PRINCIPLES OF PRODUCTION
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—STANDARD ON ENVIRONMENTAL PERFORMANCE EVALUATION 4 2 ENVIRONMENTAL PERFORMANCE INDICATORS OF GRI 4 3 GENERAL REQUIREMENTS FOR INDICATOR SYSTEMS 4 3 1 RELEVANCE 4 3 2 UNDERSTANDABILITY 4 3 3 TARGET ORIENTATION 4 3 4 CONSISTENCY 4 3 5 COMPARABILITY 4 3 6 BALANCED VIEW 4 3 7 CONTINUITY 4 4 SYSTEM BOUNDARIES FOR PERFORMANCE INDICATORS 4 5 THE PROBLEM OF FINDING A MEANINGFUL DENOMINATOR 4 5 1 SPECIFIC CONSUMPTION/ECO-INTENSITY 4 5 2 ECO-EFFICIENCY RATIOS 4 5 3 PERCENTAGE DISTRIBUTION 4 6 CALCULATING SAVINGS BASED ON PERFORMANCE INDICATORS 5 ENVIRONMENTALLY RELEVANT EQUIPMENT 5 1 CLASSIFICATION OF ENVIRONMENTALLY RELEVANT EQUIPMENT 5 1 1 END-OF-PIPE EQUIPMENT 5 1 2 INTEGRATED CLEANER TECHNOLOGIES 5 1 3 SCRAP PRODUCING EQUIPMENT AND ENERGY CONVERSION LOSSES 5 2 ENVIRONMENTAL INVESTMENTS ACCORDING TO SEEA AND CEPA 6 MONETARY INFORMATION 6 1 OVERVIEW ON THE EMA COST CATEGORIES IN THE EXCEL TEMPLATE FOR TOTAL ANNUAL ENVIRONMENTAL COSTS 6 2 DISTRIBUTION BY ENVIRONMENTAL DOMAIN 6 3 MATERIAL COSTS OF NON-PRODUCT OUTPUT 6 3 1 ESTIMATING LOSS PERCENTAGES 6 3 2 CALCULATING PROCESSING COSTS OF NPO 6 4 WASTE AND EMISSION CONTROL COSTS 6 4 1 EQUIPMENT DEPRECIATION 6 4 2 OPERATING MATERIALS, WATER AND ENERGY 6 4 3 INTERNAL PERSONNEL 6 4 4 EXTERNAL SERVICES 6 4 5 FEES, TAXES AND PERMITS 6 4 6 FINES 6 4 7 INSURANCE 6 4 8 REMEDIATION AND COMPENSATION 6 5 COSTS FOR PREVENTION AND OTHER ENVIRONMENTAL MANAGEMENT COSTS 6 5 1 EQUIPMENT DEPRECIATION 6 5 2 OPERATING MATERIALS, WATER AND ENERGY 6 5 3 INTERNAL PERSONNEL 6 5 4 EXTERNAL SERVICES 6 5 5 OTHER COSTS 6 6 RESEARCH AND DEVELOPMENT COSTS 6 7 ENVIRONMENTAL EARNINGS AND SAVINGS 6 8 CASE STUDY OF SCA LAAKIRCHEN PULP AND PAPER PLANT 7 LINKING PHYSICAL AND MONETARY INFORMATION 7 1 ENVIRONMENTAL EXPENDITURE IN THE PROFIT AND LOSS STATEMENT 7 2 IMPROVING THE CONSISTENCY OF MATERIALS INPUTS AND PRODUCT AND NON-PRODUCT OUTPUT 7 3 TRACING MATERIALS IN CORPORATE INFORMATION SYSTEMS 7 4 COST ACCOUNTING BASICS AND TERMINOLOGY 7 5 MAPPING COSTS CENTERS, PRODUCTION PLANNING AND TECHNICAL MONITORING 7 6 ACTIVITY BASED COSTING 7 7 MATERIAL FLOW COST ACCOUNTING (MFCA) 7 8 INVESTMENT APPRAISAL AND BUDGETING 7 8 1 CAPITAL BUDGETING BASICS 7 8 2 CALCULATION SHEET FOR ENVIRONMENTAL INVESTMENTS AND SAVINGS 7 9 BENCHMARKING PRODUCTION SITES 8 CASE STUDY OF A BREWERY 8 1 WORKING WITH THE EMA EXCEL TEMPLATES 8 2 THE MATERIAL FLOW BALANCE 8 3 THE BREWERY, ITS PRODUCTION FLOW AND COST CENTERS 8 4 TOTAL ANNUAL ENVIRONMENTAL COSTS 9 HOW TO ORGANIZE AN EMA PILOT PROJECT 9 1 DEFINING SYSTEM BOUNDARIES AND SITES FOR PILOT TESTING 9 2 DEVELOPING A PROJECT PLAN 9 3 EXTRACTING EMA DATA FROM ENTERPRISE RESOURCE PLANNING SYSTEMS 9 4 ELEMENTS OF AN INTERNAL EMA STANDARD 9 4 1 OBJECTIVES AND SCOPE 9 4 2 DEFINITIONS 9 4 3 RESPONSIBILITIES 9 4 4 MATERIAL FLOW DATA (INPUT-OUTPUT ANALYSIS) 9 4 5 ENVIRONMENTAL COST CATEGORIES AND ASSESSMENTS 9 4 6 PROCEDURE FOR DATA GATHERING 9 4 7 INTERNAL REPORTING 9 4 8 EXTERNAL REPORTING 9 4 9 APPENDIX: EXCEL TEMPLATES FOR EMA ASSESSMENT BY BUSINESS GROUPS 9 5 SUMMARY OF RECOMMENDATIONS FROM CASE STUDIES 9 5 1 DATA COLLECTION OF MATERIAL PURCHASE BY MATERIAL GROUPS IN FINANCIAL ACCOUNTING 9 5 2 ESTIMATION AND RECALCULATION OF MATERIAL SCRAP PERCENTAGES 9 5 3 DEPRECIATION OF PROJECTS/INVESTMENTS BEFORE THE FIRST YEAR OF COST ASSESSMENT 9 5 4 DISTINCTION TO HEALTH AND SAFETY AND RISK MANAGEMENT 9 5 5 PRODUCT ORIENTED POLLUTION PREVENTION 9 5 6 NEW COST CENTERS AND ACCOUNTS 9 6 OUTLOOK REFERENCES