Ema Casestudy1

8/13/2019 Ema Casestudy1

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The Roles of Materials and Cost Accounting

in an Environmental Management System:

A Case Study of Precix, Inc !formerly Acushnet Ru""er Com#any$

Presented as A Case Studi for PPAK

Today, like no other time in our recent history, the term “accounting” evokes muchemotion. Practices at companies such as nron, Arthur Anderson, and !orldCom haveshaken the confidence of the "orld#s economic community. $nnovative companies in allsectors are taking this opportunity to revie" their o"n accounting procedures.

%onest financial performance demands honest accounting. &ike"ise, truly understandinga company#s environmental performance, as a first step to"ard improving it, depends onaccurately accounting for the materials that are used. 'aterials accounting generallyinvolves determining the amount of materials in inventory, amount (rought on site, produced on site, recycled on site, consumed in process, produced as non)product output,shipped in *or as+ product, and amount in ending inventory. 'aterials accounting

provides a clear picture of the use and potential "aste involved "ith each materialaccounted for.

Accounting for the amount of materials alone can inform some decisions that "ill positively affect environmental performance. After completing a materials accountingeercise, some companies are a(le to immediately identify a particularly "asteful processthat is ripe for improvement. This has often (een the case, for eample, "hen materialsaccounting is performed on a solvent degreasing operation. -ftentimes it is found that,due to poor "orker practices or inadeuate cooling, close to /0 percent of the solvent islost to evaporation. This lo" efficiency can easily (e improved through "orkereducation, maintenance, and other pollution prevention mechanisms.

Sometimes the amount of materials alone does not provide so o(vious an action. %onestcosting information is necessary to assist companies in making good decisions a(outmaterials use. Cost accounting practices assure that all epenses "ill (e allocated to the particular process or product "here they originated. This differs from conventionalaccounting, "hich has allo"ed for some costs, although clearly dedicated to a particular process or product, to (e assumed as overhead and not properly allocated. %istoricallythis has (een true for all environmental costs *e.g., staff time, permitting fees, "astemanagement costs+ "hich have (een lumped into overhead.

1sing cost accounting practices, a company mightlearn that a particular product line has (ecomeunprofita(le due to aspecific toin that has (ecome more epensive to purchase, properly handle and dispose of. 1sing this information, the company candecide to replace the toin, reduce its use, or discontinue the product.

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The term that incorporates environmental costs and informationinto a variety of accounting practices is “environmentalmanagement accounting” *'A+. 'A can (e defined as theidentification, collection, estimation, analysis, internal reporting,and use of materials and energy flo" information, environmentalcost information, and other cost information for (oth conventionaland environmental decision)making "ithin an organi3ation. *Source""".ema"e(site.org+.


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This case study is an eample of ho" onecompany effectively used materials andcost accounting in an environmentalmanagement system frame"ork to achieve

their goal of reducing the use and releaseof toic chemicals, and reducing eposureto employees, the pu(lic and theenvironment.

Preci, $nc., formerly Acushnet 4u((erCompany, in 5e" 6edford, 'ass.manufacturers elastomeric products for theautomotive, safety, electrical, office products and golfing industries. $n 2//7the company (ecame the first in

'assachusetts, and the second in the1nited States, to (e certified to theenvironmental management systemsstandard, $S- 28002. 'aterials and costaccounting "ere critical tools in thesuccess of their system.

6eing a 'assachusetts company andhaving complied "ith the 'assachusettsToics 1se 4eduction Act for the past tenyears, materials and cost accounting forlarge uantity toics "ere nothing ne" toPreci. 6ut Preci "anted to do morethan 9ust focus on their large uantitytoics. %aving already (ecome certifiedto the $S- uality standards, :S /000,$S- /002 and AS/200, they recogni3edthe value of the structure that thecertifia(le standards reuire and the valueof pu(lic recognition in motivating employees.

1sing the $S- 28000 frame"ork, Preci organi3ed employee teams to assist inidentifying environmental and "orker health aspects and impacts of their operation. Thiseercise involved accurate materials and cost accounting of the materials and operationsstudied. ;ollo"ing are three eamples of successful pro9ects undertaken (y Preci,"ithin the frame"ork of their 'S, that reduced pollution, reduced "orker and pu(liceposure potentials, and saved the company money.

Materials Accounting Prompts Improvements

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Environmental Management Systems

An environmental management system *'S+ isa continual cycle of planning, implementing,revie"ing and improving the processes andactions that an organi3ation undertakes to meet its (usiness and environmental goals. 'ost 'Ssare (uilt on the =Plan, >o, Check, Act= model.This model leads to continual improvement (asedupon?

Planning, including identifyingenvironmental aspects and esta(lishinggoals @planB

$mplementing, including training andoperational controls @doB

Checking, including monitoring andcorrective action @checkB and

4evie"ing, including progress revie"sand acting to make needed changes tothe 'S @act.

-ne certifia(le 'S, developed (y the$nternational -rgani3ation for Standardi3ation, isthe $S- 28000 series. This series is acontinuation of the /000 series of internationalstandards dealing "ith uality systems. The $S-28000 series "as developed for incorporatingenvironmental aspects into operations and product standards. $n Septem(er 2//7, theinternational committee finali3ed the $S- 28002standards for environmental managementsystems. The $S-28002 reuires implementationof an 'S in accordance "ith definedinternationally recogni3ed standards. The$S-28002 standard specifies reuirements for

esta(lishing an environmental policy, determiningenvironmental aspects impacts of productsDactivitiesDservices, planningenvironmental o(9ectives and measura(le targets,implementation operation of programs to meeto(9ectives targets, checking correctiveaction, and management revie". *Source?


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1sing the environmental management system frame"ork, the company identifiedtrichloroethylene as a significant environmental aspect for three main reasons? highha3ardous "aste disposal costs, impact on human health, and its $nternational Agency for4esearch on Cancer *$A4C+ listing as a potential carcinogen. $n 2//E, Acushnet used8F,000 pounds of TC and emitted 2/,000 pounds. This materials accounting sho"ed an

inefficient process that emitted 80 percent of the amount used. Acushnet set a goal ofeliminating TC (y the end of the fiscal year. TC "as used in a vapor degreaser primarily to clean metal parts that had (een stamped (y Acushnet#s suppliers using agrease coating. Acushnet convinced the supplier to replace the grease "ith a "ater)(asedcoating that could (e removed (y an aueous cleaning process. liminating the use ofTC saves the company approimately G200,000 annually. This includes G6+. The >6 caused an unforeseen pro(lem (y dissolving the ru((er gaskets inthe production euipment (eing cleaned. This "as solved (y replacing the gaskets "ithteflon gaskets manufactured in)house and training the employees not to cleanunnecessarily. This pro9ect "as estimated to save the company approimately G70,000annually *2//< dollars+.

Cost Accounting Identifies Additional Savings

;ollo"ing the previous toics use reduction pro9ects, the annual air permit cost ofG


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Costs and Savings of EMS

Preci estimated the cost of implementing the environmental management system to (eG


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*i"liogra#hy

6ar(ara :uinn, Contri(uting ditor, “'oving 6eyond Pollution Prevention,” Pollution Engineering , 2//F.

Cochin, Ted L., “Continuously $mproving Mour nvironmental Strategies,” Corporate Environmental Strategy, Holume E, 5um(er ata,” 2//F,http?DD""".informinc.orgDtrackto.pdf

Tellus $nstitute, “Snapshots of nvironmental Accounting? A 4eport to the 1S PAnvironmental Accounting Pro9ect,” 'ay 2//J,http?DD""".dep.state.pa.usDdepDdeputateDpollprevDpdfDA&&S5APS.pdf

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