environmental costs at a canadian paper mill: a case study of environmental management accounting...

Journal of Cleaner Production 14 (2006) 1237e1251www.elsevier.com/locate/jclepro

Environmental costs at a Canadian paper mill: a case study ofEnvironmental Management Accounting (EMA)

Robert Gale*

Institute of Environmental Studies, University of New South Wales, Sydney, NSW 2052, Australia

Received 18 May 2005; accepted 24 August 2005

Available online 19 October 2005

Abstract

An Environmental Management Accounting (EMA) framework is applied to the 2000 year-end financial report for the Mackenzie PaperDivision paper mill owned and operated by Abitibi-Consolidated Inc. of Montreal, Quebec. A conventional reading of the obvious environmentalcosts from this financial report is Cdn$2,196,838. This figure is derived from an analysis of effluent treatment costs and other line itemenvironmental costs. There is no ‘‘environmental account’’ category that breaks out either costs or the mass balance of inputs and outputs.For the most part, environmental costs are rolled up into overhead accounts such as administration, infrastructure and materials accounts.

Application of the EMA framework is based on assigning environmental costs to one of four categories for which a tentative breakdown is asfollows: (1) waste and emission treatment costs ($3,348,902); (2) prevention and environmental management costs ($270,109); (3) materialpurchase value of non-product output costs ($946,799); and (4) processing costs of non-product output ($292,943). There is also a categorycalled Environmental Revenues, of which none were reported. Conservative estimates thus place the total environmental costs at $4,858,753.

What is significant about this result is that the environmental costs under EMA are at least twice as much as would normally be reported. Thissupports the view that environmental costs are much higher than generally considered and makes it clear that many important environmentalcosts as well as benefits are ‘‘hidden’’ in other accounts. More studies of a similar design are required to confirm the validity of the EMA meth-odology reported here.� 2005 Elsevier Ltd. All rights reserved.

Keywords: Environmental Management Accounting; Environmental costs; Environmental benefits; Hidden costs; Cleaner production; Waste and emission treat-

ment; Pollution prevention and environmental management; Material purchase value of non-product output; Processing costs of non-product output

1. Introduction

The purpose of this study is to report on the application ofan Environmental Management Accounting (EMA) methodol-ogy to accounting practices at a Canadian paper mill. Thestudy is based on an EMA methodology explained byChristine Jasch in ‘‘Environmental Management AccountingMetrics, Procedures and Principles’’, one of three reportsprepared for the United Nations Division for SustainableDevelopment (UNDSD) by the Expert Working Group on

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E-mail address: [email protected]

0959-6526/$ - see front matter � 2005 Elsevier Ltd. All rights reserved.

doi:10.1016/j.jclepro.2005.08.010

Improving Government’s Role in the Promotion of Environ-mental Management Accounting Systems [1e3]. Jasch’spaper was subsequently published by UNDSD under thetitle ‘‘Environmental management accounting proceduresand principles’’ [4]. Jasch’s later paper on ‘‘The use of envi-ronmental management accounting (EMA) for identifyingenvironmental costs’’ provides a practical application of theframework [5].

A second practical application is provided here. In thisrespect, the paper provides a technical guide to assessingenvironmental costs. To this end, the application of the EMAmethodology to accounting practices at a Canadian papermill focuses on the derivation of information about environ-mental costs from accessible company data. As a case study,

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1238 R. Gale / Journal of Cleaner Production 14 (2006) 1237e1251

the reported results are indicative of the range of categories ofcosts to be considered. A more exhaustive study on question-able costs or costs not presently reported would be requiredfor a complete account. While the analysis presented focuseson costs, this focus is not intended to overshadow the benefitsbrought about by expenditures on pollution prevention, controland management. It would be a mistake to conclude thatcompanies can save money by reducing environmental costswithout a full analysis of the benefits brought about by environ-mental expenditures.

1.1. Potential importance: EMA and links to otherdecision making tools

The literature on the application of EMA indicates that itis likely to lead to cost saving opportunities (or opportuni-ties to create value within current activities) [5e10]. A cu-rious omission from contemporary business organizations,however, is that they do not have environmental manage-ment accounting systems in place. Corporations must never-theless, implement other environmental management tools tocomply with environmental legislation and their own inter-nal environmental management aspirations. At the time ofthis EMA research, Mackenzie Paper Division was usingwaste management, waste minimization and pollution pre-vention tools. Mackenzie Paper Division would also haveemployed periodic environmental audits. While an Abitibi-Consolidated Inc. corporate environmental management sys-tem (EMS) had recently been developed at the head office,it had not yet been implemented at this plant. Other toolssuch as cleaner production; eco-efficiency; environmentallife cycle costing; environmental performance evaluationand benchmarking; environmentally preferable purchasing;environmental supply chain management; extended producer/product responsibility; external reporting (regulatory or volun-tary); and design for environment (DfE) were not beingactively considered, certainly not at the Mackenzie PaperDivision. Given the availability of EMA data, or a strategyto collect such data, the question arises about which environ-mental decision making tools the data could be linked to atMackenzie Paper Division to provide the best possible bene-fits. A tentative answer is provided to this question.

This case study is organised into sections involving back-ground information on the Canadian paper mill, the EMAmethodology, a report on the results of the study, a discussionof these results, and a conclusion. Additional information onEMA, including its potential role as reflexive modernizationstrategy in cleaner production, is provided by the author ina separate account [10].

2. Background to the case study

Details of the study are confined to the financial year1999e2000 and involve the Mackenzie Paper Division papermill owned and operated by Abitibi-Consolidated Inc. of

Montreal, Quebec. This mill is located 7 km from the townof Mackenzie, 181 km North East of Prince George, BritishColumbia. In 2000, Mackenzie Paper Division employed248 people, of whom 25% were salaried staff and the balancewere on hourly pay. The production of newsprint was 180,146(air dry) metric tons per year. The year-end financial reportidentifies the cost of operations including the costs of elementsand departmental costs.1 There is no ‘‘environmental account’’category that breaks out either costs or the mass balance of in-puts and outputs. For the most part, environmental costs arerolled up in overhead accounts such as administration, infra-structure and materials accounts. A ‘‘conventional’’ readingof the year-end financial report identifies environmentalcosts in ways that can be associated with the followingcategories:

Actual Cdn$

Effluent treatment plant (fixed costs) 1,080,143

Effluent treatment plant (variable costs) 1,105,044

Technical department, environmental supplies 11,651

Total 2,196,838

The paper making process at the paper mill can be dividedinto three major process groups: wood chip processing, pulp-ing and paper making. Other activities are important sub-elements to these processes, notably the provision of steamand power, the treatment of liquid wastes (effluent treatment)and solid waste management. The chemicalethermo-mechan-ical pulp process at the Mackenzie Paper Division involvespulp produced from wood chips using heated mechanicaland chemical processes to break the bonds between thewood fibres. Details of the paper making process are providedin Fig. 1.

3. Study methodology

This study reviews the Mackenzie Paper Division’s 2000year-end financial report, supporting documentation, an envi-ronmental cost survey, and consultation with managers andstaff at both Mackenzie Paper Division and Abitibi-Consoli-dated Inc. head office. The information from these sourceshas been entered into a spreadsheet created for this project ac-cording to the EMA framework of four categories of environ-mental expenditure (costs) and one category of revenue(earnings) [4]: waste and emission treatment; prevention andenvironmental management; material purchase value of non-product output; processing costs of non-product output; and,environmental revenue. In addition to these five categories,the EMA framework consists of checklists of costs or otherperformance measures for eight environmental media: Airand Climate; Wastewater; Waste; Soil and GroundWater;Noise and Vibration; Biodiversity and Landscape; Radiation;and other environmental costs. The EMA process at thecompany level is to calculate and report on costs or other

1 All financial figures are reported in Canadian dollars.

1239R. Gale / Journal of Cleaner Production 14 (2006) 1237e1251

C, LWater conditioners (H,I) T, V

B, J Papermaking Chemicals

A

R

S

Z Z

Woodchips Newsprint

D, E, F, G

X, Y

Material Flows Product/by-product flows:Internal water/material flows

Auxiliary material flows

Wood chipprocessing Pulping

Paper making &Finishing

Services (maintenance,steam & power)

Effluent Treatment

(1) These figures represent an approximation based on mill average raw water flow of 2921 US gallons per minute (USGPM) and an average effluent flow of 2440 USGPM and an estimate of 355 operating days per year. The difference is assumed to be evaporative losses or other unaccounted for error.

(2) This estimate is based on daily assessment of sludge production at 25 metric tons/day for 355 days/yr. Approximately 50% is burned for energy purposes and 50% is landfilled.

(3) This figure has been corrected for moisture content and a factor for core and wrapper weight.

I.D. Process Inputs / Outputs Annual usage I.D. Outputs Disposal Quantity

A Wood chips

B Water All domestic waste (e.g. paper & cardboard) goes to the local Mackenzie municipal landfill not mill landfill

C Wood waste (“hog fuel”)

D Fertilizer (nitrogen)

E Fertilizer (phosphorous)

F Dewatering aid (coagulant)

G Dewatering aid (Flocculant)

H Caustic soda I Sulphuric acid J Wrapper & cores K Misc. effluent treatment chemicals L Natural gas

Fig. 1. Schematic diagram of principle process inputs and outputs (Mackenzie Paper Mill).

metrics for each of the four cost and one revenue categoriesaccording to these eight environmental media (see Appendix 1)[4,5,10].

4. Results and analysis

Mackenzie Paper Division collects monthly data on operat-ing costs and material flows at the plant. These figures areconsolidated into an annual year-end financial report. Thisfinancial report provides information on the quantities andcosts of elements such as fibre and paper bleaching chemicalsas well as the costs of each department. Variable and fixedcosts are reported in Table 1.

The four categories of costs and one category of earningsare examined in the sections that follow. Since no part ofthe Mackenzie Paper Division’s operation or maintenance in-volves radiation, this medium is dropped from further analysis.

4.1. Category 1: waste and emission treatment

With regard to cost Category 1, waste and emission treat-ment, seven sub-cost categories are identified in the EMAframework:

1. Depreciation for related equipment2. Maintenance and operating materials and services


Table 1

Variable and fixed costs at Mackenzie Paper Division, 2000 (Cdn$)

Variable cost Total cost ($) $/metric ton

production

Fixed costs Total cost ($) $/metric ton

production

-Fibre, chips 20,713,756 114.99 -Salaries 4,961,608 27.54

-Purchased fibre 529,855 2.94 -Operating labour 6,949,491 38.58

-Electricity 12,357,273 68.60 -Maintenance labour 3,717,594 20.64

-Other energy 4,339,128 24.09 -Benefits 5,364,476 29.78

-Bleaching chemicals 2,622,492 14.56 -Operating supplies 1,638,260 9.09

-Paper machine chemicals 1,240,389 6.89 -Maintenance supplies 6,720,848 37.31

-Effluent treatment chemicals 1,105,044 6.13 -Fixed power electricity 3,640,557 20.21

-Chemicalethermo-mechanical

pulp chemicals

401,502 2.23 -Fixed steam, natural gas 730,947 4.06

-Steam plant chemicals 264,192 1.47 -Clothing 1,016,089 5.64

-Finishing supplies 2,756,338 15.30 -Refiner plates 778,093 4.32

-Taxes 371,018 15.92

-Other expenses 2,556,939 2.06

-Depreciation 13,691,179 76.00

Total variable costs 46,329,999 257.18 Total fixed costs 55,004,195 305.33

Total variable costs 46,329,999 $257.18/metric ton

Total fixed costs 55,004,195 $305.33/metric ton

Total costs $101,334,194 $562.51/metric ton

3. Related personnel4. Fees, taxes, charges5. Fines and penalties6. Insurance for environmental liabilities7. Provisions for clean up costs and remediation

Each of the seven sub-cost categories is considered in turnand their costs if known (or estimated) entered into a spread-sheet (Appendix 1).

4.1.1. Depreciation for related equipmentThe year-end financial report has a one-line entry of

$13,691,179 for depreciation. No breakdown is provided.Regarding new capital expenditures, the capital expenditurefor a new ash landfill (capital project) is given as $136,927in the Capital Expenditures section of the Mackenzie PaperDivision year-end financial report. A staff analysis of envi-ronment-related capital assets and depreciation was con-ducted to address depreciation information. The currentbook value of environmental capital assets is $15,931,835.All depreciation is calculated at 5% per year for 20 yearsexcepting the depreciation of vehicles and new ash landfill.These two categories are calculated over a five-year periodat 20% per year due to the shortened life of these assets.The total annual amount calculated for environmental depre-ciation is thus $866,620. The depreciation of ‘‘environment-related equipment’’ is thus 6.3% of $13,691,179, the figurerecorded for total depreciation in the year-end financialreport.

4.1.2. Maintenance and operating materials and servicesThis category involves costs related to air and climate,

wastewater, waste, soil and groundwater, noise and vibration(not applicable), biodiversity and landscape, radiation (not ap-plicable) and other environmental costs.

Air and Climate: No internal costs are reported for operat-ing materials and services. The level of detail required for thisanalysis goes beyond information readily available at theplant.

Wastewater: The operating and maintenance costs of the ef-fluent treatment plant are the sum of variable and fixed costs.The fixed departmental cost is $1,080,002. The variable costfor effluent treatment chemicals is $1,105,044 or $6.13 permetric ton of product. Effluent treatment chemicals are a nec-essary part of the existing effluent treatment process and in-clude nutrients, dewatering and settling aids and possiblyother chemicals added periodically to ensure proper systemapplication. Regarding nutrients, 166,144 kg of phosphateand 740,039 kg of nitrogen were used in 2000 at atotal cost of $245,728. Dewatering aids consist of 118,214 kgof coagulants and 89,831 kg of flocculants. The amount of asettling aid used is 25,850 kg. The purchase cost of these threechemicals amounts to $815,508. The biological system needsof this process and the amount of organic matter that isdischarged by the paper mill dictate the amount added. Giventhe process, there is little room to adjust nutrients as too littlewill result in poor performance of the treatment system.

In addition to these chemicals, an unspecified category‘‘other’’ is noted in the Mackenzie Paper Division year-end re-port. Costs associated with the category are given as $43,234.The Mackenzie Paper Division budget for effluent treatmentplant chemicals is 3.81$/metric ton or a total of $686,341 ver-sus actual costs of $1,104,470. This suggests a cost overrun of$418,129. Most of this cost overrun can be attributed to a seriesof operating problems (including electrical related problems)with the effluent treatment plant over the winter of 2000.The problems resulted in the need to use increased amountsof various chemicals to regain control of the treatment processand to maintain compliance with regulatory dischargerequirements.


Apart from the effluent treatment plant, other departmentsmay also have environmental waste and emission treatmentcosts though these are not easy to identify from the year-endfinancial report. Within the Technical Department, for exam-ple, $11,651 was spent on ‘‘Environmental Supplies’’. Thisis recorded in the ‘‘Other Environmental Costs’’ category inthe Appendix 1 spreadsheet.

Waste: A sum of $11,756 was spent on snow removal andsanding.

Soil and groundwater: No internal costs are reported foroperating materials and services.

Biodiversity and landscape: No obvious items are allocatedto this category. A cost for snow removal and sanding is en-tered in the waste category.

Other environmental costs, energy and water: The energyand water operating costs for each of the above categories areunknown. Further study is required to identify energy andwater-related maintenance and operating costs.

4.1.3. Related personnelCosts for related personnel can be broken out for air and

climate, waste and wastewater as noted in the followingsections.

Air and climate: 50% of the Energy Services Co-ordinator’stime is allocated for energy and environmental related work ata total cost of about $45,000. This work involves the planningactivities around energy consumption and the negotiation andpurchase of natural gas and electricity for operations at thesite. The balance of this employee’s time is spent on otherelectrical engineering project work (maintenance or capitalwork which is not considered environmental work).

Waste: One employee spends 75% of his time haulingwaste to on-site landfills. Total salary, overtime and benefitscosts are estimated at $33,750.

Wastewater: The Wastewater Administrator is a full-timeposition at a cost of about $65,000. There are 4 full-time op-erators (mechanics) with an overall cost of $252,783 stated inthe year-end financial report. In addition there are two electri-cians allocated to the effluent treatment operations at anoverall cost of $100,037. Within the Technical Department,personnel costs associated with the $11,651 spent on ‘‘Envi-ronmental Supplies’’ need to be considered. This departmentperforms laboratory analysis and has a total operational budgetof $1,216,809. The cost of environmental supplies represents4.3% of its non-staff budget of $270,945 for testing and sup-plies. Since direct information on labour costs associatedwith environmental supplies is not available, a first orderapproximation is that labour costs are proportional to thesupplies purchased. Applying this approach (4.3% of person-nel costs of $945,864) yields a figure of $40,672. Empiricalinvestigation is clearly required to establish a more reliablefigure.

4.1.4. Fees, taxes, chargesThe total costs of fees, taxes and charges beyond costs

recorded for three environmental media are not known.

Air and climate: The paper mill pays an annual air permitfee of $7145. There are no specific energy taxes and the taxeson energy use through Provincial Sales Tax (PST) and theGoods and Services Tax (GST) are not known.

Waste: There are two annual costs in this category, one fora refuse permit fee of $27,704, and the other for a PCB permitfee of $100.

Wastewater: The wastewater permit fee is $43,600 per year.

4.1.5. Fines and penaltiesMackenzie Paper Division had one ‘‘out of compliance’’ in-

cident in 2000, but no fines were incurred.

4.1.6. Insurance for environmental liabilitiesThere is no environmental impairment insurance at Mack-

enzie Paper Division. Abitibi-Consolidated Inc. has a compre-hensive, company-wide general liability policy with an overalldeductible that includes third party environmental liability.The costs of the premium are allocated to each site ona pro-rata basis based on production units, employee head-count or other relevant factors. The policy may apply to sud-den accidental losses and potential clean up costs that mayinclude environmental costs; although (as noted below) specificclaims for environmental costs arising from an accident are notthought possible.

There is no itemisation available for insurance costs atMackenzie Paper Division. The year-end financial report re-cords $371,018 for the overall site insurance costs (generalliability and all perils insurance). Mackenzie Paper Divisionand Abitibi-Consolidated Inc. head office environmentalstaff discussed this premium with corporate insurance staffand learned that there was no predetermined basis forassigning any portion of the insurance costs to ‘‘specific’’environmental issues, nor any agreed basis to apportion apercentage of this as environmental costs. The insurancestaff commented that if a specific environmental ‘‘rider’’were included in a local policy or for some local (site-specific) condition, it would be possible to identify thiscost. The examples given were insurance coverage for efflu-ent treatment systems and underground storage tanks. If theeffluent treatment system stopped working for whatever rea-son the company could make a claim for lost revenues orcosts to get back into compliance. The same would applyif the underground storage tank leaked and contaminatedsurrounding soils. Such riders are not considered commonin the industry and are expected to be expensive if addedto existing policies.

Company staff could not identify any specific ‘‘riders’’ oreven exclusions in any of the policies including those relatedto Mackenzie Paper Division. They also thought it unlikelythat under current policies Mackenzie Paper Division couldmake any purely ‘‘environmental’’ claims under the currentcoverage. This was interpreted to mean that no portion ofthe insurance costs could be allocated to a specific and identifi-able Mackenzie Paper Division/Abitibi-Consolidated Inc.environmental risk factor.


It is not surprising to find that environmental issues are notaddressed in insurance premiums. Environment-related insur-ance is a relatively recent development. However, even thoughspecific links are missing, waste treatment and other environ-ment-related facilities still require general liability and all perilsinsurance coverage. This raises the question of how to appor-tion that part of the overall Mackenzie Paper Division insurancepremium at least to the effluent treatment plant, if nothing else.Given that there are no separate insurance costs on either adepartmental or risk basis, pro-rating insurance according tooverall departmental costs is one way to proceed. On this basis,the insurance cost associated with the effluent treatment plantwould be 2.9% of $371,018, that is, $10,760 per year.

One company manager suggested that another way to ap-portion risk (which may be fairer) is to base it on the bookvalue of the equipment that is in the operating department.The argument advanced is that risk is generally related tothe types and quantity of operating equipment rather than tooperating costs. If the book value of all mill equipment is Xand the department equipment is Y one could argue that insur-ance is X/Y times the overall cost. However, beyond suggestingthe methodology, getting numbers for X and Y was not feasiblewithin the time constraints of the research. That aside, it is im-portant to note that risk is much broader than the book value ofthe equipment. Risk of loss of reputation and of liability due toaccidents, for example, would far exceed the risk of loss of thebook value of the equipment.

For the purposes of analysis, the $10,760 figure is used inthe calculations in Appendix 1. Whether $10,760 adequatelyrepresents the insurance risk is beyond the scope of this report.It would appear to be a small amount given the size of coststhat might arise from environmental liabilities. Clearly, theprovision for environment-related insurance warrants furtherinvestigation.

4.1.7. Provisions for clean up costs and remediationNo costs are reports for this category. These costs are

hidden in mill operating costs under department costs.Mackenzie Paper Division stated that it would be impossibleto separate these costs from small routine clean ups that inev-itably happen on a daily basis. Costs would likely be trackedfor a major remediation project but no such projects arereported for 2000.

4.1.8. Summary of waste and emissions treatment costsTotal waste and emissions treatment costs are at least

$3,348,620. The costs of each sub-category is summarised be-low with details provided in Appendix 1.

Depreciation for related equipment O$866,620

Maintenance and operating materials and services O$1,855,059

Related personnel O$537,914

Fees, taxes and charges O$78,549

Fines and penalties 0

Insurance for environmental liabilities O$10,760

Provisions for clean up costs and remediation (Unknown)

Total O$3,348,902

4.2. Category 2: prevention and environmentalmanagement

Prevention and management activities involve many tasksthat are routinely carried out as part of day-to-dayoperations. These include operator inspections, maintenanceof alarm systems, operator training, process changes,following up environmental audit items, following upactions as a result of corrective action plans that aredeveloped after ‘‘incidents’’ or ‘‘near misses’’, developmentand implementation of operating procedures, and preventa-tive monitoring and analysis. Because preventativeactivities are integral to all normal operating procedures itis difficult to fully differentiate these costs from other oper-ating costs. The figure of $207,109 from the year-end reportincludes some but not all of these costs. It might bepossible to estimate the percentage of time operators (or de-partments) spend on preventative activities (e.g., inspectionsand follow up) and then prorate this time against theoperation’s department costs. A study would be requiredto identify a reasonable basis of what this pro-rated timemight be.

Given the foregoing, it is likely that prevention and envi-ronmental management constitutes a larger set of expensesthan reported here. More detailed plant level investigationsare required for a determination beyond the figures providedin the following account.

Air and climate: Two external costs are recorded for thiscategory: $141,617 was spent on a contractor who providedfilters, media changes, and corrosion testing to the mill;$54,058 was spent on air conditioner maintenance.

Waste: $36,186 was spent on a contractor for bin rental anddelivery to municipal landfill. A second contractor received$7198 for bin rental and removal of special wastes (oil con-taminated material).

Wastewater: Approximately $12,000 was spent on an exter-nal consultant to assist with optimization of effluent treatmentoperations. The consultant assisted with a special project (trial)involving the addition of a chemical (hypochlorite) to the treat-ment system.

Soil and groundwater: $11,700 was spent on groundwateranalysis. In addition, $6582 was spent externally on installing10 new groundwater wells. The labour cost for one effluenttester for 4 days was approximately $768.

4.2.1. Summary of prevention and environmentalmanagement costs

The identified costs for prevention and environmental man-agement amount to at least $270,109 according to the follow-ing breakdown (see also Appendix 1):

Air and climate O$195,675

Waste O$43,384

Wastewater O$12,000

Soil and groundwater O$19,050

Total O$270,109


4.3. Category 3: material purchase value of non-productoutput

In EMA, ‘‘Whatever has not left the company as a productis a sign of inefficient production and must by definition bewaste and emissions’’ [4]. Because corporations pay threetimes for non-product outputdat purchase, during production,and at disposaldthis category is the most important environ-mental cost factor at Mackenzie Paper Division. Dependingon the cost of raw materials and labour, the material purchasecost of wasted materials can account for 40e90% of total en-vironmental costs. Note that where material costs are a lowproportion of total operating costs, say relative to labour,this cost factor is not the most important environmental costat all companies.

The calculation of the material purchase value of non-prod-uct output represents both a conceptual and a practicalchallenge. At the conceptual level issues related to the ‘‘effi-ciency’’ of production process are critical. The idea that inputsto production processes either leave with the product or aswaste is a critical conceptual aid to challenge conventionalideas about the acceptability of waste (inefficiency). At thepractical level, however, there are difficulties in collectingthe information required. The sections that follow providea first approximation concerning the material purchase valueof non-product output.

4.3.1. Raw materialsThe raw materials that end up in the wastewater and even-

tually in sludge waste include mostly processed fibre and smallquantities of chips, fines, or bark. The annual tonnage lost in2000 as measured daily in the sewer was estimated at5219 metric tons. This is an estimate only since there issome uncertainty in measurement.

As a result of the conversion of wood chips to wood pulpthrough the chemicalethermo-mechanical pulp process andthen the formation of newsprint paper using this pulp, thereis a portion of the material flows that is generated as a wastestream. This waste stream may be created at different unitoperations or steps along the process and may also be createdwhen a process upset or imbalance occurs. The processwaste stream is comprised of raw material fibre thatbecomes unusable (wood pulp) and may include a smallportion of actual chips, fines (small chips or bark). It ismostly wood pulp and the actual tonnage as estimated bysamples extracted from the mill sewers is 5219 metric tonsper year. For the purposes of this analysis it is valid to as-sume that the 5219 metric tons corresponds to the same orig-inal mass input of chips (and hence can be calculated asa material cost of non-product output). This material flowwill be directed to the on site wastewater treatment plantwhere additional solids are created (through biological ac-tion). The total materials are then disposed of in an on-sitelandfill.

It is important to recognise that wastes (including fibrethat becomes unusable) are created as a result of the inherent

production process which in the case of the chemicalethermo-mechanical pulp process involves both a mechanicaland a chemical process. In the mechanical stages, some ofthe initial ‘‘mass’’ of chips is lost as the solid wood chip(the ‘‘tree’’) is converted into a fibre of a few microns inlength. In the chemical portion, some of the mass constitu-ents of the original tree (log or chip) are ‘‘dissolved’’ withthe addition of chemicals. These constituents are dissolvedin the liquid phase of the mill effluent and subsequentlyare reconverted to a ‘‘mass’’ of biological solids in the sec-ondary treatment plant. These wastes all contribute to themass of non-product output. If the conversion of wood chipto paper were ‘‘ideal’’ it would generate one metric ton ofpaper for every metric ton of mass inputs. In the real world,however, the conversion is not ideal and the ‘‘yield’’ of thepulping process is a function of the process design (whatequipment is in place and how it is operated). For example,a Kraft mill has a much different yield than a chemicalethermo-mechanical mill, and the chemicalethermo-mechani-cal pulp mill has a different yield than other types of pulpingprocess. Process limitations and paper quality targets canalso contribute to not being able to use every single fibre.This means that the production process generates unusablefibre.

Operators examining efficiency have both ‘‘yield’’ and ‘‘ra-tio’’ measures to consider. The yield is the amount of pulp pro-duced per unit of wood input, so mathematically it is less thanone. At the Mackenzie Paper Division, the pulping yield isabout 88%. The ‘‘ratio’’ that is more commonly tracked by ac-counting staff, is the inverse of yield. In the cost book for theplant, the theoretical (calculated) yield is shown as chip con-sumed per metric ton of chemicalethermo-mechanical pulpproduction at 1.14 versus a budget of 1.11. A paper mill cantrack the weight of chips brought in and using instrumentationmeasure how much pulp flows out to the paper machines. Thenumber of 1.14 chips consumed per metric ton of chemicalethermo-mechanical pulp here represents a full year of data soshould be accurate. Given such records, the information at themill is that it requires 1.14 metric tons of chips to make a met-ric ton of chemicalethermo-mechanical pulp (or a yield ofapproximately 88%). This is a 3% variance from estimatesin the budget figures.

There may be some uncertainties in this calculation thatare mill specific (for example, it depends on whether everyload of chips is actually weighed and added up to a correcttotal, or if an estimated chip density is used, or how pulpvolumes are measured). However, the figures are likely tobe accurate because the calculations are tracked by auditorsand are considered ‘‘relevant’’ by accounting staff in thepreparation of budgets and cost analysis. There is a basicneed to know how much pulp can be made with each metricton of wood chips. For example, if the ratio is increasing,the production staff will consider whether there is a processimbalance or some other problem that may be generatinga higher waste stream. If they have a budgeted ratio of1.11 metric tons of chips per metric ton of chemical-thermoemechanical pulp but are operating at 1.14, it means


that there has been a higher loss of potentially good fibre,for whatever reason. The net result is that the mill generatedless good pulp (and presumably more waste) than expected.The 3% variance from the budget is thus a ‘‘telling’’ aspectof the discrepancy.

It is clear that because of process and operating limita-tions the conversion of wood chip to pulp is not 100%. Itis also a function of the product that Mackenzie PaperDivision is making and the quality needed. So while it isentirely fair to say that 5219 metric tons per year of chipsend up as non-product output, the question as to whetherthis is an avoidable cost goes to the heart of industry oper-ations and the EMA methodology. For the purposes of thisstudy, EMA focuses on the ideal of the 1:1 ratio of inputsto outputs and the related view that all output must leave aseither product or waste. Waste is lost product and bydefinition a cost that could be removed if it were possible toreduce waste or convert it into product. Given the EMA meth-odology, the actual cost of $115/metric ton of the 5219 metrictons of waste has to be considered ($600,185), plus the lostoperating cost associated with turning this non-product outputinto the waste (Category 4 costs), plus its subsequent treatmentand disposal costs (Category 1 costs). (A further complicationis that in 2001, the actual records indicated that the cost paidfor chips in 2000 was exactly $113.37/metric ton ($110/metric ton C 3.37 shipping and handling). Previous figuresfrom the earlier year-end financial report indicated $115/metric ton).

4.3.2. PackagingThe final newsprint rolls are wrapped in brown paper. Some

brown paper becomes ‘‘scrap waste’’ and ends up in the land-fill. Cardboard cores for the newspaper rolls that also becomescrap waste are also taken to the landfill. The mill is currentlyinvestigating the feasibility of using waste audits to estimatethe quantities that are ‘‘lost’’, that is, deposited in the landfill.The size and cost of these two waste streams was not known atthe time of the study. Moreover, no specific plans of internallyrecycling these waste streams were mentioned, as is the prac-tice at some other plants.

4.3.3. Auxiliary materialsAuxiliary materials become part of the product but are nei-

ther its main components or obvious to the consumer. Generalexamples include the glue in furniture or shoes. Establishingwhich chemicals fall into the ‘‘auxiliary’’ category as opposedto the ‘‘operating’’ materials category (the next section) isa challenge that requires more investigation. The followingaccount for auxiliary and operating materials is a firstapproximation.

Auxiliary materials include all chemicals used in the pro-duction of paper. These include those that are necessary, forexample, to achieve desired quality targets. They includebleaching chemicals (peroxide, sodium hydrosulphite, sodiumsilicate, DPTA, caustic soda, sulphur dioxide), dyes, coagulants,

flocculants, and chemicalethermo-mechanical pulp chemicals(caustic soda and sulphur dioxide). Some of these chemicalsend up with the product (dyes, coagulants and flocculants)and others (such as bleaching chemicals and chemicalethermo-mechanical pulp chemicals) largely end up in thewastewater stream (since they act to dissolve certain constitu-ents of wood chips). Materials such as dyes, flocculants andcoagulants are the only chemicals that go out with the sheetor in the wastewater stream. Therefore, chemicals such as per-oxide and caustic soda will end up in wastewater. The costsassociated with this process need to be investigated further.From this account, dyes, flocculants and coagulants are theonly chemicals that go out with the sheet, and are a part ofthe product, i.e., an auxiliary material.

4.3.4. Operating materialsOperating materials are materials that are not contained

in the product (or do not create a certain aspect of the prod-uct such as ‘‘whiteness’’ as created by bleaching). Operatingmaterials involve the services that are associated with theMackenzie Paper Division facility and include water treat-ment chemicals, felt conditioners, slimicides (bacteria con-trol for paper machine water systems), pitch controlchemicals and water conditioners. (Effluent treatment chem-icals have already been considered in the waste and emis-sion treatment category). Operating materials also includewrapper materials, that is, adhesives and inks, wrapperand cores, items that could be included in the packagingsection.

To reiterate, the chief challenge for auxiliary and operatingmaterials is to establish which chemicals fall into what cate-gory and the amount that become part of a waste stream ratherthan a product stream. The information provided in this sec-tion and for auxiliary materials is a first approximation only.More detailed work is required to distinguish between thetwo categories, and to work out the quantities and costsinvolved.

4.3.5. EnergyEnergy used by the paper making process is in two

forms: steam and electrical energy. Steam is supplied asa by-product from the on site cogeneration facility. Thisfacility also produces electrical energy that is supplied tothe mill (93,395 kW h). Energy production at the cogenera-tion facility is from the combustion of wood waste. Somenatural gas is also consumed (backup fuel) by the cogenera-tion facility. The remainder of electricity is purchased(495,610 kW h).

Electricity costs total $15,998,000 in 2000. The cost hasa variable component and a fixed component. The fixed costis the portion that must be paid regardless of whether or notit is consumed while the variable portion varies with actualconsumption that is over and above the base load. In addi-tion to electricity costs, natural gas consumption cost$4,340,000 and accounted for nearly 20% of the energy


output of the cogeneration facility. The natural gas costsalso include a variable (based on consumption) and a fixedportion (delivery and contract costs including pipeline amor-tization costs). As a rule, cogeneration facilities are veryefficient from an energy standpoint: a lot of the wasteheat is transferred to produce steam that can be reused inthe process. An approximate energy efficiency factor com-monly used for the cogeneration facility is 30e34%. Energyas an input to the production process leaves the plant in theform of product or waste (for example, air pollutants andwaste heat). The energy costs of these wastes shouldalso be considered though not feasible in the scope ofthe current project. A summary of energy costs fromMackenzie Paper Division’s year-end report is provided inTable 2.

If, at the end of the production process, some output be-comes waste (Y1) rather than saleable product, it would be pos-sible to argue that the material purchase value of energy forthis non-product output could be calculated as follows (figuresin metric tons):

Electricity Y1 metric tons ! $88.81/metric ton Z $1

Natural gas Y1 metric tons ! $24.10/metric ton Z $2

Hog fuela Y1 metric tons ! $4.04/metric ton Z $3

Total Z$4

a Hog fuel is a term for wood waste.

The 5219 metric tons of waste fibre and chips doesnot, however, come at the end of the process. It comes atthe front end of the process. An empirical investigation wouldbe required to investigate the energy costs for this wastestream.

4.3.6. WaterThe mill draws 5,651,404 m3 of water from deep ground-

water wells on its property for which no charges or royaltiesare assessed. The cost of extracting groundwater is not specif-ically recorded in the available information. In addition to theextraction cost, the water is treated with chemicals to ensurethat it is of the right quality for the production process. Thecost of treatment can be calculated according to chemicalcosts. More study, however, is required on this treatment andits processing as waste. The record shows that 4,720,790 m3

of treated water are discharged to the adjacent WillistonLake. The input use of groundwater as a ‘‘free good of nature’’as well as the ‘‘free’’ output of treated water into a local lake

Table 2

Summary of energy costs

Source Variable cost/

metric ton

Fixed cost/

metric ton

Total/metric

ton

Electricity, power 68.60 20.21 88.81

Natural gas 20.05 4.06 24.10

Hog fuela 4.04

a Hog fuel is a term for wood waste.

represent two areas where costs through royalties, charges, orlicence fees may arise in the future. The energy for pumpingas well as the maintenance of the equipment should also bedocumented.

The question that arises is ‘‘how is the material purchasevalue of water as a non-product output to be calculated?’’This question requires empirical investigation. An interimalbeit inadequate approach is to use the figure for the treat-ment costs of water as its basic cost. As a rough approxima-tion, the treatments costs can be taken as synonymous withthe costs of chemicalethermo-mechanical pulp chemicalsand the operation of the chemicalethermo-mechanicalpulp department. Chemical costs are given as $2.23/metricton. On this basis, the cost of treating water in the produc-tion of 180,146 metric tons of newsprint is $415,106. Theamount of water that is discharged into Williston Lake is83.5% of the total drawn from groundwater. Applying thisproportion to the treatment costs of water suggests a materialpurchase value of non-product output of $346,614. Furtherresearch on material purchase values is required to verifythis and other costs.

Although assessments of the sustainability of current wa-ter consumption trends or about the impact of the papermill’s withdrawals on the aquifer were not addressed directly,Mackenzie Paper Division currently has programs in placeto reduce water consumption and losses. The companyknows that 17% of water is lost to evaporation; however,the percentage used in converting wood chips into paperproduct is not known. Given existing metrics, input analysisis not easily amenable to quantification. Moreover, inputs interms of the amount of water, chips and chemicals cannotbe added in a simple way to compare with outputs of sale-able product and non-saleable wastes. The conversion ofwood chips to paper using chemicals, water and energy isa complex process that would require the detailed monitor-ing of inputs and outputs to generate the data required fora more comprehensive study.

Water consumption for the study year is 28.8 m3/metricton of paper. In comparison a fully modern mill can be de-signed for water usage levels in the 5e20 m3 per metric tonof paper (an industry figure used by Abitibi-ConsolidatedInc.).2 Efforts by BC Hydro (the provincial supplier of elec-tricity through hydro dams) to promote water and energyconservation are influential. Reduced snowpack and precip-itation levels in the region are one source of concern forall heavy water users.

In addition to paper making considerations, the quality ofthe water is variable such that some departments in the milldo not have access to potable drinking water. Bottled watercosting $9493 was supplied to employees for more than halfthe year in 2000. Because it is not clear whether this

2 One reviewer noted that some paper plants in Sweden claim to be near

0.5 m3/metric ton of paper. They claim to save far more of the fibres, energy

and chemicals than in facilities with higher water throughput. This suggests

a promising area of further research.


cost should be included, it is omitted from any furtheranalysis.

4.3.7. Other wasteNo other wastes were identified.

4.3.8. Summary of material purchase value ofnon-product output costs

Work is still required to estimate the total value for thiscategory. In the interim, provisional estimates of costs are atleast $946,795 according to the following breakdown(Appendix 1):

Raw materials O$600,185

Packaging (Unknown)

Auxiliary materials (Unknown)

Operating materials (Unknown)

Energy (Unknown)

Water O$346,614

Other wastes (Unknown)

Total O$946,799

4.4. Category 4: processing costs of non-product output

The material purchase value of non-product output hasjust been considered. To this must now be added the costsof processing. Processing refers to the human resource(labour and administration) costs. Three expenditures areconsidered. The first concerns non-saleable product at theend of the production process; the second expenditure isabout the 5219 metric tons of sludge waste; and thethird item is about chemicalethermo-mechanical pulpoperations.

4.4.1. Producing non-saleable productMackenzie Paper Division produces 180,146 (air dry)

metric tons of newsprint at a total production cost of$562.51/metric ton (Table 1). The lost cost associated with‘‘producing’’ non-saleable product is the sum of salaries,operating labour, maintenance labour, and benefits. The totalfor these expenditures from the fixed cost information is20,993,169 or $116.54/metric ton (Table 1). At the end ofthe production cycle some of this cost goes to non-saleableproduct at the same processing costs as the saleable product.If the non-saleable product waste stream could be estimated,the processing costs would be $116.54 multiplied by thenon-saleable product estimate, minus the $352,820 thathas already been considered for effluent treatment plantoperations. A specific study would be required for furtherinvestigation.

4.4.2. Sludge wasteThe second processing expenditure concerns the

5219 metric tons of sludge waste. The processing costs ofall sludge waste have already been captured in effluent

treatment plant costs in Category 1 above. In addition, thematerial purchase value of the 5219 metric tons has beencaptured in Category 3 costs. Given that most of the pro-cessing costs take place at the chip processing and pulpingstage (Fig. 1), labour and administration costs need to becalculated to determine this figure. The labour costs forthe chemicalethermo-mechanical pulp are $3,709,501 or$20.59/metric ton A rough estimate of labour costs wouldthus be $107,468 ($20.59/metric ton*5219). In addition tolabour costs are salary costs of administrators. This isdifficult to estimate.

4.4.3. Chemicalethermo-mechanical pulp operationsThe costs of chemicalethermo-mechanical pulp opera-

tions are given as $32.74/metric ton. The amount of timespent on water-related issues within chemicalethermo-mechanical pulp operations is not recorded. Departmentalcosts are given as $5,895,709, of which salaries, wagesand benefits take up $3,753,501. It is not known howmuch of this expenditure could reasonably be allocated towater quality. One staff estimate puts the cost at lessthan 5%. This would indicate a cost of no more than$185,475.

4.4.4. Summary of processing costs of non-product outputThe administration and labour costs of processing non-

product are at least $292,943 as summarised below (Appen-dix 1).

Non-saleable product (Unknown)

Processing sludge waste (5219 metric tons) O$107,468

Water quality treatment O$185,475

Other (not estimated) O$0

Total O$292,943

4.5. Category 5: environmental revenue

No environmental revenues were identified for MackenziePaper Division.

5. Discussion

A conventional reading of the obvious environmental costsfrom the financial report suggests they are in the order or$2,196,838. Application of the EMA framework provides pro-visional and conservative estimates of costs at $4,858,753. Thebreakdown is as follows:

1. Waste and emission treatment costs $3,348,902

2. Prevention and environmental management costs $270,109

3. Material purchase value of non-product output costs $946,799

4. Processing costs of non-product output $292,943

5. Environmental revenue ($0)

Total $4,858,753


The application of the EMA framework provides insightsinto environmental costs and benefits not generally recog-nised in corporate decision making. What is significant inthe results is that environmental costs under EMA are atleast twice as much as would normally be reported. Thisconfirms the view in the EMA literature that environmentalcosts are much higher than generally considered and makesit clear that many important environmental costs and bene-fits are ‘‘hidden’’ [5e10]. This finding, however, was notparticularly persuasive for Mackenzie Paper Division andparticipants in the study from Abitibi-Consolidated Inc.The participants believed that their operations were as effi-cient as they could be and raised more questions about theEMA methodology than the performance of the existingchemicalethermo-mechanical pulp technology. The newcategories of costs for the material purchase value of non-product output and the processing costs of non-productoutput did not appear to be compelling information forcompany participants, though they appreciated that themethodology offered better tracking of information. Fromthe participant’s point of view, the cost of money in finan-cial markets, future investment plans, and immediatepressures to be competitive were more pressing than theidea that a new accounting system could shed more lighton the costs and benefits of current production practices.This is clearly an area requiring further investigation in col-laboration with industry. In retrospect, one obvious deficiencywith the current study methodology is the absence of a detailed‘‘benefit analysis’’. A more in-depth focus on environmentalbenefits as well as environmental costs may have strengthenedthe arguments in favour of the EMA methodology.

Another finding reported by company participants is thatdespite comprehensive record keeping, the breakdown of allenvironmental costs from existing accounting frameworkswas far more difficult than anticipated. While the degreeof difficulty varies for each cost category, the datarequired for EMA are often not readily available. Thisproved to be the case for energy and water costs inparticular. Knowing what energy and water costs to assignto the material purchase value and processing costs ofnon-product output would have improved the derivation ofadditional findings. Insurance costs also represented anarea requiring further attention. Better information on thefull range of environmental costs is likely to become criti-cally important in decisions about new capital projects aswell as in due diligence studies for corporate mergers oracquisitions.

The study also showed that categories such as preventa-tive costs are difficult to identify completely but are likelyto be particularly important regarding improvements to deci-sion making. These include costs so integral to day-to-dayoperating costs that a concerted effort is needed to separatethem out so that they can be taken into account when eval-uating costs and benefits of potential future plans orchanges. Part of the ‘‘accounting’’ problem with preventa-tive costs is recognition. Mackenzie Paper Division cannotstart to estimate the costs of a problem until it realises

that a problem, or a situation that causes a material relatedenvironmental problem, exists. To this end, a concertedrecord keeping effort is essential.

Timing interruptions to production is another aspect thatneeds consideration. Often Mackenzie Paper Divisionchooses to incur certain costs because the cost of shuttingoperations down (‘‘downtime’’) to carry out a repair isjudged to be too high. In other words, the high fixed costsof production mean that operations cannot always bebypassed or turned off ‘‘instantaneously’’ in order to carryout changes or repairs. For ‘‘big’’ jobs the turn aroundtime to engineer, fabricate, order and install new equipmentcan be many months. A decision on ‘‘downtime’’ (whethera few hours or several weeks) is never easy. It istypically delayed as long as possible until sufficient accu-mulated work exists so that its justification is beyondquestion.

More work is required on the different elements to be in-cluded in each category of costs under the EMA frameworkand to understand the value of each of these elements.While the present study is indicative of the range of coststo be considered, there are still conceptual, measurementand data challenges to be addressed. EMA, by itself, maynot motivate changes in accounting practices and reporting.This is because changes to internal accounting practices areunlikely to be conducted in isolation at one division ofa company as large as Abitibi-Consolidated Inc. Accountingand reporting systems generally have to be on the samebasis so they can be integrated within the corporate account-ing chain. Adoption of EMA probably has more to do witha corporate need for a re-modernization strategy for cleanerproduction [10] than a need to identify a fuller range of en-vironmental costs. If disclosure rules for public companiesbecome steadily tougher, accounting and other environ-mental management organisations have a role to play inkeeping practices up to date and in promoting the profes-sional practice changes that are necessary to implementEMA within corporations.

While there is clearly a benefit in linking EMA to exist-ing tools such as waste management, waste minimisationand pollution prevention, there is an important distinctionto be made between ‘‘react-and-cure’’ strategies and ‘‘antic-ipate-and-prevent’’ strategies. Arguably, pollution preventioninitiatives arise at facilities where ‘‘react-and-cure’’ has beenthe norm and where waste treatment will continue indefi-nitely. In contrast, the United Nations Environment Programtakes a different approach under anticipate-and-preventcleaner production initiatives by stating that ‘‘waste treat-ment does not fall under the definition of cleaner productionbecause it does not prevent the creation of waste’’ [11]. Apollution prevention strategy tolerates waste treatment inso far as cleaner production is judged to be an end objec-tive. This suggests that cleaner production ought to bea more fundamental consideration for Abitibi-ConsolidatedInc.: indeed, there is a pressing need to consider pulp andpaper mills from a cleaner production perspective. This inturn brings into consideration the design for the


environment (DfE) tool. Given that the pulp and paper in-dustry is very capital intensive, EMA might force a companyto look at its capital base and future capital projects and toconsider technological changes from a DfE perspective inwhich proactive anticipate-and-prevent cleaner and sustain-able production practices replace react-and-cure practicesof current waste treatment processes.

EMA also has particular relevance to eco-efficiency.Mackenzie Paper Division as a natural resource companyhas environmental and resource use impacts that are directlyrelated to day-to-day direct costs. For the Mackenzie PaperDivision enterprise, eco-efficiency is largely synonymouswith waste minimisation and waste management, two toolsalready in use.

Application of the purchasing/supply chain tool may alsobe useful because the major inputs are natural resources.This tool may have more relevance in a manufacturing in-dustry where inputs are partly produced by others. Never-theless, producer responsibility is an emerging issuebecause paper and wood products represent some of themost recyclable materials available. As the biggest NorthAmerican recycler of paper, Abitibi-Consolidated Inc. is al-ready significantly involved in collection systems both at thecustomer level (printing operations waste) and the post con-sumer level. The one exception to producer responsibilitynot being considered critical is for up-stream-fibre supply(i.e., forests) management. Increasingly this is the most sig-nificant issue for the public. To the extent that EMA can ad-dress this issue, it would be helpful from a sustainableproduction perspective.

The issue of whether the EMA data and informationcould be applied to corporate accounting and managementsystems (other than EMS) and to national accountingsystems requires further analysis. At the corporate level,the value of linking EMA to (a) external ecological account-ing and reporting or regulatory ecological accounting andreporting or (b) national accounting systems for nationalecological accounting or national economic accounting isnot clear. A more likely prospect at the corporate level islinkage to management systems for financial management;environmental management; health and safety management;quality management; and human relations. The mostsignificant benefit in the short term would be to link theEMA results to the corporate environmental managementsystem to ensure that this system and audits of thissystem are informed by a fuller range of environmentalcosts.

6. Conclusion

The research results led company participants to questionthe EMA methodology rather than the performance of com-pany operations. A forum to discuss the results would havebeen very useful at this stage. However, the study wasbrought to a close without a full debriefing on points that

could have helped EMA researchers make further improve-ments in their methodologies.3 More research is thus re-quired on the shortcomings of existing accountingpractices. This is particularly the case when one considersthat established accounting norms may intentionally or unin-tentionally support polluting technologies. It is essential forpractitioners interested in this area to evaluate the strengthsand weaknesses of EMA against established accountingpractices, to undertake case study work with corporations,and to delineate barriers and obstacles to the adoption ofa standard EMA methodology.

The research might also provide some useful insights intothe assessment of capital projects. A consideration of the en-vironmental cost categories might be useful in evaluating thecosts and benefits of these projects. At the very least it shouldforce a review of the impacts of a capital project on a ‘‘Non-Product Output’’ basis and a review of other environmentaland fiscal benefits.

Specialists in corporate mergers and acquisitions mayalso find EMA useful in due diligence investigations. Giventhat valuations are difficult to ascertain and that there arecompeting legitimate ways in which companies can be val-ued, a better understanding of the full environmental costsand benefits at a given company may have importantramifications for the calculation of comparative metrics,costs and discounted cash flows upon which judgementsare made.

Acknowledgements

I would like to acknowledge the cooperation between En-vironment Canada and Abitibi-Consolidated Inc. in facilitat-ing the research of environmental costs at the MackenziePaper Division. All participants were extremely helpful inanswering questions, interpreting data, information, and incommenting on earlier drafts of the report. The study wouldnot have been possible without Environment Canada’ssupport for the work of the United Nations Division forSustainable Development’s Expert Working Group on Envi-ronmental Management Accounting and for the separatecommissioning of this EMA case study of which thisaccount is a variation. Two anonymous reviewers also pro-vided constructive comments to improve the finalexplanation.

3 The conclusion of the study coincided with the 11 September 2001 ter-

rorist attacks in New York and Washington, DC, an event which inevitably

took precedence over many research and policy development initiatives in

Ottawa.


Appendix 1. Application of Environmental Management Accounting framework to case example

Indicative restatement of accounts for FY 2000 at Mackenzie Paper Division, British Columbia, according to UNDSD EMA methodology

1. Waste and emission treatment A & C Waste WW S & GW N & V B & L R OEC Current

book

value

Total

depreciation

Total

category

costs

1.1. Depreciation for related equipment

Activated sludge project (buildings) 186,597 3,721,712 186,086

PCP replacement 2411 48,082 2404

Activated sludge project 427,491 8,526,386 426,319

Opacity meter 2367 47,210 2361

Cooling basin (fine bubble

aeration equipment)

4387 96,784 4839

Environmental laboratory 1602 35,340 1767

Effluent pH monitoring 2016 44,464 2223

Activated sludge nitrogen and

phosphate pumps

1977 43,607 2180

Effluent system upgrade 18,524 369,465 18,473

Effluent water system 81,944 1,635,392 81,770

Effluent water supply 4793 95,589 4779

Effluent line extension 3588 71,554 3578

Parking lot 1803 35,958 1798

TMP project e paving 1671 33,334 1667

TMP project e paving 743 14,811 741

Asphalt pad (chips) 16,539 329,876 16,494

Activated sludge project 15,814 315,413 15,771

Hog reclaiming paving 2515 12,575 2515

Ash landfill 27,385 136,927 27,385

Volvo truck 73,214 317,356 63,471

Total current book value 15,931,835

Total depreciation by environmental media 103,010 774,371 0 0 0 0 0

Sub-total depreciation 866,620

1.2. Maintenance and operating materials and services (MOMS) Total MOMS

Air and climate 0

Waste 0

Snow removal and sanding 11,756 11,756

Wastewater 0

Rentals 36,710 36,710

Vehicles 59,750 59,750

Lab supplies 8,329 8329

Outside services 0 0

Lubricants e Oil 3,616 3616

Safety supplies 0 0

Operating supplies 3192 3192

Maintenance supplies 398,059 398,059

Major maintenance 217,526 217,526

Effluent chemicals 1,104,470 1,104,470

Energy use at ETP (Unknown)

Soil and groundwater 0 0

Noise and Vibration 0 0

Biodiversity and Landscape 0 0

Radiation N/A 0

Other environmental costs 11,651 11,651

Costs by environmental media 11,756 1,831,652 0 0 0 0 11,651

Sub-total MOMS 1,855,059

1.3. Related personnel Total

personnel

Energy services coordinator (50% of time) 45,000 45,000

Waste Hawler (75% of time) 33,750 33,750

Landfill operator (covering landfill with sand) 672 672

Wastewater Administrator (full time) 65,000 65,000

Two electricians (full time) 100,037 100,037

Four mechanics (full time) 252,783 252,783

(continued on next page)


Appendix 1 (continued)

Pro-rated personnel costs for environment

related laboratory analysis

40,672 40,672

Costs by environmental media 45,000 34,422 458,492 0 0 0 0 0

Sub-total related personnel 537,914

1.4. Fees, Taxes, Charges Total fees etc

Air and climate: energy taxes 0 0

Air and climate: air permit fee 7145 7145

Waste: refuse permit fee 27,704 27,704

Waste: PCB permit fee 100 100

Wastewater: permit fee 43,600 43,600

Soil and groundwater 0 0

Noise and vibration 0 0

Biodiversity and landscape 0 0

Radiation N/A 0

Other environmental costs 0 0

Costs by environmental media 7145 27,804 43,600 0 0 0 0

Sub-total fees, taxes and charges 78,549

1.5. Fines and penalties Total fines etc.

Fines or penalties 0

Costs by environmental media 0 0 0 0 0 0 0

Sub-total fines and penalties 0

1.6. Insurance for environmental liabilities Total insurance

Estimate of 2.9% of total insurance

premium for ETP dept. only

10,760 10,760

Costs by environmental media 0 0 10,760 0 0 0 0 0

Sub-total insurance 10,760

1.7. Provisions for clean up costs, remediation Total

provisions

Provisions for clean up

costs and remediation

Costs by environmental media 0 0 0 0 0 0 0 0

Sub-total provisions for clean up 0

Total waste and emission treatment 3,348,902

2. Prevention and environmental management Total costs

Air and climate: contract for services 141,617 141,617

Air and climate: air conditioner maintenance 54,058 54,058

Waste: contract for services 36,186 36,186

Waste: contract for services 7198 7198

Wastewater consultant 12,000 12,000

Soil and groundwater: groundwater analysis 11,700 11,700

Soil and groundwater:

groundwater well installation

6582 6582

Soil and groundwater:

1 effluent tester for four days

768 768

Noise and vibration 0 0

Biodiversity and landscape 0 0

Radiation N/A 0

Other environmental costs 0 0

Costs by environmental media 195,675 43,384 12,000 19,050 0 0 0 0

Total prevention and

environmental management

270,109 270,109

3. Material purchase value: non-product output Total costs

Raw materials

Chips (5219 m.t. @ $115/t) 600,185 600,185


Appendix 1 (continued)

Other raw materials (not included) 0

Packaging

MPV of brown wrapping paper unknown 0 0

MPV of cardboard cores unknown 0 0

Auxiliary materials N/A 0

Costs not known

Operating materials (not known) 0

Dyes (costs not known) 0

Energy

Costs not known

Water

Treatment 346,614 346,614

Costs by environmental media 0 0 600,185 0 0 0 0 346,614

Total MPV of non-product output 946,799 946,799

4. Processing costs of non-product output

Processing sludge waste (5219 m.t.) 107,468 107,468

Water quality treatment 185,475 185,475

Total processing costs of

non-product output

292,943 292,943

5. Environmental revenue

Revenue by environmental media 0 0 0 0 0 0 0 0 0

Total environmental revenue 0

Grand total: costs by medium (estimate) 495,640 440,752 7,569,588 38,100 0 0 0 902,005 4,858,753

Summary Total

1. Waste and emission treatment 3,348,902

2. Prevention and environmental management 270,109

3. Material purchase value: non-product output 946,799

4. Processing costs of non-product output 292,943

5. Environmental revenue 0

Grand total 4,858,753

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