Assessing the practical relevancy of environmental cost accounting for industrial waste Waste accounting, process efficiency, and cleaner production

Abstract: The main purpose of the Thesis work is to conduct an assessment of both the way companies currently account for their waste costs, and of the potential relevancy of engaging in a more comprehensive cost accounting for waste in terms of achieving industrial waste minimisation and cost optimisation. In order to do so, literature about environmental and cost accounting was reviewed, an empirical study was conducted with 20 Swedish industrial companies and production sites, as well as a case study with one of the companies previously interviewed. The main findings of the research are that: - As expected, the gap between concepts developed by academics and what companies are doing in practice is big. Most companies and production sites reviewed do not have any cost accounting in place for process waste, and consider it as an environmental issue to be kept under control rather than a production-related cost indicating existing inefficiencies in the manufacturing process; - A majority of companies do not appear to have a strong interest in engaging in cost accounting for their waste. Although sometimes justified by the possible irrelevancy of waste accounting in their specific case, it is believed that such unwillingness is often based on an underestimation of the real amount of waste-related costs; - Many factors can have an influence on the degree of relevancy of waste accounting for a particular company. The ones selected based on the empirical review and the case study include the current definition of waste costs at the company/site reviewed, the existing cost accounting for defects, the data and resource availability to engage in waste accounting, the quantities, types and origins of the waste generated, the proportion of raw material in total production costs, as well as the level of raw material efficiency; - Waste accounting was found to be environmentally and economically relevant, but it appears that a one-size fits all solution for all companies is not appropriate. Implementing waste accounting has to be done in accordance with case specific characteristics and needs. However, a broad five-step approach to be able to run an inititial evaluation of the degree of relevancy of waste accounting at a given company was drafted: understand the industry, gather information/data and understand waste-related costs, analyse and identify specific needs, develop an appropriate performance metric, and recommend management applications.