Sound environmental management is good business. We have taken steps to further integrate this thinking in our organisation with the use of Environmental Management Accounting. This provides management with the information needed to make more sustainable business decisions – information that traditional financial and cost-accounting methods cannot provide.

Environmental Management Accounting

Compared to 2002, environmental costs have grown by DKK 10.7 million. This is due to an increase in activities and production volumes. In 2003, environmental costs represented 1.9% of total production costs, which is comparable to the same level in 2002 (2.1%). Environmental investments of DKK 23 million in 2003 have increased by DKK 8.6 million compared to 2002. Environmental investments constituted 1% of gross investments, an increase of 0.6 percentage points compared to 2002. A significant reduction in gross investments from 2002 to 2003 also contributed to this increase. A large part of the increase is related to a DKK 6 million environmental investment in the new Insulin
Bulk Plant in Kalundborg, Denmark in 2003. In 2002, environmental investments were not specified separately in the overall investment in this project.

The ability to single out environmental investments in new projects is one of our goals in working with Environmental Management Accounting (EMA). Another aim is to assess environmental costs and calculate the extent to which environmental aspects also have an impact in monetary terms.

The EMA perspective allows managers to see the economic value of natural resources, and the business and financial value of good environmental performance. For example, initiatives to reduce waste from a particular production process will also enhance efficiency and move towards a more sustainable production mode. In view of increasing prices, efficient use of resources is a sensible business strategy as well as beneficial to the environment. Any efficiency gain achieved in consumption of water and energy entails lower costs. But those gains might not actually show as decreased costs if the price increases at a higher rate, even though they do represent true savings. Had nothing been done, the price increase would have resulted in even higher costs. EMA is about showing the full environmental costs and benefits of alternative solutions in a transparent way.

EMA is also about challenging traditional thinking and showing how innovative solutions can be integrated in business decisions. We believe that documenting environmental business cases will increase awareness throughout the company that savings and better practice are still to be found in many places. It will also help us keep track of environmental costs and focus directly on where impact and effects are the greatest. This may change the immediate understanding of where the environmental costs are highest – traditionally supply of water and energy, and waste management. The implementation of EMA follows a pilot project in 2003 at our production facilities in Bagsværd and Hillerød, Denmark.

Environmental costs and investments
(click to view table as pdf file)