Organisations are required by regulations such as the International Standard Organisation (ISO) series 14000 to give priority to reducing their environmental impact throughout the various phases of their operations (ISO, 2007). This might be the reason why many organisations are promoting environmental management in
Input- Additional materials Input- Auxiliary materials
Input Main Materials Work-in-Process Output Products
Waste- Due to deterioration of main material
Waste- Due to material loss & defective processing
Waste- Due to deterioration of work- in-process inventory
Waste- Due to material loss; defective products; & loss of auxiliary materials Waste- Due to deterioration of Finished Goods Process 1 Processs 2 Positive Products Positive Products Positive Products Positive Products
their facilities just to comply with regulations and environmental laws. However, some organisations are promoting environmental management through waste recycling (Morrow & Rondinelli 2002:168). Waste recycling is an important waste management measure that promotes effective use of resources (Geng, Zhu & Haight 2007:146). The recycling process often requires incurring substantial expenses on input acquisition and the consumption of kilowatts of energy during the conversion of recyclable materials for eventual use as input materials (van Berkel 2005). In addition, recycling expenses include amount spent on material resource from input to output to waste generation (Smith & Ball 2012). Consequently, waste-reduction may seem a logical option since it avoids such expenses as in a recycling.
The adoption of MFCA in an organisation will assist to capture material and monetary flows in a production process, and makes any inefficiency in the production processes clear by using physical and monetary information (Jasch 2003:669). This is since MFCA identifies the quantities and costs of materials, processing, and waste treatment so that decision-makers can have a look at the very source of waste generation with a transparent view of impending challenges in its reduction, which leads to reduction of waste generation itself (METI 2007). Consequently, there may be a need to adopt the MFCA framework in an organisation to facilitate environmental performance, increase environmental accountability in terms of regulatory compliance, and support informed environmental and waste-reduction decisions (see Figure 3.3).
Figure 3.3: Researcher’s illustration of improvements from adopting MFCA for an organization
3.4.1. PERFORMANCE MEASUREMENT
Bartelmus (2009:1850) indicates that the difficulties of measuring the utility of economic goods and aggregating it are more pronounced for ecological or environmental services, which, in most cases, are not traded and priced by market forces. Alternatively, MFCA is a valuable tool to measure and internalise environmental performance results and improvements with regard to established waste-reduction targets (Jasch 2006). MFCA can provide the needed physical and monetary process waste information in creating environmental performance indicators that will enable environmental performance measurement (Nakajima 2003). An objective of waste-reduction from an environmental point of view is to eliminate inefficiency in resource usage throughout the whole production process (Gray & Bebbington 2001:143; Schiliephake et al. 2009:1258). In contrast, this study argues that the end-of-pipe approach to waste management is the treatment of output waste to reduce its hazardous content for safe disposal to waste sites. However, the need to identify; measure and assign costs to processes generating waste, thereby assisting operational managers to achieve improved environmental
performance and make sound process waste-reduction decisions is plausible to be filled through the adoption of the MFCA framework that is specifically.
3.4.2. Increased environmental accountability
Nevertheless the provision of environmental-related information is seen as a responsibility of the MAS (Jasch 2006). Hence, waste information generated through the MFCA framework reflects this responsibility which promotes organisations’ accountability to its society (Kokubu et al. 2009:17). Even more the MASs facilitate the provision of adequate financial and non-financial waste information to support waste-reduction decisions (Jasch 2009). Indeed, such information should be useful to both the external and internal stakeholders with diverse information needs (ICAEW 2004). As a result, organisations can improve their accountability role through the inclusion of MFCA information in external reports as provided by Canon Incorporated (Canon 2011). As such, the information provided by MFCA may be instrumental in the provision of support for sound process waste-reduction decisions. However, this study contends that greater improvements can be made to current systems for better process waste-reduction decisions.
3.4.3. Decision support
Many organisations have failed to consider the full range of environmental costs in their decision-making in the past (van der Vorst, Grafe-Buckens & Sheate 2010:172). However, with increasing regulations and tightening of environmental laws, organisations may need to select an appropriate Environmental Management System (EMS) or a combination of approaches to fulfil their environmental responsibilities. Although, the adoption of MFCA is still in its early stage, it can assist decision makers within organisations to achieve improved environmental performance (Schaltegger et al. 2012). Most often, organisations are unaware of the loss incurred from recyclable waste, since such waste is reused as resources and sometimes can be sold to external recyclers for a fee (van Berkel 2005). Yet processing costs lost in waste such as labour, depreciation, fuel, utility, and materials discarded due to deterioration of quality or because of the introduction of new product designs are difficult to identify and do not usually form part of the environmental costs used in waste-reduction decisions (METI 2007:7). However, not
all of these costs may be captured by the MFCA approach and therefore it becomes necessary to develop an adjusted MFCA waste information system to provide more comprehensive waste information to further improve waste-reduction decisions.
The waste-reduction decision process requires that waste generating sources are identified and the necessity for improvement is recognised. An organisation will be able to identify the existence of material loss and its monetary value through MFCA which it could not have recognised on a conventional basis (METI 2007). Quite often, organisations lay claims that they monitor their materials yield whereas in actual fact, only part of material losses in processes is covered in the scope of such monitoring. Indeed, losses arising from the main materials may be covered without monitoring the amount of auxiliary material costs lost (METI 2007). Regardless of this, decision-makers are often not aware of such losses, and opportunities for cost savings are lost (Jasch 2003:668). This is likely to happen if organisations concentrate their waste-management efforts on waste treatment only. Consequently, there may be a need to identify and uncover such uncontrolled material losses through an adjusted MFCA so that informed waste-reduction decisions can be made.