The continued extraction and depletion of earth’s natural resources by organisations have led to unsustainable business practices (Jennings & Zandbergen 1995). Reversing the negative environmental impact caused by unsustainable business practices is the responsibility of the organisations whose activities causes harm to the environment (Ahuja & Khamba 2008). Civil societies and governments are pressurising organisations to redress their unsustainable business practices by reducing the negative impacts caused by their actions so as to preserve the natural environment (Aguilera, Rupp, Williams & Ganapathi 2007). Managers require adequate and accurate financial and non-financial information on their unsustainable business practices to successfully manage both internal and external environmental effects of their actions (Schaltegger & Burritt 2000). Gale (2006:1231) argues that the conventional MAS do not have the ability to adequately monitor the increasing material costs and overheads in production processes with sufficient transparency. This inability to provide adequate process waste information will make it difficult for organisations to keep accurate waste records. As a result, it is important to integrate both the physical quantity and cost information of process waste for sound decision- making. It is, therefore, essential that managers use an appropriate EMA tool to generate adequate environmentally-related data on material flow, energy, and systems costs that will enable managers improve on their waste-reduction decisions and adopt appropriate environmental management strategy (Wagner 2003a). Peat (2007) notes that many accounting practitioners have been more comfortable dealing with readily quantifiable information and have therefore handled environmentally related information with reluctance. Dascalu, Caraiani, Lungu,
Colceag and Guse (2010) reiterate that accounting practitioners have an environmental responsibility to provide managers with both financial and non- financial environmental information necessary to improve environmental decisions.
Many organisations have yet to fully embrace environmental accounting, which requires that conventional accounting systems undergo and incorporate environmental changes to their costing system (Gray, Bebbington & Walters 1993; da Silva Monteiro & Aibar-Guzmán 2010; Barquet, Cunha, Oliveira & Rozenfeld 2011). The slow pace of incorporating environmentally-related impacts in corporate annual reports through the conventional MAS has limited managers’ opportunity to make informed waste-reduction decisions because of the lack of appropriate and adequate waste information (Fritsche, Jonas, Kayser & Koranyi 2010). The conventional MASs has a responsibility to provide managers with waste information to improve waste-reduction decisions thereby reducing the level of environmental devastation (Cardinaels & Veen-Dirks 2010). This is necessary since activities within the organisation affect both the internal and external business environment (Wong, Boon-Itt & Wong 2011). In South Africa, the King III Code on Sustainability Reporting is a requirement for listing on the Johannesburg Stock Exchange (JSE) which stipulates that organisations report their environmental, social, and economic activities annually to stakeholders in Integrated Reports (IOD 2009).
The growing concerns about the negative impact which organisations’ activities have imposed on the natural environment require that the conventional MAS identifies and assess organisations’ environmental impact in a more accurate manner (IOD 2009). The problem arises in arriving at sound waste-reduction decisions most often when environmental costs are inappropriately hidden in overhead accounts (Jasch 2003:78). This may indicate that inaccurate environmental or waste cost information could have been used by decision-makers to make waste-reduction decisions in the past. Jasch and Schnitzer (2002:6) contend that the waste generated by organisations impacts on both costs and the environment in several ways such as lost income through a combination of lost materials and disposal costs. However, certain barriers exist to limit organisations’ quest to achieve and implement a successful waste-reduction strategy. These barriers are oftentimes related to administrative preferences for different information needs (Allen 1996:55).
Invariably, different managers prefer certain other sources of information to others to the effect that all available information sources are not fully exploited (Allen 1996).
Some managers regard accounting information as limited to generating financial statements and the preparation of budgets, but not useful to environmental issues (Jasch 2003: 668). Decision-makers often wait to assess waste information at the end of a batch before initiating corrective measures (Jasch 2009). This might have led to substantial losses occurring which could have been prevented if a more waste specific waste data capturing tool had been applied to provide waste information (Jasch 2003). The use of the conventional MAS is insufficient to provide adequate waste information since it ignores vital process waste related costs hidden in overhead accounts (Nakajima 2003).
Consequently, MFCA, a contemporary EMA tool was developed to provide both financial and non-financial waste information necessary to improve process waste- reduction decisions (Kokubu et al. 2009). While MFCA-related research and case studies have been conducted in European countries like Japan, Germany, and Austria (Jasch 2003; Nakajima 2003); this study seeks to replicate this trend in the South African brewery industry. Extending the applicability of MFCA to support process waste-reduction decisions in South Africa remains almost unexplored according to the researcher. The focus of this study is to extend the adoption and to adjust the MFCA framework for use in the brewery industry of South Africa which generates a lot of waste especially wastewater considering that brewing consumes a lot of clean water in beer production which is also a very scarce resource in South Africa (WWF 2012).
This study therefore seeks to adjust the existing MFCA framework for use in the brewery industry in South Africa through case studies in a micro-brewery (Hope Brewery) and a large brewery (SAB Ltd). In addition, the study seeks to contribute to practice, knowledge and literature by focusing on the South African brewery industry on the importance of adopting the MFCA framework and also to adjust the existing MFCA framework to include and separate important waste components either neglected or subsumed to improve waste-reduction decisions in the South African brewery industry.