UN ENCANTAMIENTO ESPECIAL

The MFCA framework is developed to measure the flows of materials and energy in the production processes both in physical quantity and monetary value (Onishi et al. 2009:398). Also, as an accounting tool it captures the material flows and monetary flows in the production process, and makes clear any inefficiency in the production process by using physical and monetary information (Hargroves & Smith 2012). Moreover, in the MFCA analysis, operation costs of production are allocated to material flows (Hyršlová et al. 2011:6). Additionally, it provides cost and quantity information on resource productivity for environmental management as well as production management (METI 2007). More importantly, by applying MFCA, all input materials in the production process can be traced and categorised either as positive or negative products (Jasch 2009). However, the environmental costs to be managed include raw material costs and all related overheads charged to waste (non-product) output (Jasch 2006). Although, the scope of the environmental costs is very wide, through MFCA, high environmental costs are often identified, drawn to the attention of managers and managed once their size is realised (Jasch 2003). The use of MFCA information to improve brewery process waste-reduction decisions is the focus of this study and is expanded in Chapter three.

2.9. SUMMARY

In this chapter, the theoretical perspective for this study was described. This contingency approach to Management Accounting is based on the premise that

there is no universally appropriate management accounting system applicable to all organisations in all circumstances. Again, the study suggests that contingency theory needs to be designed to identify specific aspects of an organisation’s accounting system that is associated with certain defined circumstances and to demonstrate appropriate matching to specific needs within the organisation such as its environmental impact and resource utilisation.

The impact on the environment by organisations due to unsustainable use of natural resources and production inefficiencies extends beyond compliance with waste- management regulations and raises a major challenge and implications to the Management Accounting function. Conversely, waste management approaches, as well as the challenge and relevance of Management Accounting information in environmental decisions, pose a challenge to organisations to reduce waste generation, increase shareholders profit, and improve environmental performance. Consequently, deciding on an appropriate waste minimisation strategy requires informed analysis of available options. Therefore, it is the responsibility of the accounting systems within individual organisations, whether small or large, to provide adequate waste information for informed decisions.

Environmental issues associated with the brewery process include energy consumption, water consumption, wastewater, solid waste and by-products, and emissions into the air. However, breweries in South Africa can intensify efforts to reduce the environmental impact of beer not only in the way it is packaged, but in the entire brewing process.

Even more, the MAS has a responsibility to provide quality environmental information to assist managers to make informed decisions and to improve the efficiency and effectiveness of existing operations. Yet the failure of organisations to meet the challenges of comprehensive environmental reporting is the reason most organisations continue to be unaccountable for their unsustainable practices. Nevertheless, EMA has been developed to provide managers with adequate financial and non-financial environmental analysis in order to optimise corporate environmental and economic performance and to achieve sustainable business. There are different environmental cost approaches used to assess environmental

costs at different times by organisations including activity-based costing, full cost accounting, and life cycle costing. However, the failure of these environmental cost approaches at analysing waste cost sufficiently informed this study. This study advocates the use of material flow cost accounting (MFCA) to sufficiently capture and analyse all related waste cost and facilitate improved waste-reduction decisions among organisations. The next chapter provides discussions on material flow cost accounting.

CHAPTER THREE

MATERIAL FLOW COST ACCOUNTING

3.1. INTRODUCTION

Chapter One introduced the scope of this research, Chapter Two reviewed the literature on the link between Management Accounting and waste management, discussed various waste management concepts, the major environmental impact of the brewery industry as well as relevant standards by the International Standards Organisation (ISO) that regulates the issue of waste in the industry, reviewed the challenges of accounting for waste, and the interventions and recent developments in the accounting discipline to incorporate and report environment-related information like waste separately for improved decisions. This chapter reviews the relevant literature on the development of Material Flow Cost Accounting and the effects of integration between enterprise resources planning (ERP) and MFCA. MFCA which is a major concept in this study is discussed. It links to objectives one and two of this study.

The debate about resource efficiency especially relating to process waste-reduction is not only a concern for scientists, environmentalists, and environmental activists. In an effort to contribute to the waste-reduction issue from a different perspective, contemporary Management Accounting developed a waste specific collection tool, MFCA to provide both financial and non-financial waste information to support waste-reduction decisions by managers.

3.1.1 GOAL OF THIS CHAPTER

The aim of this chapter is to discuss MFCA that was developed to provide waste cost information by making visible waste related costs hidden in overhead accounts in the conventional accounting system. MFCA was developed to analyse production output into good and negative products. This enables managers to identify and determine the sources of waste generation and its corresponding value to improve decision-making. Hence, this chapter argues that, an understanding of the MFCA approach will make stocks and flows of materials and energy in production

processes visible and transparent so that managers can initiate corrective actions to reverse identified areas of inefficiency.

3.1.2 LAYOUT OF THE CHAPTER

The previous chapter provided a general understanding of Management Accounting information systems for waste management. This chapter provides a detailed discussion on material flow cost accounting which is the focus of this study, and Figure 3.1 provides a visual representation of the chapter’s layout. A review of the development of MFCA is provided in Section 3.2. Types of waste information, such as positive and negative product costs included in MFCA calculations, are explained in Section 3.3. In Section 3.4, the application of MFCA is discussed. Material flow analysis approaches, such as environmental costing and waste costing, are discussed in Section 3.5. In section 3.6, the true cost of waste is addressed. The benefits of MFCA are the topic of Section 3.7, while Section 3.8 discusses the differences between MFCA and conventional Management Accounting Systems. An analysis of the findings in the literature is presented in Section 3.9 and the steps for introducing and utilising MFCA, which include identifying the need for an alternative waste reduction technique; determining waste-reduction targets for product lines and processes; collection and compilation of brewery output through MFCA calculation; comparing and analysing planned and actual waste-reduction targets through MFCA; and responding to divergence from planned waste-reduction targets, are provided in Section 3.10. The potential of MFCA to the organisation and its external environment is presented in Section 3.11. The integration of MFCA with enterprise resource planning is presented in Section 3.12, including relevance of data integration to brewery waste-reduction decisions, and the effects of integrating MFCA and ERP are addressed in Sub-sections 3.12.1 and 3.12.2 respectively. The chapter is summarised in Section 3.13.

This layout is represented in Figure 3.1.

Figure 3.1: A visual representation of the layout of Chapter 3