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Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Outline
Sustainability for businesses Environmental management accounting Economic, environmental and social impacts Environmental costs Improving supply chain management through measuring environmental and social impacts Sustainability and performance measurement Strategic performance measurement systems (SPMS) and sustainability Environmental outcomes: capital expenditure analysis Climate change and management accounting
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Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Financially-oriented EMA
Environmental costs
Costs incurred to prevent, monitor and report environmental impacts and the cost of failing to comply with environmental regulations Cost of waste management systems, environmental training, legal activities and fines, record keeping and reporting, cost of remediation of environmental impacts
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Environmentally-induced revenues
Arise from positive environmental actions Increased revenue from the sale of recycled materials, from higher selling prices for greener products, increased customer satisfaction, improved employee morale
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Physically-oriented EMA
Techniques that focus on supplying information to management that accounts for the organisations impact on the natural environment
Kilograms of noxious waste emissions, kilowatt hours of electricity used, decibels of noise Used for tactical decisions and capital expenditure decisions
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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ISO 14001 is an international standard for EMA and its audit EMS and adoption of ISO 14001 requires that environmental performance be measured against policies, objectives and targets
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Environmental costs
The costs that an organisation incurs to prevent, monitor and report environmental impacts
May extend into the future
US EPA defines 5 tiers of environmental costs Private costs (tiers 1 to 4) and societal costs
(cont.)
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Appraisal activities
Monitor the levels of environmental impact Measures damage, inspects processes and products, audits supplier performance (cont.)
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Environmental costs
Internal failure activities
To correct breakdowns discovered in appraisal activities Cost of cleaning the plant after spillage, cost of occupational health and safety claims by employees
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Improving supply chain management through measuring environmental and social impacts
Suppliers
An organisation may be willing to pay more where suppliers have reduced environmental and social impacts Organisations may work with suppliers to adopt more responsible environmental and societal practices; this can lead to cost reductions Formal supplier evaluation can include assessment of a range of environmental and social factors, as well as financial factors
(cont.)
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Improving supply chain management through measuring environmental and social impacts (cont.)
Customers
An organisation can work with customers to reduce the adverse environmental and social impact of products
Recycling and disposal programs Substitution of materials Cost savings
Sometimes customers may be willing to pay more for a more environmentally-friendly product Marketing and strategic considerations need to be considered in such pricing decisions
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Inside-out approachmeasures developed within the business and then fed through to sustainability reports Outside-in approachreported measures of sustainability performance driven by external regulations or guidelines
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
(cont.)
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Dow Jones sustainability index (DJSI) compares the sustainability performance of the worlds largest companies Australian SAM Sustainability Index (AuSSI) assess the sustainability performance of Australian companies
(cont.)
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Strategy maps may be developed to identify cause and effect relationships between objectives, strategies and to guide the selection of performance measures
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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(cont.)
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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For example
Estimate the cost of emissions produced by products, department and customers Identify carbon non-value-added activities Understand carbon drivers Supplier evaluation may include supplier emissions Quantity of emissions produced and causes of emissions may be measured
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Summary
Sustainability involves considering the economic, environmental and social impacts of an organisation's activities Environmental management accounting (EMA) consists of environmental-related management accounting systems and practices Environmental and social impacts can be difficult to recognise and to measure Environmental costs can be classified and managed using a five-tier framework
(cont.)
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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Summary (cont.)
Environmental and social costs can be input into management decision making, including capital expenditure analysis Performance measurement systems, including SPMS, can be adapted to include environmental and social measures
External frameworks include ISO 14000 series and the GRI guidelines
Management accountants are well equipped to produce a range of information that will help businesses respond to climate change
Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith
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