Environmental management accounting in Lithuania:

exploratory study of current practices, possibilities

and strategic intents
Workshop -Environmental Management Accounting: Towards an
internationally validated procedure
Jurgis Kazimieras Staniskis, Professor, Doctor Habilitat, Director of The Institute of
Environmental Engineering, Kaunas University of Technology

Zaneta Stasiskiene, Associate Professor, Dr. The Institute of Environmental Engineering, Kaunas
University of Technology
K.Donelaicio str.20, LT-3000 Kaunas, LITHUANIA

ABSTRACT

There is a growing consensus among the Lithuanian policy makers, practitioners and industrialists

that environmental policy must move from a reactive stance to more proactive sustainable

development approach. As a result, many companies are increasingly interested in the application of

economic incentives at least as supplements or reinforcements of environmental standards.

The Institute of Environmental Engineering (EU Centre of Excellence in Sustainable Industrial

Development (APINI – SID)) in the period 1992 – 2003 has been involved in introduction and

implementation of preventive environmental strategy in industry in Lithuania and other countries.

In Lithuania, these efforts resulted in the implementation of more than 200 Cleaner Production

innovations in more than 100 Lithuanian companies. Effective plant maintenance is becoming a

higher priority to plant managers. Cost-saving at all levels, maximizing productivity and energy-

saving are key issues, which mean that effective and efficient maintenance is not just desirable, but

is fundamental to profitable business operation. Therefore, central to the environmental view of

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sustainable development is the notion that economic and social systems are sub-systems of the

global environment.

As APINI experience shows, decision makers at company level often fail to recognize the economic

values of natural resources as assets and the business and financial value of good environmental

performance. Therefore, there is a need to upgrade the business decision-making process by

including information on material flows and related costs to account for efforts of sustainable

development. Decisions are increasingly affected by environmental costs. Application of

Environmental Management Accounting (EMA), which integrates two of main principles of

sustainable development - environment and economics, can significantly improve decision- making.

EMA is becoming increasingly important not only for environmental management decisions, but for

all types of routine management activities, such as product and process design, cost allocation and

control, capital budgeting, purchasing, product pricing and performance evaluation.

Companies, which use EMA as a part of integrated management system, are provided with accurate

and comprehensive information for the measurement and reporting of environmental performance.

This paper investigates the current state of EMA practices in Lithuanian SMEs with implemented

CP innovations. EMA in this case is analyzed as an innovative assessment and evaluation method of

CP innovations environmental impacts and economic benefits. It should be stressed, that there are

obvious differences between various case studies in different industries. However, review of the

results shows that there are many similarities in what improvements can be suggested for

environmentally concerned companies both in terms of environmentally sound operation and for

reporting of environmental management accounting information.

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Introduction

Generally, companies are spending significant amount of money on pollution abatement and

control. In most cases these costs represent the most obvious and most easily measured

environmentally related costs. But it is only a top of an iceberg. Hidden environmental costs may be

greater than expenditures to pollution abatement and control and uncovering of these hidden costs

can provide significant opportunities for decision making and business planning.

Companies are facing increasing concerns from various groups about their environmental impacts,

and different stakeholders are requesting different types of information. Company management

needs information on costs, revenues, and profits. Environmental protection agencies,

environmental organisations, and community require information on environmental impacts, while

tax authorities, shareholders, and investors are concerned about environmental assets and liabilities.

Environmental accounting can provide information to meet all these requirements. [1]

Table 1 Environmental costs analyzed by Lithuanian industrial companies

To identify problems and possible improvements in a company’s performance, including its

environmental performance, accurate measurement is essential. Management dictum says, “What

gets measured gets managed”. In developing an environmental management system (EMS) for a

company, initial efforts should focus on environmental accounting techniques for measuring

performance, followed by the development of an auditing system, and by the publication of

environmental reports to communicate with stakeholders. In practice, most companies that are

implementing EMS, have tend to start with auditing, followed by reporting and lastly by

introducing environmental accounting. This “backward” approach reduces the effectiveness of

measuring, assessing, communicating and improving a company’s environmental performance. [2]

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Experience and analysis of EMS implementation in Lithuanian industry shows that companies need

to estimate environmental costs for the same reason they account other costs: environmental costs

affect their bottom line. Environmental costs may be a substantial portion of a company’s total

costs, although many companies are not aware of it. In most cases, the environmental costs are

under-estimated and can vary from 3% of total cost (in investigated Lithuanian electronics

company, were only waste disposal and treatment costs were considered as environmental; other,

such as labour and planning were not included) up to 17% of manufacturing costs in chemical

companies. In reality, the actual environmental costs are significantly higher: companies do not

include marketing expenditures, personnel costs, cost of raw materials are not converted into

product but turned into waste, etc.

Fig. 1. General costs of a company [2]

Implementation of cleaner production (CP) and pollution prevention (PP) projects may improve a

company’s bottom line and bring long-term benefits as increased production efficiency reduces the

use of resources and generation of wastes. Additionally it should be stressed that in conventional

accounting, most environmental costs are mixed with non-environmental costs and usually allocated

to overheads. Such cost aggregation and allocation cannot provide the environmental cost data

needed to formulate corporate environmental policy. The full costs and benefits of existing and

alternative production systems are obscured by conventional accounting practice. APINI experience

shows that companies’ managers will not invest resources in CP if they do not see the

environmental costs of existing systems and obvious economic benefits of CP. [3]

Eco-labelling schemes and product take-back schemes are starting to spread. Environmental

performance indicators are being developed to help different stakeholders to get a clearer picture of

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a company’s activities and to enable benchmarking. All these changes will certainly have impact on

management practices.

For most organizations, the main reason for introducing environmental management accounting is

the logical consequence of changed relative costs and benefits rather than “green” idealism.

Although there is encouragement for organizations to be mindful of social, economic and

environmental impacts, the financial indicators still permeate through business thinking and they

present the main driver for business actions.

Environmental management accounting will be one of the most effective instruments to support the

implementation of environmental management system (EMS), preparation of corporate

environmental reports, assessing the gains of eco-labelling and development of environmental

indicators.

CP investment project development under APINI – NEFCO methodology

In conventional cost accounting, the aggregation of environmental and non-environmental costs in

overhead accounts results that they are “hidden” from management. There is substantial evidence,

based on experience from Lithuanian industrial companies that management tends underestimate

the extent and growth of such costs.

Therefore, it is very important to apply systematic method and to evaluate effectiveness of proposed

or controlled actions. This can improve the foundation necessary for local communities to avoid

costly environmental management failures and to meet the common goal - to provide the scientific

understanding required to measure, model, maintain and/or restore, at different scales, the integrity

and sustainability of ecosystems now and in the future.

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More than 150 companies participated in CP programmes in Lithuania. By identifying, assessing,

and allocating environmental costs, CP investment project development methodology, developed by

APINI and Nordic Environmental Finance Corporation (NEFCO) allowed companies’ management

to identify opportunities for cost savings. The methodology is based on:

1. identification of the current environmental impact of industry (including transport, energy

production units, etc.) and economic factors most closely associated with that impact;

2. identification of available options to improve environmental and economic performance of the

company and restore degraded ecosystem. [4]

Environmental issues in the CP investment project development of projects focus on the following:

• location of the project in respect to population centres, sensitive local land uses, and the

existing levels and sources of pollution;

• pollution category (air, surface water, ground water, hazardous waste, etc.);

• scale of the pollution impact;

• effect associated with the pollution including possible toxicity to human health, possible impact

on climate change, and damage to the natural ecosystems and habitat. [5]

The results of CP programs performed in Lithuania shows that it is environmentally and

economically reasonable to develop projects under APINI – NEFCO methodology:

• electrical energy consumption can be reduced by 21 %;

• heat energy consumption - by 15 % (in textile companies up to 55 %);

• water consumption - by 22 %;

• emissions to the atmosphere - by 33 % (in some cases up 100 %);

• solid waste amount (transported to landfills) - by 25 % (in some cases up 100 %).

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 • economic results show, that annual pay-back of all CP projects developed under the

methodology is up to 3 years. [6]

From 1998 to 2004, 38 CP investment projects have been developed under APINI – NEFCO

scheme. 80 % of projects are implemented already, 54% of provided loans are fully repaid.

Many companies simply include all environmental protection costs in their general overhead costs,

together with the top management salaries, advertising costs and all other costs that were not traced

back to individual production processes. At a time when environmental compliance costs were

marginal and profits high, this might have been reasonable. But within increased environmental

awareness, strong competition and the need to improve production efficiency, especially with

regard to material efficiency, the cost of tracking and tracing material flows throughout the

company are by far outweighed by the improvement potentials identified and realized.

Under APINI – NEFCO methodology material flow analysis is taken as a basis for problem

identification, i.e. evaluation of CP potential at the plant level, preliminary estimate of waste

generation costs, in-depth analysis of selected assessment focuses (quantification of the volume and

composition of various waste streams and emissions as well as a detailed understanding of the

causes of these waste streams and emissions) (Fig. 2).

Fig. 2. Material and energy flows in asphalt Production Company

The systematic investigation of material flows and stocks of anthropogenic systems provides a new

view to production, economics and the environment. Material flow analysis links anthropogenic

activities with resource consumption and environmental loading.

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In case the important flows and stocks of materials used by humans are uniformly analyzed using

material flow analysis methodology and the information obtained is linked to powerful databases on

material sources, pathways, intermediate stocks and final products, then more efficient use of

resources will be possible. This motivates management of the companies and reallocates

investments from end-of-pipe solutions to preventive measures and to get significant environmental

and economic benefits [7, 8].

It is very important to agree on how environmental costs have to be defined and what they would

include, and exclude. The determination of environmental costs was performed after a consideration

of the environmental impacts of the companies analyzed, and which of the environmental costs

contribute most to the impacts. Also it is essential to set the reasonable scope of costs considered,

because EMA is more successful when it is introduced in an incremental manner. For example,

during the analysis of a pipeline company have been discovered, that the trench methodology used

by the company as simplest and cheapest is not as cheap as initially thought – the costs of

mechanisms’ emissions, landscape renovation costs and risks have not been taken into account.

Two proposed alternative methods - a) build in new plastic pipes into old ones and b) to spread

cement – sand mix into old pipes were compared using APINI – NEFCO methodology. The results

of this comparison are presented in Fig. 3.

Fig. 3. Comparison of pipeline methods

It should be stressed that proposed alternative methods enable to protect soil levels, not to destroy

pathways and roads (the cost for their renovation are reduced or excluded), due to small scope of

digging works pollution with dust, noise and vibration is reduced. Use of overhead accounts

generally contributed towards company’s failure to monitor and control its environmental costs.

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They hide many environmental costs, and therefore many opportunities to improve the financial and

environmental performance of the company. It is suggested that companies should consider review

of such accounts and identify what types of costs they are hiding, and how the use of an overhead

account could lead to some products effectively subsidising other products (Table 2).

Table 2. Comparison of pipes renovation methodologies

Analysis of the results shows that the third method - spread cement – sand mix into old pipes is

most economically and environmentally feasible. But it has some limitations in terms of

requirements for water quality and long term credibility, therefore the most suitable is the second

method - build new plastic pipes into old ones.

Companies did not fully account their waste. The analysis suggests that companies should establish

a separate account (system) for waste, and apart from including waste disposal costs within the

account, other costs such as the cost of purchased resources that are wasted, should also be

included.

Another very important advantage of the proposed APINI – NEFCO methodology is that all

relevant, significant costs are considered when making business decisions, which materially

influence the pricing of products. From the point of view of environmental protection investments,

conventional investment appraisal methods often cannot be used without adaptation. Therefore,

whenever it is possible, environment-driven costs should be allocated directly to the activity that

causes the costs and to the respective cost centres and cost drivers. For example, in many

Lithuanian companies pay back of environmental projects was calculated mainly taking into

account reduced environmental fees, penalties and direct exploration costs, therefore the pay back

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period was 7, 10, 15 or even more years. These results were not a good motivation for companies’

management, nor stimulate care for environment.

Results presented in Fig. 4, show that CP investment projects developed according to APINI –

NEFCO methodology have annual pay back period of 2 – 3 years.

Fig. 4. CP investment projects developed in Lithuanian companies according to payback period

It should be also stressed that mentioned improvements cannot be achieved by simply installing

new software – there is no separate software for environmental accounting that solves all problems.

Those seeking such solution are likely to be disappointed. Because environmental cost information

serves for so many different functions in organization, system is better thought as a set of

adjustments to current cost accounting systems, all with purpose of identifying and reporting

environmental information to sharpen management decisions. More rigorous process flow

information, linked with allocation of overhead costs to the respective cost centres and objects is

vital. This amounts to nothing more than sound management and engineering practices also being

applied to environmental projects.

For each project, the realised savings are verified and compared with expected savings. A

standardised reporting format is provided with focus on savings in use of energy, water, chemicals,

etc. The environmental effects of each project are also verified. This verification should document

reduction in emissions and wastes and reduction in inputs (water, energy, materials, etc.) (Table 3).

Table 3. Examples of Lithuanian CP investment projects financed NEFCO loans

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It should be stressed that EMA and APINI – NEFCO methodologies for CP investment project

development have many common points. The main part of environmental cost evaluation, which is

used in EMA, is performed in APINI – NEFCO methodology.

In compliance context, the company’s choice between an end-of-pipe or a prevention strategy will

depend heavily on comparative economics of theses options. This is so even in instances where

profitability is negative, that is, when a company expects a net loss on its investment. Unlike most

end-of-pipe technologies, pollution prevention projects help to reduce operating costs by reducing

waste generation, regulatory activities and pollution related liabilities. The revenue may increase by

improving product or corporate image. Including these indirect or less tangible benefits in financial

analysis of projects may enhance the estimated profitability of prevention strategy, and may be

decisive in selecting a Cleaner Production versus end-of-pipe option. The concepts and methods

used by APINI experts, such as Total Cost Assessment (TCA), Flow Cost Accounting and other

types of comprehensive, long-term financial analysis of cleaner production projects, can play a role

in improving the financial indicators of cleaner production investment. The mentioned methods can

also improve the projected financial performance of discretionary cleaner production projects,

thereby increasing their ability to compete for limited capital resources.

Investment in CP seems to be attractive economically due to reduced costs of input materials,

energy and water, and waste treatment/disposal as well as increased production and better output

quality. In spite of that, small and medium sized industries have a particularly hard time making CP

investments for variety of reasons, ranging from the cost of capital to the absence of appropriate

funding mechanisms. Therefore, a decision-making process can be adapted and improved to

translate CP assessments into feasible investment options. To shift the emphasis towards CP

options, two ways influencing the capital budgeting process at the company level can be

considered:

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• developing and promoting the use of improved management accounting system, techniques and

practices, facilitating a reasonable inclusion of environmental costs and benefits and favour the

participation of various departments and management levels in the decision–making part of the

process;

• promoting the use of different hurdle rates for the approval of CP projects.

In the analysed Lithuanian CP case studies, the following common points were identified:

• Waste costs of companies were either not reported or significantly underestimated because they

did not consider the costs of bought resources that were included within the waste. Waste costs

typically reflected the amount paid to remove the waste.

• Failure to identify properly environmental costs means that numerous opportunities to improve

the financial performance of companies were lost.

• The inclusion of an additional section in the existing accounting system to provide non-

financial information can provide possibility to monitor efficiently resource consumption and

to gain economic benefits.

• Incorrectly allocated or not allocated to particular processes or products environmental costs

(for example, cost of electrical energy, raw materials, etc.) had implications when significant

capital budgeting decisions are not undertaken or inefficient solution is chosen.

In terms of equity financing, companies must comply with normal reporting standards to generate

capital through issuance of shares. As environmental awareness increases, shareholders may

consider environmental factors in their investment behaviour. Therefore, to realize sustainability at

company level, decision-makers need sufficient information to assess their position on the path to

sustainability. Within this context, a concept offering a methodological framework, instruments and

measures to operationalise the normative concept of sustainable development have to be developed.

[9, 10]

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The pilot studies on EMA in Lithuanian industrial companies (mostly SMEs) and analysis of 38 CP

financing projects’ results shows that environmental management accounting in its modernized

form not only reduce costs, but can also save natural resources.

This organizational approach is based on a high degree of transparency with regard to the type,

quantity and cost of materials and energy flows. The environmental management accounting can

achieve maximum impact only where an efficient supply of information is ensured. Information

system therefore plays a key role as a link between materials and energy flows and decision –

making process.

Within company, environmental management accounting concerns definition, assessment and

allocation of environmental costs and expenditures for the purposes of cost and resource

management, compliance reporting and capital budgeting, planning and operational decision

making. Modifications of existing management accounting systems can be relatively inexpensive if

they generate significant financial and environmental benefits. Some of the suggestions within the

case studies simply involved the introduction of an extra field within the accounting system to

provide physical information about the resources being acquired (for example, the amount of

electricity or water that was consumed), or a modification to how costs are allocated to processes or

products (fig. 5 a and b).

Fig. 5a. Cost allocation in Lithuanian food Industry Company before EMA.

Fig. 5b. Cost allocation in Lithuanian food industry company with EMA (1st stage of implementation).

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Of course, environmental issues should also be reflected in existing financial accounting systems.

Today, environmental costs, revenues, assets and liabilities are often incorrectly assessed or

allocated resulting in a risk for suboptimisation.

After the analysis of several case studies from industries in Lithuania and other countries, it could

be stressed that there is a need for:

• improved consistency between physical and monetary data and related departments;

• material flow accounting as a basis for good cost accounting;

• adequate treatment of contingent costs for the assessment of investment decisions.

From environmental point of view, the absolute indicators are the most important because they

measure total consumption of resources and emission of pollutants. For comparison with previous

years, a relation to previous production volumes or other significant issues is necessary. Relative

indicators allow monitoring of efficiency improvements while absolute indicators describe the total

environmental burden. [10]

Further the concept can be delineated into two main areas: financial and managerial environmental

accounting. In the financial environmental accounting, analysis and reporting component of internal

costs and liabilities related to environmental matters is emphasized. The assessment and reporting

of environmental risks and liabilities, capitalization for environmentally related expenditures and

the treatment of environmental debt, all fall into environmental accounting stream.

Managerial environmental accounting supports the internal management and decision – making

process through various techniques of cost allocation, performance measurement and business

analysis. It is interdisciplinary in scope: on the one hand it helps to identify internal and external

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costs, on the other hand can be used to allocate these costs within existing and emerging

environmental and sustainability accounting frameworks.

Fig. 6. The role of EMA in decision making process

It should be stressed, that there are obvious differences between various case studies in different

industries. However, review of the results shows that there are many similarities in what

improvements can be suggested for environmentally concerned companies both in terms of

environmentally sound operation and for reporting of environmental management accounting

information.

In recent years, increasing pressures and incentives for the adoption of CP measures have emerged

both inside and outside enterprises. An abundance of case studies and pilot programmes have

demonstrated that CP does work, and it is a necessary pathway to sustainable development. The

concept is recognised at the highest levels of governments, many of which have integrated CP into

legislation and policy instruments. Internally, the adoption is driven by pressure to reduce the costs

of waste, to ensure compliance with changing regulations and to position enterprise as a “green”

enterprise in the local or global marketplace. Externally, investors, financial analysts, regulatory

bodies and the public increasingly question to corporate environmental performance. [11]

EMA as a link between environmental performance and shareholder value

Until recently, the financial markets’ recognition of environmental performance was restricted to

legal liabilities and to negative risk factors. Today, a growing number of players within the financial

markets are starting to factor environmental considerations into their thinking. Insurers and bankers

are naturally concerned about the financial risks posed by specific environmental issues, such as

15
climate change. But some are also recognizing that good environmental performance can translate

into shareholder value. What’s been missing, however, are some indicators that would allow

financial markets to measure environmental savings so that they make sense in the balance sheet.

[2]

Experience of APINI experts in Lithuania, other Eastern and Central European countries and

developing countries shows that banks nowadays routinely look at the environmental performance

of a borrower. While it is still more usual to get a penalty for having poor environmental

performance than to be rewarded for having a good one, all financial institutions are working very

hard at pricing risk, and that includes environmental risk, more accurately. [4]

A major step in right direction is introduction of indicators system for economic evaluation of

potential customers, their projects and reporting of results. One of such system introduced to

Lithuanian industrial companies and potential customers of financial institutions was proposed by

European Bank for Reconstruction and Development (EBRD).

The system is based on drivers for preventive strategy development and helps to ensure long term

environmental compliance. In fact the main steps of potential customer or presented project

evaluation are the as in CP investment project development methodology [7]:

- gathering and analysis of the primary information about potential customer;

- analysis of similar cases at national level and worldwide;

- visit to the site;

- clarifying the information

- decision about financial support;

- monitoring and analysis of the results.

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Therefore, investors and banks get the information to what extent the environmental performance of

a company impacts on its shareholder value.

Detailed and uniform transparency of materials flows within the company not only brings the

benefits already described and the possibilities for cost saving, but in addition the information

system developed for this purpose can also be used to support the company’s environmental

management system.

The most important task is to make sure that all related significant costs are considered. It should be

stressed that environmental costs are just subset of the bigger cost set that is necessary for good

decision making. Environmental costs are the part of integrated system of material and money flows

throughout the company and not a separate type of cost altogether. Applying EMA is simply doing

better, more comprehensive management accounting, while stress on environmental issues

highlights hidden costs. Therefore the focus of material flow accounting in this context is not an

assessing in total environmental costs, but a revised calculation of production costs on the basis of

material flows.

Conclusions and considerations

Existing accounting systems might be well accepted and have been in place for many years, and

therefore it is important that the strengths and weaknesses of existing systems are known before

suggesting changes. It was discovered that it is useful to construct flow charts or other types of

diagrams to understand how costs are currently being allocated or treated (Fig 7).

Fig.7. Integration of material and energy flows in the environmental information management system

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It is suggested that all significant environmental costs (and impacts) be traced to the responsible

product (as opposed to the use of overhead accounts). That is, material tracking could be used for

materials costs and other related product costs (such as energy, water use, and so on), as well as for

waste streams. An assessment of what, where, why, and how much material is used, incorporated

into products and co-products, and channelled into waste streams. Materials tracking activities

commonly highlight larger than anticipated material losses and uncover unexplained waste streams.

For example, study of furniture production companies revealed that price of rejects is approximately

5 % of total product price.

Where tracking does identify costs, these should be clearly identified with the tasks or processes

generating the costs. A number of sources, which were already used in CP investment project

development according APINI – NEFCO methodology can be involved:

• production records for material usage rates;

• invoice records for disposal rates and quantities;

• observations of activities and discussions with employees;

• bills for the costs and usage of water and energy;

• procurement records for the costs of equipment.

Having gone through the process of material tracking, and perhaps diagrammatically depicting the

materials flows it is then insightful to compare this with a diagram of how the accounting system

currently accounts for the flow of resources. The results can be used to make suggestions for new

approaches to allocating the environmental costs that are generated by a company.

APINI practical experience in CP investment project development and implementation shows that

environmental activities can be efficient if a company’s material flows are transparent and well

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known. Therefore, the environmental impacts of the CP project and their economic consequences

are estimated. This is the basis of EMA methodology as well. It represents the attempt to integrate

material intensities into the decision-making process of companies. By referring to the inputs, the

implementation of methodology is quite easy, as input data already exists in companies to a

considerable extent.

APINI experience in Cleaner Production investment project development, its implementation and

application of EMA principles demonstrated that if EMA is applied in CP project development

stage, this enables company to perform capital budgeting and motivate financing institutions much

more easier.

Ultimately, businesses will benefit from including probabilistic and difficult to estimate costs in

cost allocation, capital investment, process/product design and other decisions. The best approach is

to go as far as you can in integrating environmental costs, including hidden, future and contingent

costs, into management decisions. But despite encouraging developments in the field of EMA, it

must be kept in mind that simply updating conventional accounting and enlarging it with ecological

accounting will not help to solve environmental problems unless the management of information

about environmental protection efficiency is integrated with the environmental management system.

To identify problems and possible improvements in company’s performance, including its

environmental performance, accurate measurement is essential. As CP investment project

development experience shows that effective cost accounting requires effective material flow

accounting, i.e. understanding material flows as they move though a production system is a

prerequisite to identifying and tracking environmental cost. Material flow balances are the most

important basis for development cost related information and therefore should be done precisely.

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Companies are facing increasing concerns from various groups about their environmental impacts,

and different stakeholders request for different types of information. Company management needs

information on costs, revenues and profits. Environmental protection agencies, environmental

organisations and community require information on environmental impacts, while tax authorities,

shareholders and investors are concerned about environmental assets and liabilities. EMA can

provide information to meet all these requirements.

APINI – NEFCO CP investment project development and implementation methodology includes all

environmental cost categories used in EMA:

- disposal and emission treatment costs including related labour and maintenance materials

(the first category);

- all non-product output is assessed by material flow balance (the third category);

- cleaner production project and related costs (the second category);

- non-product output which include labour hours, depreciation of machinery and operating

materials and financing costs (the fourth category).

The next step will be the efficient, economic and environmental design of materials and energy

flows as the central focus of eco-management. However, this can be achieved only if environmental

management is largely integrated into decision-making processes of organizational units such as

purchasing, product development, production, cost accounting and marketing.

Governmental institutions should take active part in promotion of environmental management

accounting. Their effort can benefit from coordination among governmental agencies, including

environmental protection agencies, other regulatory agencies, tax and local authorities, and others.

Design and coordination of corporate reporting requirements to promote the use of environmental

accounting for reporting will also promote its use for internal management purposes. On the other

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hand, burdensome reporting requirements due to lack of coordination among different agencies may

produce and adversarial attitude from companies regarding environmental data collection and

disclosure.

Environmental accounting is still in development stage, and its concepts, tools, processes and the

potential benefits to both Lithuanian industry and government are not clearly recognised. Therefore,

common and close collaboration between them and academic, research institutions and

environmental organisations will be an important factor in environmental accounting development

and implementation. International organisations (for example, United Nations) perform increasingly

important role in international exchange of information and experience, and establishment of

various guidelines and standards.

References

1. Environmental Management Accounting Procedures and Principles (2001) - UN, 144p.

2. Schaltegger S., Burritt R. Contemporary Environmental Accounting: Issues, Concepts and Practice (2000). –
Greenleaf Publishing, 464 p.
3. Staniskis J.K., Stasiskiene Z., Arbaciauskas V. Introduction to Cleaner Production Concepts and Practice (2001).
– Kaunas, 166p.
4. Stasiskiene Z. Environmental Accounting in Lithuanian industry: analysis of necessity, possibilities and
perspectives (2001) - Environmental research, engineering and management. Nr. 2 (16) – Kaunas: Technologija. –
pp.56-64.
5. Staniskis J.K., Stasiskiene Z. Environmental Performance Evaluation – Tool for CP Investment Development and
Monitoring (2002) - Environmental research, engineering and management. Nr. 4 (22) – Kaunas: Technologija. –
pp.3-10.
6. Staniskis J. K., Stasiskiene Z. Promotion of Cleaner Production Investments: International Experience // Journal
of Cleaner Production ISSN: 0959-6526. Elsevier Science, 2002, Volume/Issue: vol 11/6 p. 619 - 628.
7. Staniskis J. K., Stasiskiene Z. Cleaner Production Financing: possibilities and barriers // Clean Technologies and
Environmental Policy, ISSN 1618-9558. Springer 2003 DOI 10.1007/s10098-003-0182-2.
8. Staniskis J.K., Stasiskiene Z. Environmental Performance Evaluation – Tool for CP Investment Development and
Monitoring // Proceedings of “4th Asia Pacific Roundtable for Cleaner Production ”, RGD80M-50402 80, 2002.
9. Jasch Christine. Environmental Performance Indicators and Standard Framework of Accounts, How to Define
System Boundaries and Reference Units in the Green Bottom Line // Environmental Accounting for Management
Bennet M., James P. Greenleaf Publishing, Sheffield, U.K., 1998.
10. Jasch Christine, Gyallay-Pap R. Environmental Statements and Environmental Performance Indicators in Austria
and Germany // IOW Vienna, Informationsdienst 4, 1998.
11. Staniskis J.K., Stasiskiene Z. Environmental Management Accounting for CP Investment Project Development
(2003) - Environmental research, engineering and management. Nr. 1 (23) – Kaunas: Technologija. – pp. 60-69.

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Author’s Vitae

Prof. Dr. Hab. Jurgis Staniskis, director of the Institute of Environmental Engineering Kaunas
University of Technology.
Main research areas: development and implementation of the concepts and techniques of pollution
prevention /waste minimisation /cleaner production, cleaner production investments,
environmental systems.

Assoc. prof. Dr. Žaneta Stasiskiene, senior researcher, project department manager at the
Institute of Environmental Engineering, Kaunas University of Technology.
Main research areas: pollution prevention / waste minimisation / cleaner production in Lithuanian
industry; cleaner production investments, environmental management accounting.

22
Figures

Production costs

Material costs in waste

Waste handling costs (aproximatelly 99%
of waste material costs)

External waste disposal costs

(aproximatelly 1% of waste material costs)

Fig. 1. General costs of a company [2]

Sand (8 899,5 t)
Siftings (9 605,2 t) Raw materials Polluted sand
Road-metal (14 819,4 t)

Natural gas CO, NOx, SO2, CnHm,

Drying Formaldehyde (37,6t)
(469 600 m3)
(180-220 °C) Clay dust

El. energy
(512 015 kWh) Emission to atmosphere
Fractionation

El. energy Weighing 1

Mineral powder
(3 685,25 t) Clay dust
El. energy Weighing 2, 3 (up to 3 %)

CO, NOx (16,8t)

Bitumen
Bitumen
(140-150°°C)
(2 195,5 t) Boiler Mixing Emission to atmosphere
Natural gas house El. energy
(78 750 m3)

Sludge

El. energy Mixing of asphalt Emission to atmosphere

(30-60 s)

El. energy Pouring into tankage

Emission to atmosphere
Fuel Transportation

Fig. 2. Material and energy flows in asphalt Production Company

23
 %
100

80

60

40

20

0
Total costs

atmosphere
Mechanisms
materials

Wage fund
Costs of

Emissions
to
Trench method
New plastic pipes build in old ones
Spread of cement - sand mix into old pipes

Fig. 3. Comparison of pipeline methods

5%

27%

68%

2-3 years 1 - 2 years < 1 year

Fig. 4. CP investment projects developed in Lithuanian companies according to payback period

24
 Administration costs
El. energy costs
Raw Costs of natural gas Raw
materials, Water costs materials,
packaging packaging

Mayonnaise Ketchup
Wastewater

Marketing
Transportation
Wastewater treatment

Price of Price of
mayonnaise ketchup

Fig. 5a. Cost allocation in Lithuanian food Industry Company before EMA.

Administration costs
Raw
Costs of natural gas Raw
materials, materials,
packaging packaging

Mayonnaise Ketchup
El. energy

El. energy
Wastewater

Water

Water

Marketing
treatment

Transportation

Price of Price of
mayonnaise ketchup

Fig. 5b. Cost allocation in Lithuanian food industry company with EMA (1st stage of implementation).

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 Management and
decision making process

Information Information

EMA Interested stakeholders

(governmental institutions,
financial institutions,
society)
Information

Material and energy flows, technological

requirements, technical data

Fig. 6. The role of EMA in decision making process

Data Adaptation of
collection goals
(under set period)

Flow
identification
and
calculations

Comparison Measures
with
benchmarks

Gap analysis

Production processes

Report to
management

Fig.7. Integration of material and energy flows in the environmental information management system

26
Tables

Table 1 Environmental costs analyzed by Lithuanian industrial companies

Energy Water Materials Labour Packaging Transportation Waste
Total + + + + + + +
costs
Costs in - + - - - +
waste

Table 2. Comparison of pipes renovation methodologies

Indicators Methodology for pipes renovation
(for 100 water supply Trench method Build new plastic pipes Spread cement – sand
pipes) into old ones mix into old pipes
Fuel consumption, l 40.00 20.25 12.76
Amount of excavated 500.00 152.5 152.5
soil, m3
Area of destroyed soil, 350.00 122.5 122.5
m2

Table 3. Examples of Lithuanian CP investment projects financed NEFCO loans

Company Investments Pay back Environmental benefit
1. JSC “Vilniaus 246 322 EUR 2,97 year El. energy consumption reduced by 350 880
Vingis” kWh/year;
(electronics) Water consumption reduced by 12000 m3/year;
Heat consumption reduced by 167 Gcal/year;
Solid waste amount reduced by 20 t/year
2. JSC “Ekranas” 200 156 EUR 2,27 year Heat consumption reduced by 2621 Gcal/year.
(electronics)
9. JSC “Linų 85 280 EUR 2,8 year El. energy consumption reduced by 200 000
audiniai” kWh/year;
(textile) Air pollution reduced by 5,5 t/year.
3. JSC “Utenos 91 810 EUR 1,4 year Steam consumption reduced by 853 Gcal/year;
trikotažas” El. energy consumption reduced by 20 400
(textile) kWh/year;
Water consumption reduced by 5060 m3/year;
Air pollution reduced 0,21 t/year.
4. JSC “BenDida” 281 209 EUR 3 year Air pollution reduced by 171,3 t/year.
(chemical industry)
17. JSC “Vienybė” 78 200 EUR 2,8 year El. energy consumption reduced by 1 928
(metal processing) MWh/year;
Air pollution reduced by 7,85 t/year;
Water consumption reduced by 1130 m3/year;
Solid waste amount reduced by 1,35 t/year.
5. JSC “Kauno 268 190 EUR 2,4 year El. energy consumption reduced by 620 000
baldai” kWh/year;
(furniture Heat energy consumption reduced by 1 292
production) Gcal/year;
Water consumption reduced by 14000 m3/year;
Air pollution reduced by 50 t/year;
Solid waste amount reduced 720 t/year.

27