Introduction of material flow cost accounting (MFCA) to the supply chain: a questionnaire study on the challenges of constructing a low-carbon supply chain to promote resource efficiency

doi:10.1016/j.jclepro.2014.10.044

Journal of Cleaner Production

Volume 108, Part B, 1 December 2015, Pages 1302-1309

https://doi.org/10.1016/j.jclepro.2014.10.044 Get rights and content

Abstract

The purpose of the present article is to identify the requirements and challenges of promoting a low-carbon supply chain caused by the introduction of material flow cost accounting (MFCA). To this end, the role of an MFCA leader company within the low-carbon supply chain was examined. Next, the results of a questionnaire study that was carried out in 2012 were shown in the second part of the paper. The questionnaire was sent to the listed industrial enterprises (1,561 enterprises) in Japan, and the response rate was 22.8% (356 questionnaires received). The status quo of information sharing between the buyers and suppliers along the supply chain, preconditions, and requirements for introducing MFCA was considered. The study showed that setting environmental indicators as performance evaluation criteria of a company's purchasing department, as well as explaining the performance of MFCA to the purchasing department on the one hand, and promoting inter-organizational information sharing between buyers and suppliers on the other, are important steps in order to effectively introduce MFCA in the supply chain.

Introduction

Efficient environmental management is becoming more important for enterprises. In order to achieve governmental reduction goals for greenhouse gas emissions set for every industry in Japan, many Japanese enterprises are carrying out technology development for “energy and resource conservation”, and are marketing “environmentally friendly products”.

Under such circumstances, enterprises are not only developing more environmentally friendly products, but are also working on the reduction of environmental impacts with measures of environmental management. Material flow cost accounting (MFCA) had been promoted in Japan since the year 2000 in order to increase resource productivity, originally based on a German idea (Strobel and Redmann, 2000, Strobel and Redmann, 2001).¹ MFCA is an environmental management accounting method that simultaneously pursues the reduction of environmental impact and reduction of cost. MFCA has been globally used and recognized as one of the most useful environmental management accounting method (see Burritt and Saka, 2006, Onishi et al., 2008, Herzig et al., 2012, Schmidt and Nakajima, 2013, Fakoya and Margaretha van der Poll, 2013). Public recognition in Japan and abroad has grown since the publication of the international standard on MFCA, ISO 14051, in September 2011 and its Japanese adaption, JIS Q14051,² in March 2012 (ISO, 2011). Since then the concept of MFCA has been further developed both theoretically and methodologically. Its scope has been widened from MFCA procedures within individual enterprises to the extended accounting of material flows along entire SCs (supply chains) (METI, 2011, 109–122).³

Public awareness and political programs to reduce environmental burdens presently focus strongly on the reduction of CO₂ emissions, pinpointing emissions of CO₂ and other greenhouse gases as (one of) the dominant factors of environmental impact. A major challenge therefore seems to be to promote environmental management systems that target a low-carbon economy. While MFCA in its initial stages concentrated mainly on the analysis of, and measures within, single companies, it is also expected today to find additional, perhaps even higher potentials for carbon reduction along the SC (supply chain) by making use of synergetic optimization and cooperation within the SC network.

The present paper therefore evaluates, first, existing SCs from the perspective of a low-carbon approach, by applying MFCA, and investigates management mechanisms targeting a low-carbon SC. The present paper will try to define the requirements for a low-carbon SC, including the upstream and downstream enterprises in the scope of the evaluation, along with one's own company, by sharing CO₂ emission information among these enterprises (Kokubu et al., 2012). The paper will discuss how low-carbon SCM (supply chain management) might be planned, executed, and controlled in order to construct a low-carbon SC.

First, the relationship between buyers and suppliers with respect to low-carbon SCM is examined. Subsequently, the challenges in introducing MFCA in SCM are identified based on a questionnaire study carried out with domestically listed Japanese companies in February 2012. Finally, the implications and challenges for future research are discussed.

Section snippets

Visualizing material losses

MFCA quantifies material loss in relation to a product or a production process. MFCA carries out a cost evaluation of that material loss using production cost information, and is used as management accounting information to increase resource productivity. The reduction of material loss simultaneously decreases environmental impact and cost, and decreasing the amount of input material or the amount of energy used can help construct a low-carbon SC. MFCA is therefore not only a cost control tool,

Overview of the questionnaire research

In Japan, initial research on low-carbon SCs has been conducted by Kajiwara and Kokubu (2012), according to whom the status and form of the business relationship between buyer and supplier and the purchasing department's goals have a major impact on the promotion of low-carbon SCM. In their survey, Kajiwara and Kokubu (2012) were first able to show the determining factors of low-carbon SCM. The results of their study thus served as a fundamental information to the present paper, which was

Performance evaluation indicators of the purchasing department

First, the priorities of criteria to select suppliers were considered. The previously considered criteria on delivery, cost, and quality were completed by an additional performance indicator on environment. According to Table 3 and Fig. 3, quality clearly ranked top as a performance indicator to select a supplier, while the number of enterprises that select according to environmental performance was negligible.

While the purchasing departments declare quality to be the most important performance

Closing remarks

The present questionnaire study found that the costs of purchased material are seen as the dominant performance indicator by purchasing departments when dealing with suppliers. Also, it is clear that under the present conditions companies tend to build up long-term relationships with suppliers, and enterprises that have information on the suppliers' material yield often undertake improvement activities by collaboration.

This sets the framework when introducing MFCA into SCs with the objective of

Acknowledgments

This research was partially supported by the Environmental Research and Technology Development Fund (E-1106) of the Ministry of the Environment, Japan, and KAKENHI (25380629), Grant-in-Aid for Scientific Research (C), Japan.

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Introduction of material flow cost accounting (MFCA) to the supply chain: a questionnaire study on the challenges of constructing a low-carbon supply chain to promote resource efficiency

Abstract

Introduction

Section snippets

Visualizing material losses

Overview of the questionnaire research

Performance evaluation indicators of the purchasing department

Closing remarks

Acknowledgments

J. Clean. Prod.

Int. J. Prod. Econ.

J. Clean. Prod.

J. Clean. Prod.

J. Clean. Prod.

Japanese Corporate Organizations: Mechanisms for Innovative Adaptation

Supply Chain Development for the Lean Enterprise – Inter-organizational Cost Management

Guide to Corporate Environmental Cost Management

The profitability and pricing of major customers

Rev. Acc. Stud.

Environmental Management Accounting; Case Studies in South-east Asian Companies

Expansion of material flow cost accounting to supply chain

Accounting

ISO 14051 Environmental Management – Material Flow Cost Accounting – General Framework

Environmental and Material Flow Cost Accounting: Principles and Procedures

Factors influencing low-carbon supply chain management: centered on buyer supplier relationship

J. Econ. Bus. Admin.