; outline the universe of possible metrics; suggest key metrics for a typical company; identify data quality, availability and other constraints; and suggest a methodology for incorporating environmental metrics into operating metrics. [Note: This article is not intended to provide a definitive overview of environmental metrics; rather, it proposes an operational framework for considering, selecting, and implementing metrics that are meaningful in both environmental and business terms. For an overview, see for example, Environmental Policy Performance Indicators;¹ Company Environmental Reporting;² The Greening of Industrial Ecosystems;³ Measuring Corporate Environmental Performance⁴]. The flow and embodiment of materials and energy in production and consumption activities of the economy underlie both economic growth and environmental perturbations… [Yet] existing accounting systems can prevent modern firms from internalizing environmental costs and considerations, and can compound difficulties encountered in effecting environmentally preferable changes⁵.     

Corporate waste accounting at PSE&G: Bringing a companywide system on-line

Waste accounting has become a necessary practice for companies endeavoring to track their wastes toward realizing discrete waste minimization and pollution prevention objectives. Measurement systems and program initiatives certainly must be tested to find out what will repeatedly work for and best serve a company. Public Service Electric and Gas Company (PSE&G) has committed to revolutionizing the processes of managing materials, wastes, and their associated information. In laying out their strategic plan, company representatives specified the need for a companywide waste accounting system to enable them to monitor progress toward achieving two important short-term waste management targets by the close of 1995. Together with the Electric Power Research Institute, PSE&G is implementing a four-year program to install such a system. The results of the first year-and-a-half's work are reported in this article. The purpose of this article is to discuss the results of implementing a waste accounting system on a utility companywide basis. We will address the experience of bringing such a system on-line at PSE&G. The Electric Power Research Institute (EPRI) previously developed a framework and approach for measuring the performance of utility pollution prevention programs called waste accounting, including the development of a software program called Accounting Software Application for Pollution Prevention or ASAPP.¹ These programs were devised to assimilate detailed information from the facility up through the corporate levels.     

Monitoring and measurement systems for implementing ISO 14001

There is a lot of work involved in establishing an effective and useful monitoring and measurement system, but it can be a critical tool for business success. With reliable data based on important performance metrics, you can quantify environmental and business improvement; communicate success; provide valuable input to environmental objectives, targets, and programs; and make sound business decisions based on facts. This article details how companies can set up procedures, processes, and schedules using ISO 14001 to monitor regulatory compliance and help establish an integrated management system.     

Getting started with environmental cost accounting

Proactive corporations have been looking at methods to determine the real costs of doing business, including environmental costs using environmental cost accounting (ECA) methodology. Many companies do not track or measure environmental costs and therefore do not know their true environmental costs. Unfortunately, conventional accounting practices rarely tease out environmental costs, and the costs associated with environmental compliance remain hidden in general overhead accounts. ECA can bring the world of business and the environment closer. When we have a better handle on environmental costs, we can use this information to better prioritize environmental projects, identify cost improvement projects, and allocate environmental costs to products. In this article we explore how some companies approach ECA and show how to initiate an ECA program.     

The business implications of implementing ISO 14000

The ISO 14000 standards for environmental management systems (EMS) are voluntary standards intended to aid companies that wish to improve their environmental performance. The standards owe their existence, at least in part, to three widely shared views: (1) that existing environmental management systems are either inadequate or ineffective; (2) that companies will want to improve environmental performance for economic or social reasons; and (3) that governments and stakeholders will require companies to exercise greater control of the impacts to the environment through new regulations. ISO 14000 offers a solution—an ?integrated”? EMS, with components designed to effect sound management in any size organization and in any country. The standards are an embodiment of both the policy and practice of environmental management. This article is a consideration of the business implications of the ISO 14000 series of standards. How will a movement toward an integrated EMS be realized? Who will be in the best position to respond? ISO 14000 is a management system, and it carries with it business consequences.     

Expanding the benefits of environmental management systems through DFE

Industry's role in environmental protection is changing and growing. Increasing evidence shows that a corporation's understanding and response to environmental issues and concerns can have strategically important consequences for some kinds of businesses.¹ Focusing on concepts of prevention, industry has developed and struggled with a number of environmental approaches, all of which attempt to link the environment with common business practice. Industry has followed and in some cases embraced concepts and approaches like sustainable development, eco-efficiency, green manufacturing, pollution prevention, and extended product responsibility. A particularly timely and promising strategy to reduce the environmental impact of both manufacturing and product use while enhancing business success is the integration of environmental management systems (EMS) with design for the environment (DFE) efforts. A desirable relationship can and should exist between DFE and EMS. This relationship has not been well understood, but is crucial to fulfill the promise of each. In application, the institutionalization of DFE in an organization is difficult and tenuous at best. Some authors suggest that management issues block the implementation of DFE.² Others say that DFE has not been institutionalized to the extent that pollution prevention has.³ This article suggests that through an explicit connection between an EMS and DFE, DFE can extend the promise of EMS to reduce industry's environmental impact and produce business success, and it can do so in an ongoing way. The authors will show the importance of an EMS/DFE linkage, suggest company types that might benefit from investigating these approaches, and then review a series of DFE tool types.     

COST SHARING AND IMPLEMENTATION OF NATIONAL WATER RESOURCES POLICY1

ABSTRACT: In this article a managerial approach to developing and implementing National Water Resources policy is suggested. Proper consideration can be given to national economic development (NED), environmental quality (EQ) and conservation and still result in an implementable policy at the operational level if proper incentives are built into the process with proper attention to alternate non-Federal cost sharing rates. Not only can these multiple objectives be entertained but the Administration and Congress will have a management tool that should ensure a certain probability of success.     

Systems vs. metasystems: EMIS at the crossroads

As environmental management responsibilities expand beyond regulations to address business issues such as design for the environment, total cost accounting, and strategic planning, it is tempting to plan for expanded information systems (EMIS) to handle new responsibilities. The author argues that we should pursue exactly the opposite course: shrink the EMIS to the minimum size possible. It would be impossible to feed the self-standing EMIS with all the data it needs—replicas of almost any data tracked by the organization. The EMS and EMIS should be “meta-systems” that store the organization's knowledge about how EH&S relates to various business processes, and what should be measured and reported to assure that EH&S objectives are met. The author provides examples of how companies are creating these EMS “metasystems” by leveraging enterprise systems implemented for accounting, business planning, groupware, maintenance, and process control.     

Instruments and strategies to improve the eco-efficiency of products

This article examines what tools can be used to analyze and improve the environmental performance of a product. It discusses how companies can upgrade the environmental performance of products in a cost-effective way and enhance their competitive position in the market through product innovation. Based on current examples, it is concluded that a complete toolbox is available to assist companies in developing more eco-efficient products. Which combination of practices can best be applied depends on various factors, particularly the type of external demand(s) the company is facing, its available resources, its time horizon, and its environmental strategy. Experience shows that it is better for companies to be ahead of external criticism and act more proactively. This article shows how companies can follow four main strategies in which eco-efficient product development goes hand in hand with a better competitive position in the market: (1) an efficiency improvement strategy; (2) a market share improvement strategy; (3) a market development strategy; and (4) a product diversification strategy. Finally, the importance of product innovation is stressed in order to implement the eco-efficiency strategies mentioned above.     

Environmental management auditing: When credentials count!

We all know that the process of driving a car is not as simple as turning a key in the ignition and moving. When you want to drive a car, you take a written test to show your knowledge of the rules of the road. You learn to operate a vehicle (remember the operating difference between a standard shift and an automatic?) and then how to operate that vehicle in moving traffic. After you have gained competence in vehicle operation, you take a “hands-on” driving test to prove to an independent third party (the State) that you know what you are doing. Then, if you do know, you are issued a license, subject to renewal and perhaps retesting at some later point in time. Your license has become your credential to operate. It implies a certain minimum level of knowledge and experience. Should environmental auditing be any different? This article considers the application of a uniform standard for environmental auditor qualification. With an emphasis on ISO 14001¹ and auditing of environmental management systems, it discusses:

• the evolution of environmental auditing;
• established environmental auditor qualification processes;
• limitations of compliance auditing; and
• characteristics of a good auditor.

     

Making pollution prevention part of the coors culture

This article is about Total Quality Management and its relationship to corporate environmental affairs. As the TQM movement expands, the commitment to continuous quality improvement, customer satisfaction, and collaborative, team-oriented workplaces is finding new applications. Just as the success of Federal Express, AT&T, and other winners of the Malcolm Baldrige National Quality Award shows that Total Quality Management can transform a business, we also are learning of successes companies are having applying TQM principles to environmental management. Our experience with TQM and environmental management at Coors Brewing Company is in the area of pollution prevention. In addition to our brewing operations, we also operate the country's largest aluminum can manufacturing plant, where we produce 4 billion cans a year, a separate facility that makes the can tops, a glass bottle manufacturing plant, and various support facilities. In all, we have some 7,000 employees, and building a commitment to pollution prevention in an operation of that size requires much more than just adopting quality principles. In this article we show how it also means understanding how those principles will mesh with the corporate culture. What we found is that before TQM can begin its magic, a company must review its own culture to see how problems have traditionally been solved and how challenges have been met.     

Proposals for rehabilitation and management of Isipingo lagoon and estuary,South Africa

The Isipingo lagoon and estuary, situated to the south of the Durban metropolitan area, on the east coast of South Africa, has been subjected to intense environmental degradation. Historical events, such as the building of a major airport and the development of an industrial township, have contributed to the reduction in water flow from 102 × 10⁶ m³/yr to 3 × 10⁶m³/yr between 1952 and 1969. Current environmental issues such as water quality, litter, noise, air pollution, and solid waste dumping are described. A rehabilitation and management program that seeks to address these issues is proposed. The main objectives of this program are: the improvement of the water flow, the improvement of the water quality, and the curtailment of the destruction of littoral zone elements. The rehabilitation proposal is summarized by means of a flow chart, which lists short-, medium-, and long-term actions and identifies parties and/or organizations responsible for implementing the actions. A two-tier management structure is proposed, with the first level comprising an environmental monitoring committee, consisting of organizations with scientific expertise who would function in a watchdog capacity, monitoring restoration efforts and intervening where actions are contrary to the objectives of the rehabilitation program. The second level would consist of an estuarine management committee, which would be responsible for evaluating the restoration program and modifying objectives where necessary.     

Improving corporate environmental performance through economic value added

These days, corporate annual reports are full of references to shareholder wealth creation. In today's highly competitive capital markets, most chief executives understand that unless they are seen as value creators, investors will place their scarce capital somewhere else. Clear evidence of the growing importance, even dominance, of shareholder wealth creation is the growing use of a performance measure known as economic value added (EVA®).¹ Within ten years, it is almost certain that most large, publicly traded companies in the United States will be using EVA or something like it as a primary performance evaluation tool. Recently, many non-American companies have also adopted it to better align the incentives of managers with shareholders and to signal their commitment to value creation. EVA is not widely known or understood among environmental specialists, and those who have heard about it often fear it. We find this attitude unfortunate. In this article, we discuss EVA and how its use can aid corporate environmental managers in promoting more proactive environmental investments, and in funding capital investments on environmental improvement, waste reduction, and pollution control in their companies. The use of EVA and other shareholder value measures can also improve general capital investment decisions by integrating environmental factors that affect the long-term interests of the corporation into the managerial decision-making process.     

Motivations for Adopting the ISO 14001 Standard: A Study of Spanish Industrial Companies

This article analyzes what motivates companies to obtain ISO 14001 certification and what factors within companies determine the success or failure of the environmental management standard. The most important motivators appear to be the worldwide recognition accorded the ISO 14000 norm, and its applicability to all sectors. The factors that most contribute to success are the company's experience in management systems and involvement by management. Failure most often results from lack of employee training and organizational rigidity. © 2001 John Wiley & Sons, Inc.     

Inventorying and Monitoring Wetland Condition and Restoration Potential on a Watershed Basis with Examples from Spring Creek Watershed, Pennsylvania, USA

We developed an approach for inventorying wetland resources, assessing their condition, and determining restoration potential in a watershed context. This article outlines how this approach can be developed into a Wetland Monitoring Matrix (WMM) that can help resource management agencies make regulatory and nonregulatory decisions. The WMM can be embedded in a standard planning process (Wetlands, Wildlife, and Watershed Assessment Techniques for Evaluation and Restoration, or W³ATER) involving the setting of objectives, assessing the condition of the resource, prioritizing watersheds or sites, implementing projects, and evaluating progress. To that process we have added the concepts of reference, hydrogeomorphic (HGM) classification, and prioritization for protection and restoration by triage or adaptive management. Three levels of effort are possible, increasing in detail and diagnostic reliability as data collection shifts from remote sensing to intensive sampling on the ground. Of key importance is the use of a consistent set of monitoring protocols for conducting condition assessments, designing restoration and creation projects, and evaluating the performance of mitigation projects; the same variables are measured regardless of the intended use of the data. This approach can be tailored to any region by establishing a reference set of wetlands organized by HGM subclasses, prioritizing watersheds and individual wetlands, and implementing consistent monitoring protocols. Application of the approach is illustrated with examples from wetlands and streams of the Spring Creek Watershed in central Pennsylvania, USA.     

Corporate environmental excellence and stewardship: Five critical tasks of top management

One of the most important challenges facing business is shaping the role of senior management in corporate environmental performance. In some leading companies, the CEO or chairman takes the initiative to carefully define his or her role because of a strong personal commitment, a keen grasp of the business incentives, in response to past problems, or because of a combination of these. In other companies, even where corporate policies genuinely support and promote corporate environmental, health, and safety programs, there may still be inaction or reluctance on the part of top management to participate or get involved. This management posture may work for a few more years, but no longer than that—and could quickly become a major detriment to any company's ongoing market success or viability. This article will focus on a strategy for getting top management involved in your company's programs and, where they are already involved, for sharing some insights we have gained from our work with a number of companies where top management has taken a strong role in environmental issues and has established precedence for what can work well.     

Comparing EQM practices of small and large companies

There is some concern in the environmental quality management (EQM) community that small and mid-sized companies do not have the technical, economic, and personnel resources or expertise to carry out significant programs of pollution prevention or waste reduction in the way that large corporations do. Thus, a very significant proportion of the economy may not be contributing to or benefiting from EQM approaches. This article begins to clarify what small and mid-sized companies that are committed to EQM can actually do and how this compares with the efforts of larger plants or plants operated as part of large multiplant corporations.     

Aquatic biodiversity and the electric utility industry

/ Results from a 1995 survey of utility company biologists indicate that aquatic biodiversity is an emerging and poorly understood issue. As a result, there is some confusion about what aquatic biodiversity actually is, and how we can best conserve it. Only one fourth (24%) of the respondents said their company has a stated environmental policy that addresses biodiversity. Many respondents indicate that over the years they have not specifically managed for biodiversity, but have been doing that through their efforts to assure balanced indigenous populations. While regulations are still the major driver for biological work, an increasing number of companies are involved in voluntary partnerships in managing water resources. Of these voluntary partnerships, 70% have biodiversity as a goal. Biodiversity is becoming an increasingly common subject of study, and a vast majority (75%) of the respondents suggested it should be a goal for utility resource management. Conservation of aquatic biodiversity is a complex task, and to date most aquatic efforts have been directed toward fish and macroinvertebrates. Ecological research and technological development performed by the utility industry have resulted in a number of successful biopreservation and biorestoration success stories. A common theme to preserving or enhancing aquatic biodiversity is preserving aquatic habitat. Increasingly, ecosystem management is touted as the most likely approach to achieve success in preserving aquatic biodiversity. Several utilities are conducting progressive work in implementing ecosystem management. This paper presents the potential interactions between power plants and biodiversity, an overview of aquatic biodiversity preservation efforts within the electric utility industry, more detail on the results of the survey, and recent initiatives in ecosystem management.KEY WORDS: Biodiversity; Ecosystem management; Watershed management; Utilities; Aquatic; Adaptive management