Accepted Manuscript

Expanding material flow cost accounting. Framework, review and potentials

Stefan Schaltegger, Dimitar Zvezdov

PII: S0959-6526(14)00863-4
DOI: 10.1016/j.jclepro.2014.08.040
Reference: JCLP 4618

To appear in: Journal of Cleaner Production

Received Date: 2 July 2013

Revised Date: 18 July 2014
Accepted Date: 13 August 2014

Please cite this article as: Schaltegger S, Zvezdov D, Expanding material flow cost accounting.
Framework, review and potentials, Journal of Cleaner Production (2014), doi: 10.1016/
j.jclepro.2014.08.040.

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 ACCEPTED MANUSCRIPT

Expanding material flow cost accounting. Framework, review and potentials

Stefan Schaltegger; Dimitar Zvezdov

Centre for Sustainability Management (CSM)

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Leuphana University Lüneburg

Scharnhorstr. 1

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D-21335 Lüneburg

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Email: schaltegger@uni.leuphana.de; zvezdov@uni.leuphana.de

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Submission to the special Issue of JCP on MFCA (guest editors: Guenther et al.)
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REVISED MANUSCRIPT
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Abstract
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Existing research argues that impressive environmental and economic benefits can be and have been
achieved with Material Flow Cost Accounting (MFCA). This paper examines the body of literature on
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MFCA and identifies a limited application of MFCA in comparison to its potential application.
Examining the scope of MFCA shows that the methodological proposals and applications are largely
focused on production related decisions. So far, the growing (but still limited) body of research on
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MFCA has not been linked with the conceptual developments in environmental management
accounting (EMA). By conducting a literature review based on the EMA framework, additional
decision situations and decision makers are identified and the potential benefits of expanding MFCA
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are discussed. This paper provides a research agenda both for developing MFCA tools and
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subsequently for spreading them to new areas, where they can contribute to the sustainable
development of organizations, the economy and society. Practitioners could benefit from this paper
by considering additional areas of applications for MFCA in the specific settings of their company.

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Expanding material flow cost accounting. Framework, review and potentials

1 Introduction

Material Flow Cost Accounting (MFCA) can be seen as an approach which has been directly and
indirectly influenced from various perspectives. Material flows and the ecological relevance of
dematerialization have received attention from ecological economics and cleaner production (CP) as

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well as from management accounting.

From an ecological economics perspective Herman Daly already pointed out in the 1970s that the

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reduction of material flows and their ecological impacts is a key approach to a more environmentally
friendly economy (Daly, 1979). Early approaches to CP (e.g. Christie et al., 1995; Jackson, 1994;
Milne, 1996; Pauli, 1997) highlight the relevance of managing toxicity, persistency and ecological

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impacts of material flows as well as of reducing material flow quantity (e.g. Binder et al., 2009).
Similarly, material flow management plays a prominent role in industrial ecology (Moriguchi, 2001).
A closer focus on the company level reveals that approaches such as eco-efficiency (e.g. Schaltegger

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and Sturm, 1990; 1995; von Weizsäcker et al., 2009) have raised attention among managers that
material flows are relevant for both ecological and economic performance.
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Management accounting is largely based on information on material flows, units of production,
volume figures, etc. Material usage furthermore presents a cost driver of growing significance for the
success of a company and as such has been addressed extensively for the past three decades (e.g.
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Chapman, 1975; Günther and Kaulich, 2005; Kerr and Ryan, 2001). Whereas (conventional)
management accounting approaches have neglected the analysis of material flows from an
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environmental dematerialization and eco-efficiency perspective for a long time, this topic has more
recently been dealt with under the notion of environmental management accounting (EMA)
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(Bartolomeo et al., 2000; Bennett and James, 1997; Burritt et al., 2002; Schaltegger et al., 2013). EMA
is the subset of management accounting dealing with environmental issues and has been defined as
the group of accounting methods and activities that support the collection, creation, analysis and
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communication of the necessary information to take decisions for dematerialization, environmental

impact reduction and improved eco-efficiency (Herzig et al., 2012; Jasch, 2003; Schaltegger and
Burritt, 2000).
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In addition to the environmental and sustainability importance of managing material usage, declining
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access to numerous resources and increased costs of handling, storing and disposing of waste have
created a demand for improving material efficiency (e.g. Rohn et al., 2009). A study conducted in the
manufacturing sector concludes that material usage accounts for 40 to 80 per cent of the overall
expenditures (Jasch and Danse, 2005, p.355).

One of the EMA tools that have been developed to enable environmentally and economically
efficient material usage is MFCA. With its focus on company-internal costs of material flows and the
ISO standard 14051, MFCA can be considered the most specifically described and standardized
approach of the whole range of EMA methods (Bennett et al., 2011; Burritt et al., 2002; Burritt and
Tingey-Holyoak, 2012; ISO, 2011; Jasch, 2009; Kokubu and Nakajima, 2004).

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The conceptual work in the field as well as the empirical investigation of MFCA application in practice
have been propelled by a notably simple, yet powerful idea: MFCA combines physical and monetary
information concerning a company’s performance with regard to reducing wastage and thereby
improving resource efficiency, environmental and economic performance (e.g. Jasch, 2009; METI,
2007; Schaltegger and Müller, 1997; Strobel and Redmann, 2002; Wagner and Enzler, 2006). This is
done by analyzing the costs of inefficiencies in production, in particular the costs of wasted materials
and materials going into the products. For industries where the largest part of material flows goes
directly into the end product a particular focus on the reduction of materials going into the product

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can unveil interesting potentials for material saving or substitution. The results of a MFCA analysis
provide support to decision makers in reducing material consumption and thus costs (Viere et al.,
2011a; Herzig et al., 2012).

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Since the first publications in the area (LfU, 1999; Loew and Jürgens, 1999, Wagner and Strobel,
1999; Schaltegger and Müller, 1997; Strobel and Redmann, 2001), MFCA has been subject to

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research and has been applied in various pilot companies, although no rapid adoption in practice has
been documented to date (Jasch, 2009). In fact, Kokubu and Nashioka (2005, p. 332) showed that
MFCA is among the least frequently adopted EMA tools in Japanese companies. Similarly, MFCA

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remains at the periphery of topics in academic literature, as identified in a comprehensive literature
review on EMA publications for the last two decades (Schaltegger et al., 2013).
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Extant research on MFCA has so far focused on conceptual publications and on case studies depicting
its applicability in corporate practice and illustrating the application of the method in various
companies and contexts (e.g. USEPA, 1995; Furukawa, 2008; METI, 2010). MFCA has been applied to
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various materials and industries (e.g. Busch et al., 2006; Herzig et al., 2012; Montel, 2002; Onishi et
al., 2009; Papaspyropoulos, 2012) in large (e.g. Jasch and Lavicka, 2006; Seuring, 2003), small and
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medium-sized companies (e.g. Burritt et al., 2009; Heupel and Wendisch, 2003; Jasch et al., 2010;
Wendisch and Heupel, 2005) as well as in industrial and developing countries (Herzig et al. 2012;
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Jasch and Danse, 2005; Jasch et al., 2010; Schaltegger et al., 2012a). Existing publications highlight
the need for more differentiated material flow accounting tools within a broader architecture of
accounts, indicators and analytical tools, including economic modelling and qualitative assessments
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(e.g. OECD, 2008, p. 19). This could help recognize the interrelationships between different types of
information tools, and identify the most appropriate level of detail for a given purpose (Schaltegger
and Burritt 2000, 362), taking into account the resources and expertise available.
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In spite of the calls for developing a broader material flow accounting tool box, the range of decision
situations in which MFCA could be applied has remained underexposed in the literature. Therefore,
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this paper investigates the question: What information recipients, application areas and decision
situations does MFCA currently focus on and to which of these could it contribute? The results show
that attention has been focused on past oriented, short term information. These findings highlight
the potential for the application of MFCA beyond its present use.

The paper is structured as follows. Given that MFCA can be and has been considered an EMA
approach (Burritt et al., 2002; Viere and Möller, 2006; USEPA, 1995), an EMA framework developed
by Burritt et al. (2002) is presented and adapted to MFCA in the following section. Section 3 adapts
the EMA framework to MCFA, thereby highlighting the “empty boxes”, i.e. those decision situations
which have not had corresponding MFCA application so far. A concluding section highlights the

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relevance of developing the missing tools and argues that decision makers could benefit from their
application.

2 Literature review
To identify potentials for the future development of MFCA tools supporting decision making in
various decision situations, this paper reviews the body of extant literature.
The literature search was conducted according to the following principles to enable a comprehensive

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literature review. Publications on MFCA were collected by an extensive search with several search
engines, including google scholar, ecosia, google, etc., and databases. The latter included Scopus,
Thompson Reuters Web of Knowledge and Springer Link. In addition to the search string “material

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flow cost accounting”, further terms sought for included “environmental cost accounting” and
“material flow accounting”. In addition, the web sites of prominent institutes and authors identified
in a first step were searched to identify research reports.

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Subsequently, snowball sampling was carried out to identify further relevant literature that does not
contain the term MFCA in its title but which nevertheless deals specifically with this EMA approach.
Thus, for example literature on material-flow accounting with an explicit reference to cost aspects

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was also included. The search was limited to publication in English and German.
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As a result, 74 relevant publications were identified. About the half of these publications (31) is
journal articles, 36 publications constitute chapters in edited volumes and conference proceedings or
have been published as monographs. Seven further publications are reports published by standard-
setting bodies and ministries.
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2.1 MFCA in the context of EMA

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The International Organisation for Standardisation defines MFCA as a “tool for quantifying the flows
and stocks of materials in processes or production lines in both physical and monetary units” (ISO,
2011, p. 3). Kokubu and Kitada (2012, p. 3) consider MFCA to have become “one of the most
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promising” EMA tools. The authors argue that information gained from MFCA can act as a motivator
for organizations and managers seeking opportunities to simultaneously generate financial benefits
by improving material efficiency through simultaneously reducing material costs and adverse
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environmental impacts.
Since the emergence of the very first publications in the late 1990s (LfU, 1999; Loew and Jürgens,
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1999; Schaltegger and Müller, 1997; Wagner and Strobel, 1999) MFCA has enjoyed attention by
practitioners and researchers alike, particularly in German-speaking countries, where its origins can
be traced (Jasch, 2009; Loew and Jürgens, 1999; Wagner and Strobel, 1999; Miyazaki, 2002). The
basic concept of MFCA was first introduced to Japan around the turn of the century (Nakajima,
2010). Both Germany and Japan have a strongly efficiency and technology-driven industry, which has
laid the ground for the development and the diffusion of MFCA (Endenich, 2012; Schaltegger et al.,
2013). This technical approach to environmental and sustainability management in Germany has
been emphasized by extant management accounting literature which highlights the dominating focus
on optimizing production processes (Ahrens and Chapman, 2000; Wagenhofer, 2006).
This extensive review of MFCA literature shows several notable traits of the development of the
research area. First, although many of the identified publications have been published in EMA related

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journals and edited volumes, only few of them (e.g. Fischer, 2001; Jasch, 2009; Schaltegger et al.,
2012a; Viere et al., 2007) explicitly refer to the framework concept of EMA along with its
presumptions and characteristics. Second, the development of MFCA has been marked by numerous
attempts to adapt it to various industries (e.g. Wagner and Enzler, 2006; Miyazaki, 2002; Kokubu and
Nakajima, 2004), yet the various decision situations within a company in which MFCA can be useful
have remained under-researched. Third, although several publications identify the possibility of
extending the addressees of MFCA information (Fakoya and van der Poll, 2013; Heupel and
Wendisch, 2003; Nakano and Hirao, 2011), this issue has not been addressed systematically to date.

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Table 1 groups the existing literature on MFCA in accordance with its main contribution to 1)
developing and 2) adapting methods as well as to 3) providing information to different information
users.

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Stream Key considerations Related publications

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Developing Developing the method to overcome its limitations Fischer, 2001; Jasch, 2009;
MFCA and improve its applicability. METI, 2007; Strobel and
Redmann, 2002; LfU, 1999;

The development of MFCA as an approach has
Wagner and Strobel, 1999;
so far not been explicitly related to different

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Loew and Jürgens, 1999;
EMA methods or applications.
USEPA, 1995; ISO, 2011
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Adapting the Another stream of MFCA research has been Busch et al. 2006; Montel,
method characterised by adapting the method to various 2002; Onishi et al., 2009;
industries, countries, or issues. Herzig et al., 2012; Viere et
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al., 2011b; Wagner and

The research on adapting MFCA has focused on
Enzler, 2006; Miyazaki,
industry and geographical differences.
2002; Kokubu and Kitada,
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2012; Onishi et al., 2009;

Wang and Milis, 2009
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Providing Different departments and people have different Jasch, 2009; Viere et al.,
information information needs (Schaltegger and Burritt, 2000, 2011a; Fakoya and van der
to recipients 65ff.). The MFCA literature recognises these Poll, 2013; Heupel and
of MFCA diverging needs and addresses them in the context Wendisch, 2003; Hyršlová
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information of production. and Hájek, 2005

The considered addresses of MFCA information
have been largely limited to production and
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environmental managers.
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Table 1: Identified streams of MFCA research in extant literature

The table summarizes the observation that MFCA has been developed with regard to its applicability
in general as well as for different industries. In spite of its increasing diffusion and the fact that MFCA
serves to support decision making, the approach has so far only been developed and used in a
limited number of contexts with regard to the information used. The literature review also supported
the assumptions that MFCA has not been discussed in depth with regard to different decision
situations so far.

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2.2 Decision situations and decision tools according to the EMA framework

The distinction of different decision situations has been examined on a more general level for EMA.
Burritt et al. (2002) propose a comprehensive framework for EMA (Table 2), that breaks down
management information into: physical and monetary dimensions, the time frame of decision
making – past, future, length of time frame being short or long run, and routineness of the
information generated – regular or ad hoc.

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Environmental Management Accounting
(EMA)
Monetary EMA Physical EMA

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Short Long Short Long
term term term term

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Routinely
generated
Past oriented
Ad hoc

Routinely

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Future generated
oriented
Ad hoc
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Table 2: EMA framework (similar to Burritt et al., 2002)

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This framework can serve as a fundamental guide to the most relevant information properties and
workflows related to collecting and managing environmental information. With the growing number
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of businesses looking at the environmental aspects of their activities (e.g. Schaltegger and Burritt,
2000; Bennett et al., 2011), extended research has been carried out to cover the different aspects
and tools of EMA. The framework has been applied and documented in a number of situations,
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including carbon management accounting (Burritt et al., 2011), developing countries (e.g. Herzig et
al., 2012; Fakoya and van der Poll, 2013; Jasch and Danse, 2005; Jasch et al., 2010) and various
industries (Burritt and Saka, 2006; Schaltegger et al., 2012b). Yet, an in-depth discussion of MFCA in
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light of the EMA framework could not be identified in extant literature.

This raises the question, how MFCA can support managers in different decision situations
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distinguished in the EMA framework.

2.3 Developing a framework for MFCA

MFCA builds on the core idea of eco-efficiency (Schaltegger and Sturm, 1990; 1995; Loew, 2003, p.
44) as it links physical and monetary information in one accounting concept. Given the combined
consideration of physical and monetary information in one approach, the existing EMA framework
(Table 2) cannot be applied to MFCA without alterations.
This is why we simplify the EMA framework by removing one of the four dimensions, which
differentiates between physical and monetary information. The resulting Table 3 comprises eight
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boxes which display potential areas of MFCA development and application as well as publications
that refer to each area.

Short term Long term

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2
Altham, 2007; Burritt et al., 2009;
Gale, 2006; Hyršlová and Hájek, 2005;
Fakoya and van der Poll, 2013;
Huang et al., 2012; Hyršlová et al.,
Furukawa, 2008; Herzig et al., 2012;
2011; ISO, 2011; Jasch, 2009,
Heupel and Wendisch, 2003; Hyršlová

et al., 2011; ISO, 2011; Jasch, 2003,
2009; Jasch and Danse, 2005; Jasch
Routine
and Lavicka, 2006; Jasch et al., 2010;
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Moriguchi, 2001; Onishi et al., 2009;
Qian et al., 2011; Rautenstrauch, 2007;
Schaltegger et al., 2012a, 2012b;
Schmidt and Nakajima, 2013; Viere et

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Jürgens, 2002; Kokubu and Kitada,
al., 2007
2012; Kokubu and Nakajima, 2004;
Past
LfU, 1999; METI, 2007; METI, 2010;
oriented
Papaspyropoulos et al., 2012; Staniškis

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and Stasiškienė, 2006; Strobel, 2001;
Strobel and Redmann, 2001;Wagner
and Enzler, 2006; USEPA, 1995

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Möller et al., 2000; Scheide et al., 4
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Ad hoc 2002; Schmidt et al., 2013; Viere et al., None identified
2011a
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Routine Sygulla et al., 2009; Wang and Milis,
Herzig et al., 2012
2009
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Future
7 Burritt et al., 2009; Herzig et al., 2012;
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oriented
ISO, 2011; METI, 2007; Moriguchi,
Ad hoc None identified
2001; Nakano and Hirao, 2011; Onishi
et al., 2009; Schaltegger et al., 2012b;
Staniškis and Stasiškienė, 2003; Viere
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et al., 2011b

Table 3: Proposed MFCA framework and current MFCA literature focus

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These eight boxes represent eight different decision situations, discussed in more depth with regard
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to MFCA in Section 3. The high environmental and economic relevance of material flows for
corporate performance and sustainable development requires that management is supported with
relevant information for each decision situation.
Reviewing the MFCA literature in light of this framework shows that those publications which make
the decision situation explicit, emphasize information from the last period for performance
measurement. Such information is subsequently used for identifying improvement potentials. The
information properties are thus short term, past oriented, and based on routinely generated
information from production and cost accounting systems. Various publications address long term
past oriented situations and are based on routinely generated information (Gale, 2006; Hyršlová and
Hájek, 2005; Huang et al., 2012; Hyršlová et al., 2008; ISO, 2011; Jasch, 2009, Moriguchi, 2001; Onishi
et al., 2009; Qian et al., 2011; Rautenstrauch, 2007; Schaltegger et al., 2012a, 2012b; Schmidt and
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Nakajima, 2013; Viere et al., 2007). Publications where the decision situation is not clearly
attributable are not listed in Table 2. Publications which do not explicitly state the kind of decision
situation considered but where the characteristics of the decision situation are clear are mainly
focused on using past-time information for one-off applications of MFCA (e.g. Möller et al., 2000;
Scheide et al., 2002; Schmidt et al., 2013; Viere et al., 2011a).
As Table 3 reveals, only few publications have discussed future oriented and long term decision
situations (Burritt et al., 2009; Herzig et al., 2012; ISO, 2011; METI, 2007; Moriguchi, 2001; Nakano
and Hirao, 2011; Onishi et al., 2009; Schaltegger et al., 2012b; Staniškis and Stasiškienė, 2003; Sygulla

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et al., 2009; Viere et al., 2011b; Wang and Milis, 2009). None of the publications identified describes
MFCA in view of a potential past-oriented, long-term, ad hoc application (box 4) or a future-
orientated, short term, ad hoc application (box 7). Supporting managers in effective material flow

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and cost management, however, requires extending the MFCA “toolkit” in particular to the future
oriented and long term perspectives.
Hence, the following sections describe each decision situation of the proposed MFCA framework and

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the role MFCA can play to support decision making in these decision situations. The analysis is led by
the questions “What are the relevant tools for this decision situation?” and “Who can benefit from
using them?”

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3 Expanding MFCA systematically

Management accounting serves two main purposes: performance evaluation and decision-making.
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Performance evaluation relies heavily on past-oriented information whereas decision making can
either be based on past-oriented or on future oriented information (e.g. Blackwell et al., 1994). The
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observed focus on past oriented information can be explained with the predominant availability of
past oriented information, which reduces collection cost (e.g. Jasch, 2009). Past oriented information
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can be retrieved from production and cost accounting information systems. Future oriented
information, on the other hand, is less common, related to higher cost of collection and thus likely to
be collected only when needed (Tse and Yaansah, 1999).
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Yet, it needs to be considered that future oriented use of information such as for forecasting and
budgeting mostly rests on past developments and experiences. For the most part, past information is
more reliable compared to future oriented information, as the latter is by nature exposed to a larger
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extent of uncertainty. Therefore, the process of gaining experience and trust in the applicability and
usefulness of the MFCA approach can be initially supported by the use of past oriented information.
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Experiences and developments in MFCA on the basis of past oriented information serve as a
foundation for discussing the expansion of MFCA and further applications thereof.

3.1 Past oriented, routinely generated short term information (Box 1)

The decision situation depicted by the first box (past oriented, routinely generated, short term) has
been explicitly and implicitly discussed in a fairly large number of MFCA publications (e.g. Jasch,
2009; METI, 2007; Strobel 2001; Wagner and Enzler, 2006; Kokubu and Nakajima, 2004) and is the
main focus of the ISO standard on MFCA 14051 (ISO, 2011).

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The focus of MFCA research and application on this decision situation is not astonishing since a
similar emphasis can be observed in EMA and in management accounting in general. Cost accounting
is to a large extent past oriented, serving as a methodological approach to evaluate whether the
projected results have been achieved for the previous accounting period, whether operations have
been managed within their originally planned budgets and to discuss whether changes in existing
operational plans or investments for correction of the developments are needed (e.g. Bhimani et al.,
2008).
Several publications discuss the interface between MFCA and conventional production information

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systems, highlighting the relevance of material flow related information for evaluating and managing
the short term performance of the company (Heupel and Wendisch, 2003; Jürgens, 2002). The typical
application of MFCA is examining and analyzing what material inefficiencies have occurred in the

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most recent production period. The existing focus of MFCA has led to a large number of applications
and case studies reporting the benefits of reducing and rethinking material flows identified with
information on inefficiencies incurred in the past accounting period (Jasch, 2009; Nakajima, 2010).

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3.2 Past oriented, routinely generated long term information (Box 2)

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Together with Box 1, Box 2 reflects the most common decision situation (Rautenstrauch, 2007)
within the proposed MFCA framework (Table 2). The attention on the past oriented long term
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perspective has also been addressed by the ISO standard on MFCA 14051 (ISO, 2011).
Applying MFCA to create past oriented, long term information with routinely generated information
allows for continuous tracking of achieved (or not achieved) material and cost savings and thus eco-
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efficiency performance and ex post assessment of past decisions and investments. The typical
information described by this box is the long term routine tracking of past environmental, financial
and eco-efficiency performance. Although the notion of ex post Material Flow Costs Assessment has
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not been coined to date, such information can be valuable for environmental managers controlling
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for the performance of CP and eco-efficiency measures over a longer time period. This tool would
allow documenting and evaluating the actual benefit of dematerialization investments. The
respective information supports the ex post assessment of the operational benefits and costs with
time series. Similar to decisions characterized by the demand for past oriented, ad hoc long term
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information (see Section 3.4), routinely generated information over several past periods can help to
better assess performance developments as they occur over time. Such experience-based
information allows ex post assessment of whether the expected benefits and costs were realized
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over the whole investment period in their practical application. In contrast to long term, ex post
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assessment of dematerialization decisions and measures, MFCA applied as an ex-post assessment of

past decisions and investments could also reveal the unnecessarily incurred costs of poor investment
decisions taken in the past (e.g. regarding inefficient equipment and technologies). Demand for
information to support this decision situation has been demonstrated by a case study in the textile
industry (Schaltegger et al., 2012b).
Further potential addressees of past oriented, long term information are those responsible for
environmental management systems in a company (e.g. Hyršlová and Hájek, 2005) and reporting.
In addition to the above application, regularly produced information on past performance can serve
the communication needs of the company and support environmental and sustainability
communication in particular. Although MFCA is a predominantly managerial approach, information
produced with its support could reveal a different perspective on the overall sustainability

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performance of a company. Thus, another benefit from using MFCA information is securing
corporate legitimacy in the long run.

3.3 Past oriented, ad hoc generated short term information (Box 3)

Ad hoc or project-related decision situations mainly require past oriented, short term information. A
management accounting tool that utilizes such information is the ex post assessment of short term
measures or the assessment of the achieved results after a certain (first or subsequent) application

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period of an investment (Viere et al., 2011a). Such a specific kind of MFCA could be called Material
Flow Cost Short Term Assessment.

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Early MFCA applications are characterized by this decision situation because particularly the material
flow information, but often also the costs related to these material flows, were not easily traceable
from the established cost accounting systems. It is thus not astonishing that the development of

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software to support MFCA has for a long time placed the emphasis on one-off ex post assessments to
be in accordance with the characteristics of the available information. Examples of such software
include Umberto, GaBi and Sima Pro, to name a few (Schmidt et al., 2013), all of which have in the

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meanwhile been further developed.
In addition to the described application for ex-post assessments of short term impacts of
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investments, such information can be used by the environmental and sustainability managers of the
company to support previously made decisions. Doing so can expose the additional benefit
generated in, for example, the first time period after an investment has been made or a measure has
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been implemented (similar to Box 2).

In addition to identifying improvement measures such as organizational and machinery adjustments,
just in time supply management and investment decisions, applying MFCA to the analysis of the last
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accounting period with specifically ad hoc generated information could also serve internal legitimacy
purposes, e.g. to justify past decisions as a basis for further planned CP investment.
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3.4 Past oriented, ad hoc generated long term information (Box 4)

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None of the reviewed publications could be attributed to this category. The application of MFCA as
an approach to this decision situation, however, may support various kinds of decisions.
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The ex post assessment of long term effects of past environmental, financial and eco-efficiency
performance reflect this decision situation. Material Flow Ex Post Long Term Assessment is MFCA
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applied as an ex post assessment of past decisions and investments. It can reveal suboptimal
investment decisions for inefficient equipment and technologies in the past and unnecessarily
incurred costs thereof. The consideration of the whole investment period of the inefficient
technologies allows for a direct comparison with the performance of CP and dematerialization
projects as well as with planned future projects.
The benefits of past investment decisions made for CP and eco-efficient technologies can be assessed
ex post to check whether they match the expectations and to support current decision situations
with experience based information. Such information is valuable for managers to assess the
development of the performance of CP and eco-efficiency measures over a longer time period. An ex
post assessment over a longer time period allows distinguishing one-time environmental and cost
improvements from repeatedly realized improvements. Furthermore, the development of structural
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operational savings, which are realized every period, can be traced. This is important as such savings
may, for example, decrease over time if material efficiency cannot be sustained at the same level
with equipment growing older. In sum, an ex post analysis of the efficiency improvements as a result
of certain measures can provide a more elaborate analysis and unveil additional benefits as well as
costs of decisions and investments made in the past. Applying past oriented, long term information
to MFCA may serve to argue for and internally legitimize planned CP investments even better than
using short term information. An example of such a past- and long-term oriented ad hoc decision
situation is the evaluation of project performance or an investment made in the past.

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3.5 Future oriented, routinely generated short term information (Box 5)

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The primary application of future oriented accounting information is continuous budgeting (e.g.
Bhimani et al., 2008). The regular use of future oriented MFCA information was not reported in any

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of the reviewed publications, although the potential value of applying MFCA in such a setting has
been touched upon. Herzig et al. (2012) suggest using MFCA as an EMA approach to deliver future
oriented information on a regular basis. Discussing the case of an electroplating company, the

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authors highlight the applicability of MFCA to establishing a routine generation of costing
information with the purpose of supporting future decisions (Herzig et al., 2012, p. 168 ff.).
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Material Flow Cost Budgeting as an approach to use MFCA as a future oriented method would create
estimations of material flows and related costs for the next accounting period. This can serve as a
basis for targets of material usage and related costs as well as for management control to closely
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monitor eco-efficiency progress.

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3.6 Future oriented, routinely generated long term information (Box 6)

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Although the regular collection and application of MFCA information in decision-making has been
scarcely documented, some publications discuss the potential benefits of doing so. One potential
application is providing information to enable more precise long-range planning of material flows
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and material flow costs (Sygulla et al., 2009; Wang and Milis, 2009). Material Flow Financial Planning
may serve as a basis to identify the optimal time to phase out current inefficient production
technologies and to realize substituting cleaner production investments. The costs of future material
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inefficiencies of the current equipment can be compared with the investment costs and cost savings
of substituting material efficient technologies. The need for and the potential benefits of routine
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generation of long term, future oriented information to support decision-making has been identified
with regard to supply chain management (e.g. Seuring, 2003). However, no further developments in
the area could be identified for the last decade.
An investigation of the inefficiencies may inform strategic decision-making and investment decisions
better than conventional analysis of inputs and wastes. Such information can also serve to establish
strategic alliances with suppliers. The range of business functions and managers applying material
flow financial planning thus exceeds production and environmental management as procurement,
facility management and strategic management may profit from the created information.

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3.7 Future oriented, ad hoc generated short term information (Box 7)

None of the existing publications reviewed could be clearly attributed to this category. Nonetheless,
project related Material Flow (Cost) Budgeting based on ad hoc information could present an
important tool for decision makers.
An example of a one-off situation whose outcome can be improved by producing and using MFCA
information is observed when a certain raw material, hazardous substance or semi-manufactured
input product is to be substituted (e.g. with another material or input, or with a similar semi-

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manufactured input from another vendor). In such a situation, the effects of the replacement may
result in a similar end product but different (consumption of) auxiliaries, by-products or waste. As a
difference to an investment decision which is long-term oriented, the replacement of auxiliary

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materials may in many cases be possible in a much shorter time period. Bennett et al. (2013) report
on such a situation in a publishing company, whose production manager realized that the paper new
rolls for the printing machines resulted in a large volume (both relative and absolute) of waste and

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thus needed to be changed more often resulting in unexpected inefficiencies. The exchange of these
paper rolls with other paper rolls (different from the originally used ones) allowed to not just get rid
of these inefficiencies but to even increase the efficiency compared to the initial situation. MFCA

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information can support decision making in further similar situations: e.g. when a comparatively
large production assignment is evaluated. MFCA can support decision making to establish the
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conditions under which the assignment can be accepted (by analyzing the opportunity costs of each
possibility). The marketing department, in addition to the production management, can thus
substantially benefit from information produced with the help of MFCA (e.g. by assessing additional
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soft indicators).
A further department that can use MFCA information for improved decision making is procurement.
For instance, an analysis that includes MFCA information when considering replacing suppliers can
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unveil additional benefits beyond the own production line, support sustainable supply chain
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management, and provide eco-efficiency information on the overall production footprint (Seuring,
2003).
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3.8 Future oriented, ad hoc generated long term information (box 8)

Identifying inefficiencies in material flows for the support of one-off, future oriented decisions has
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been described by several authors (ISO, 2011; Herzig et al., 2012; Onishi et al., 2009). The examples
illustrate the applicability of MFCA to support investment decisions in the sense of Material Flow
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Investment Appraisal. The calculation of the net present value of expected future material losses and
material flow costs may influence investment decisions when comparing to conventional investment
appraisals (for an elaboration of this decision situation and approach see Schaltegger and Burritt,
2000). The investment in more efficient technology not only reduces what is typically observed at the
two ends of the process – inputs and unwanted outputs – but can also help account for further long
term benefits such as reduced machine wear, electricity consumption and auxiliary use due to less
material throughput.
In addition to the above considerations, related tools can be used for risk management (Burritt,
2005), e.g. when evaluating the option of replacing a production process with a more efficient one.
This can, however, lead to a situation in which materials are replaced with materials related to
different risks which might be caused by i) strict supranational regulation (e.g. REACH), ii) national
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regulation (e.g. substances that can no longer be landfilled) and iii) intensified social attention (e.g.
rare earths, PCBs). Applying material flow investment appraisal may help to identify, quantify and
analyze the (mid-term and) long term risks that arise in such a situation and that go beyond the pure
technical reduction and avoidance of material inefficiency. Last but not least, extant literature on
MFCA discusses the significance of applying MFCA to identify and analyze for improvements of new
product development (e.g. ISO, 2011; METI, 2007; Moriguchi, 2001; Nakano and Hirao, 2011). A life-
cycle costing approach to incorporating environmental considerations into the design and
development stages of products has been identified as a suitable tool in this context. The original life-

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cycle concept (Blanchard, 1978) has been extended to focus on environmental factors that affect
costs in the life-cycle of a product. The resulting approach – known as environmental life-cycle
costing – provides a framework for evaluating decisions within product sustainability assessments

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consistently (Hunkeler and Rebitzer, 2003; Swarr et al., 2011).
A potential recipient of such information is strategic management. By identifying the long term
future impacts of certain decisions (such as improving carbon efficiency through an energy-efficiency

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increasing investment), corporate strategy of a company may be adjusted to take advantage of long-
term effects of efficiency improvements (e.g. increased competitiveness through lower prices
achieved through reduced production material flow cost).

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4 Discussion and conclusion

By framing MFCA within the EMA framework, presented in Section 2, this paper highlights a
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significant research gap of relevance for both academics and practitioners and unveils potentials for
further development of different MFCA approaches supporting a variety of decision situations.
The contribution of this paper is two-fold. First, it highlights the potential benefit of using MFCA for
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further addressees such as financial, marketing strategic managers and of providing the possibility for
these addressees to be involved in increasing material efficiency as a specific form of eco-efficiency.
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Thus, a more consistent material and cost management throughout the company can be established.
Second, the paper analyses a number of decision situations for which MFCA-based tools still have to
be (further) developed to produce the needed information.
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The literature review identifies various applications of MFCA as well as gaps, i.e. potential
applications of MFCA that have not attracted attention yet. The results confirm the initial proposition
that MFCA is not applied within all potentially relevant decision situations. None of the studies
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identified analyzes the information demands and the information use from the perspective of the
various internal and external decision makers. As a consequence, no in-depth analysis of the MFCA
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application under different decision settings (as distinguished in the EMA framework) has been
conducted to date. By systematically revisiting the scope of MFCA as an approach, future research is
challenged to develop various specific MFCA tools as well as to examine the potential and actual
usefulness for different business functions in a company. The analysis in Section 3 shows, that
developing and applying MFCA beyond its originally conceived scope (cf. Table 3) may be an
economic value-creating activity based on reducing material flows and environmental impacts.
Led by the view that MFCA is not an encompassing but an important approach for companies to
reduce materials and costs, and thus to increase eco-efficiency on the path to sustainable
development, this paper identifies further directions that need to be researched to support and
improve decision making. Such an improved decision making requires the identification of i) the
addressees of the information to be produced, ii) the type of accounting, iii) the specificity of the
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information generated, and iv) the tools and methods (Schaltegger and Burritt 2000, 66f.). These
considerations are particularly important in view of the diverse and often conflicting interests of
stakeholders.
The literature developing and documenting applications of MFCA has so far focused on past-oriented
short term decision situations in production. The application of the proposed framework for MFCA
supports the identification of further possible decision situations in which MFCA could be useful.
Applying MFCA as an approach to different decision situations evokes the development and use of
new tools such as material flow budgeting, material flow investment appraisal, material flow target

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costing, etc.
In particular, the future oriented use of information has been neglected so far. Although the use of
MFCA for retrospective analysis of material usage and related costs appears intuitive, contributing to

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sustainable development – which after all is a future oriented vision – requires creating and using
future oriented information, too. Also, from an economic perspective applying MFCA to producing
future oriented information can make a lot of sense. This allows anticipating cost consequences of

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material and energy (in)efficiencies of different investment options and can therefore lead to
improved investment appraisal and financial planning.
With regard to the time frame of the information produced with the help of MFCA, both short term

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and long term applications can be useful as both have their advantages in certain situations. In most
cases, conducting analyses on the basis of MFCA requires information granularity with usually more
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detail in the short term.
This research approach is also confronted with limitations. The research gap identified is based on a
literature review. MFCA is, however, often “disguised” (e.g. Heupel and Wendisch, 2003) and
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relevant publications might have remained outside the authors’ perceptions. This limitation was
approached in the paper by adopting a systematic literature search, as described in Section 2,
including case study publications and working papers. Furthermore, the helpful feedback of four
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reviewers has contributed to identifying further relevant literature.

Another limitation of the proposed framework arises due to the context-dependent separation
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between short term and long term information. The resulting implication is that tools providing short
term information sometimes also provide mid to long term information, depending on the
circumstances.
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Yet another limitation can be considered the illustrative (rather than exhaustive) list of MFCA tools
described in Section 3. Similarly to the original publication on the EMA framework (Burritt et al.,
2002), this paper aims to demonstrate the multitude of tools that can uncover and satisfy certain
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information needs. Nevertheless, there might be further MFCA-related tools and applications within
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these situations.
Last but not least, the paper focuses on MFCA in view of different decision situations in which the
approach can be applied. Such an analysis is conducted in light of the EMA framework and focuses on
the information properties relevant for decision-making. Yet, there are further possibilities to expand
existing MFCA to support improved decision-making. For instance, approaches seeking to integrate
physical tracing with existing cost accounting systems might be a good starting point. Examples of
such hybrid methods include extensions of life-cycle assessment and costing, input-output analysis,
environmental impacts assessment, and emergy analysis (e.g. Odum et al., 2000).
In spite of these limitations, the literature review of MFCA publications in light of the developed
framework for MFCA reveals a number of further benefits from applying MFCA beyond its original
scope and purpose. Such further purposes include securing legitimacy (both internal and external),

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justifying decisions (before and after they have been made), communicating corporate
environmental activities, or improving (target) pricing.
This paper discusses MFCA from a management decision and performance management perspective
which considers economic issues and environmental performance improvement as the two pillars
driving the interest of researchers and practitioners engaging with the approach. With material flows
being the starting point of by-products (waste and emissions), MFCA provides a powerful analysis
tool for reducing environmental impacts and costs at the same time. MFCA’s additional character to
conventional accounting has made its integration into the existing accounting systems a challenging

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task. A further challenge arises in the attempt to create strong links that support institutionalizing
this accounting approach as a means to achieving environmental performance improvements so that
it becomes a part of standard accounting and management procedures.

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Furthermore, MFCA can be analyzed from a behavioral viewpoint (Hopwood, 2002; Kholeif, 2011).
Being affected by additional transparency created by MFCA information, organizational structures
and individuals’ behavior are likely to change. Such a change in structure is expected with regard to

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the empowerment of non-accounting professionals (e.g. Zvezdov et al., 2010) which has recently
been observed to threaten existing organizational structures (Bennett et al., 2013).
Overall the analysis shows that MFCA still has a huge development potential for research and

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practice.
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