lable at ScienceDirect

Journal of Cleaner Production xxx (2014) 1e12

Contents lists avai

Journal of Cleaner Production

journal homepage: www.elsevier .com/locate/ jc lepro

Review

Material flow cost accounting: a review and agenda for future research

Katherine L. Christ a, *, Roger L. Burritt b

a Centre for Accounting, Governance and Sustainability, School of Commerce, University of South Australia, GPO Box 2471, Adelaide, SA 5001, Australiab Department of Accounting and Corporate Governance, Macquarie University, Sydney, NSW 2109, Australia

a r t i c l e i n f o

Article history:Received 28 November 2013Received in revised form30 August 2014Accepted 2 September 2014Available online xxx

Keywords:Material flow cost accountingMFCAResearch agendaISO 14051Environmental management accountingReview

* Corresponding author. Tel.: þ61 410 468 523; faxE-mail addresses: chrkl002@mymail.unisa.edu.au

mq.edu.au (R.L. Burritt).1 Environmental Management Accounting being th

integration of physical environmental information ining system. EMA incorporates a variety of tools thatpast or future-oriented; routinely generated or produfinally, they can have either a short or long-termcoverage of available options readers are advised to c

http://dx.doi.org/10.1016/j.jclepro.2014.09.0050959-6526/© 2014 Elsevier Ltd. All rights reserved.

Please cite this article in press as: Christ, K.Cleaner Production (2014), http://dx.doi.org

a b s t r a c t

Recent times have seen the business world challenged to improve efficiency by reducing its material andenergy usage. Material flow cost accounting has been suggested as a management tool that can assist anda new international environmental management accounting standard, ISO 14051, has emerged forconsideration by business. This paper presents a review of extant MFCA literature, the purpose being todevelop a research agenda which will provide a foundation for future development of the material flowcost accounting tool. Concerns are raised about the absence of theorising behind material flow costaccounting; the lack of knowledge and application of the tool in practice; the need for survey, interviewand statistical research methods to supplement case studies; lack of systematic evidence of the tool'sapplicability beyond manufacturing and in different firm sizes; and complementarity with other ac-counting tools used to improve performance. An agenda identifying promising avenues for research, thescope of application within companies and broadening of methods for investigation is then outlined.

© 2014 Elsevier Ltd. All rights reserved.

1. Introduction

With increasing “pressure to achieve higher productivity withreduced environmental impacts”, business organisations requireaccess to tools that enable them to account for all inputs and out-puts to their operations with a view to supporting eco-efficientdecisions that simultaneously improve economic and environ-mental performance (Kokubu and Tachikawa, 2013, p. 351). Mate-rial flow cost accounting (MFCA) has been suggested as one suchtool that can support eco-efficient decisions. The potential impor-tance of MFCA has been further recognised with the release inSeptember 2011 by the International Organization for Standardi-zation (ISO) of the ISO 14051 standard for material flow costaccounting.

MFCA has been described as among the most basic Environ-mental Management Accounting (EMA) tools1 (Jasch, 2006;Schaltegger and Wagner, 2005). The data afforded by MFCA also

: þ61 8 830 20992.(K.L. Christ), roger.burritt@

e term used to describe theto the management account-can be physical or monetary;ced on an ad-hoc basis; and,focus. For a comprehensiveonsult Burritt et al. (2002).

L., Burritt, R.L., Material flow/10.1016/j.jclepro.2014.09.005

provides a foundation for the development of further environ-mental management accounting activities which may include in-vestment appraisal, environmental impact assessment and shortand long term environmental budgeting (Burritt and Schaltegger,2001; Jasch, 2006; ISO, 2011). Based on these arguments it wouldbe reasonable to assume knowledge concerning MFCA would (orshould) be among the most developed topics within the EMAliterature. However, a review of available publications suggests thatdespite 15 years research in this field, there remain more questionsthan answers.

To date, extant research on MFCA has been predominantlyconceptual. Although limited case studies do exist, these are largelyaction-based projects in which experienced researchers played acentral role in facilitating the adoption and implementation process(Heupel andWendisch, 2003; Jasch, 2006; Nakano and Hirao, 2011;Schaltegger et al., 2012). Furthermore, even in the presence ofexperienced researchers it may be difficult to convince managers ofthe merits associated with MFCA activity. For example, at theMackenzie Paper Division paper mill in Canada, Gale (2006) foundthat while an MFCA approach revealed environmental expenses tobe more than double what would usually be reported in thefinancial statements, management remained unconvinced of themerits associated with EMA in general and argued that the orga-nisation was already efficient.

While the normative origins associated with MFCA are notproblematic in and of themselves it can be argued that, if the takeup of MFCA by business is to improve, it is now necessary to

cost accounting: a review and agenda for future research, Journal of

2 ‘Materials’ in this context is generally held to include energy and water (ISO,2011, p. 3).

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establish what is currently known about the direction of researchon the topic. This knowledge can then be used to inform thedevelopment of a pragmatic research agenda. With the release ofISO 14051 the future is likely to see increased interest inresearching MFCA techniques. In order to be effective it is impor-tant this research be placed in the context of what is already knownand what needs to be known. Accepting that contemporary orga-nisations require access to management tools that supportimproved resource efficiency and reduced environmental impact,this paper utilises a literature review to develop a greater under-standing of MFCA, the purpose being to develop a research agendaby which knowledge can be improved and the implementation ofMFCA activities by organisations further promoted and improved.

The remainder of the paper is arranged as follows. The nextsection provides a basic overview of what MFCA is and places it inthe context of more generic EMA knowledge and development.Section 3 discusses the method used to undertake the literaturereview. Section 4 covers the development of MFCA as a manage-ment tool. This is followed by section 5 in which the MFCA processis discussed. Empirical evidence concerning MFCA in practice issynthesised in Section 6, with Section 7 summarising what iscurrently known on the topic with a view to identifying what needsto be known via the presentation of a research agenda. Section 8then concludes the paper.

2. What is material flow cost accounting?

The purpose of this section is to provide a basic overview ofmaterial flow cost accounting. The discussion will commence withbrief mention of EMA as the larger discipline from which MFCAemerged and is closely aligned. This is followed by a basic overviewof MFCA and what the practice entails with the research questionpresented towards the end of the section.

2.1. Generic environmental management accounting background

With population growth and increased demand for finite re-sources in the face of an often limited supply, recent years haveseen mounting interest in developing business tools that supporthigh levels of productivity while simultaneously minimisingresource use and adverse environmental impacts. The need for amore integrated approach to corporate economic and environ-mental management led to the development in the 1990s ofEnvironmental Management Accounting (EMA) (Christ and Burritt,2013). EMA provides a starting point to redress the oft citedshortcomings associated with traditional management accountingwhich has been criticised for its failure to explicitly considerenvironmental information; a situation which may lead to flawedconclusions (de Beer and Friend, 2006; Godschalk, 2008;Schaltegger and Burritt, 2000; Tsai et al., 2012). Thus EMA offersorganisations an information system in which physical and mon-etary data concerning how business activities impact on, and areimpacted by, environmental issues is explicitly considered (Burrittet al., 2002). The further relevance of EMA to business becomesclear upon reviewing extant case studies presented in the academicand professional literature in which the potential for cost savings,more efficient material use, and increased revenue streams havebeen consistently supported (Altham, 2007; Burritt et al., 2009; deBeer and Friend, 2006; Deegan, 2003; Ditz et al., 1995; Schalteggeret al., 2012; V�an and G€artner, 2011).

The last two decades have seen the EMA literature develop toincorporate a number of different tools. Lang et al. (2005) suggestMaterial Flow Cost Accounting (MFCA) is among the most funda-mental and well-developed of these. The recently released ISO14051 standard defines MFCA as a “tool for quantifying the flows

Please cite this article in press as: Christ, K.L., Burritt, R.L., Material flowCleaner Production (2014), http://dx.doi.org/10.1016/j.jclepro.2014.09.005

and stocks of materials in processes or production lines in bothphysical andmonetary units” (ISO, 2011, p. 3).2MFCA is underpinnedby the premise that all materials purchased by an organisationmusteventually leave as either product or waste, also referred to as non-product output or negative product (Fakoya and van der Poll, 2013;Jasch, 2009), and Jasch et al. (2010) describe MFCA as the startingpoint for the implementation of EMA activities.

2.2. A basic overview of MFCA

MFCA incorporates two distinct elements: physical and mone-tary. Within the EMA literature, MFCA falls within the group oftools that come under the umbrella term ‘environmental cost ac-counting’ (Papaspyropoulos et al., 2012). As with environmentalcost accounting, although generally classified as a monetary EMAtool, MFCA relies on access to “corresponding physical information”but specifically “ about materials and energy flows” and is usuallyclassified as past-oriented with a focus on short-termmanagement(although the information provided by MFCA can be used to sup-port the implementation of other future-oriented EMA tools suchas various forms of environmental budgeting) (Bennett et al., 2013,p. 8; Burritt and Schaltegger, 2001;Wendisch and Heupel, 2005). Inaddition, the information made available via implementation of anMFCA system is expected to be generated on a routine basis (forfurther information, please refer to the comprehensive frameworkfor EMA presented in Burritt et al., 2002).

Jasch (2011, p. 256) submits the reason EMA places especialemphasis “on the use, flows and final destiny of energy, water,materials and wastes” is because “(1) use of energy, water andmaterials, as well as the generation of waste and emissions, aredirectly related to many of the environmental impacts of organ-isational operations; and (2) materials purchase costs are a majordriver in many organisations”. Thus by focussing on material andenergy flows, as well as their related costs, MFCA provides afoundation by which opportunities for improved eco-efficiency areable to be more clearly articulated and understood (Scavone, 2006).In addition, prior research has shown the costs associated withwasted materials can amount to as much as 40e70% total envi-ronmental expenses for individual organisations; environmentalexpenses being defined as those business expenses that are asso-ciated with impacts on the environment which includes the cost ofenvironmental protection (Bautista-Lazo and Short, 2013; Jasch,2009). In consequence, it can be argued the effective manage-ment of material and energy flows constitutes an important un-dertaking for contemporary organisations, both economically andenvironmentally.

2.3. Context of the research and research question

Yet despite the arguments presented in the preceding para-graphs, knowledge concerning MFCA in practice remains under-developed. Furthermore, a comprehensive agenda to guide currentand future research in this area has yet to be developed. Thus thepurpose of this paper is to provide a synthesis of current knowledgeconcerning MFCA and to present a number of directions for futureresearch bywhich knowledge can be advanced and the further takeup of MFCA by business promoted and improved. In doing so thefollowing research question will be addressed: (RQ1) How can ac-ademic research be used to further understanding of current MFCAdevelopment? The next section will discuss the method used toinvestigate this research question.

cost accounting: a review and agenda for future research, Journal of

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3. Method

In order to investigate the research question presented in Sec-tion 2, this study utilised a review of extant MFCA literature. Insummary, the purpose of the research was to review, critique, andsynthesize “representative literature on a topic […] such that newframeworks and perspectives on the topic are generated” (Torraco,2005, p. 356; Neuman, 2006). Torraco (2005, p. 363) suggests thatamong the primary reasons for undertaking a literature review is todevelop and present “a research agenda that flows logically fromthe critical analysis of the literature” and it was with this purpose inmind that the current study was undertaken (also see Neuman,2006).

Literature for inclusion in the review was sourced from thefollowing databases: Science Direct, EBSCO, Emerald ManagementPlus, JSTOR, ProQuest, SpringerLink, Taylor and Francis and WileyInterscience. Given the emerging and contemporary nature ofMFCA as a topic, keyword searches were limited to ‘material flowcost accounting’, ‘flow cost accounting’, ‘ISO 14051’ ‘material andenergy flow cost accounting’, ‘energy flow cost accounting’ and‘MFCA’. Database search tools were set to order references based onrelevance to these search terms.

The resources identified via the aforementioned means werefurther supplemented with official documents from governmentand non-government organisations in which MFCA was among theprimary concerns. These references include resources from TheInternational Organization for Standardization (ISO), Federal Min-istry for the Environment in Germany, Ministry of Economy, Tradeand Industry (METI) in Japan, and the International Federation ofAccountants (IFAC).

Once identified the academic references were subjected to apreliminary word search in line with the keywords provided above.This undertaking was used for the purpose of screening and toensure reference to MFCAwas not limited to a passing comment ora sole item located within the reference list. Any documentsdeemed irrelevant to the topic on this basis were discarded. Uponcompletion of this process the remaining resources were read infull with relevant data documented against individual references intable format. The information gleaned from this process allowed acomprehensive understanding of the topic to be developed whichprovides the foundation for the information presented in theremainder of this paper.

In order to appreciate how academic research can be used to aidunderstanding of current MFCA development it is necessary to firstunderstand what MFCA is, how the practice developed and thesteps involved in the implementation process. This information isrequired to contextualise the empirical evidence on the topic whichis addressed later in the paper. Hence the following section willcommence the review by considering the development of MFCA ingreater detail.

4. The development of MFCA as a management tool e a briefoverview

MFCA was developed in the late 1990s by the Institut fürManagement und Umwelt (IMU)3 in Augsburg, Germany, under thename ‘flow cost accounting’ (Federal Ministry for the Environment,2003; METI, 2007). The potential relevance of the practice tomanufacturing concerns attracted the attention of Japanese au-thorities and in 2000 the Japanese Ministry of Economy, Trade, andIndustry (METI) began promoting a modified version of MFCA tothe Japanese business sector (Kokubu and Tachikawa, 2013). An

3 Institute of Management and the Environment.

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important element of this process was the ‘Environmental Man-agement Accounting Promotion Project’which commenced in 1999(Onishi et al., 2009). The Japanese effort culminated with therelease of a Guide for Material Flow Cost Accounting published byMETI in March 2007 (METI, 2007). To date, while it can be arguedGermany and Japan have been the prime instigators at the forefrontof global MFCA development, interest in the practice is growing andemanating from regions as diverse as Europe, Asia, the Middle Eastand North America (Jasch and Savage, 2008; Jindrichovska andPurc�area, 2011; Kokubu and Tachikawa, 2013).

The Japanese and German versions of MFCA are often discussedseparately within extant literature. It is possible this situation isattributable to the difference in system boundaries recommendedunder each approach. The Japanese version, for example, has pri-marily been concerned with product lines or processes (IFAC,2005). The German version, on the other hand, is more interestedin facility wide management (IFAC, 2005). Nonetheless, it can beargued recent years have seen a more pragmatic stance on the partof MFCA advocates and there is now greater acceptance that thesystem boundaries associated with any MFCA experiment willlikely be determined by both organisational circumstance and theunderlying reasons for implementation (Kokubu and Tachikawa,2013). Furthermore, regardless of the level at which MFCA isimplemented (company, facility, cost centre, process or product),the underlying principles will remain essentially unchanged (Jasch,2003b). While MFCA can undoubtedly be implemented at differentorganisational levels, it has been suggested that initial adoption ismore usual at the company level given this form of aggregate data ismore readily available in most operations (Jasch, 2003b).

Recent years have seen even further development in MFCA. Inparticular the success of the practice when applied to Japanesecompanies became the catalyst in 2008 for a submission by theJapanese Industrial Standards Committee (JISC) to the InternationalOrganization for Standardization. A working group was subse-quently created with the culmination of their efforts being therelease in September 2011 of the first edition of ISO 14051: MaterialFlow Cost Accounting (Kokubu et al., 2009; Trappey et al., 2013).Countries involved with the development of this standard include:Japan, Germany, Brazil, The United Kingdom, Finland, Malaysia,Mexico and South Africa (Schmidt and Nakajima, 2013). In linewiththe published preamble, the overarching aim of ISO 14051 is to“offer a general framework for material flow cost accounting” (ISO,2011, p. v). In addition, ISO 14051 provides information concerningcommon terminologies, objectives and principles, fundamentalelements and an overview of the MFCA implementation process(ISO, 2011, p. v).

In keeping with more recent publications ISO 14051 placesespecial emphasis on the universal applicability of MFCA to busi-ness (Kokubu and Tachikawa, 2013). While it can arguably becontended MFCA is likely to be more useful to organisationsinvolved with the manufacture of physical products (IFAC, 2005),there is growing consensus the practice can also be applied in non-manufacturing settings which include organisations located ineither the service or not-for-profit sectors (Jasch, 2009;Papaspyropoulos et al., 2012). Indeed, ISO 14051 argues “MFCA isapplicable to any organization that uses materials and energy,regardless of their products, services, size, structure, location, andexisting management and accounting systems” (ISO, 2011, p. 1).

Finally, as with EMA, MFCAwas developed primarily to evaluatematerial flows within individual organisations, the purpose beingto support eco-efficient decisions that enhance resource efficiencyand simultaneously improve the economic and environmentalperformance of the entity (METI, 2007). However, in more recentyears there has been growing interest in howMFCA techniques canbe extended to assist with supply chain management (Jasch, 2011;

cost accounting: a review and agenda for future research, Journal of

Fig. 1. The MFCA process.

K.L. Christ, R.L. Burritt / Journal of Cleaner Production xxx (2014) 1e124

Jindrichovska and Purc�area, 2011; METI, 2007; Schrack andPrammer, 2013). For example, between 2008 and 2011 the Japa-nese METI conducted a project examining this potential by intro-ducing MFCA into 50 supply chains (Kokubu and Tachikawa, 2013).The capacity to extend MFCA to include both up and downstreamsupply chain partners has also been explicitly recognised in therecently released ISO 14051 standard (ISO, 2011).

As can be seen from the preceding paragraphs, the last 15 yearshave witnessed the rapid development of MFCA techniques. How-ever, in order to place extant evidence on the topic into context, it isnecessary to first provide a brief overview of the basic MFCA pro-cess. Such an overview is provided in the following section.

4 Readers interested in obtaining a further understanding of these cost categoriesare advised to consult ISO 14051 (ISO, 2011), Jasch (2009) and METI (2007).

5. The MFCA process

Despite minor differences in terminology and the systemboundaries used, the process of implementing MFCA has beenconsistently represented in extant literature. For ease of under-standing a flow chart displaying the main steps involved in thisprocess is provided in Fig. 1. Once an appropriate system boundaryhas been agreed, it is widely accepted the first step in implementingany MFCA experiment is to develop a basic understanding of theflows of material and energy throughout the organisation. This isachieved via a visual representation commonly referred to as a‘flow model’ (Kokubu and Tachikawa, 2013; Scavone, 2006; Strobeland Redmann, 2002). Flow models are essentially a heterogeneousdepiction of organisational processes and, as such, each model willdiffer according to the specific activities in which individual orga-nisations are engaged. Furthermore, while flow modelling repre-sents an important step in the implementation of MFCA, Heupeland Wendisch (2003) suggest the construction of a flow modelmay even be a catalyst for organisational improvement when usedin isolation from additional action. Indeed, this information can beused as the basis for undertaking material or substance flow anal-ysis which, while lacking a monetary element, may assist inimproving the organisation's environmental performance. Whilethere are numerous software packages that can be used for thepurpose of constructing a flow model, Kokubu and Tachikawa(2013) suggest computer generated models are not essential withmanual representations assembled using paper or post-it notesoften equally effective.

Once the flow model is complete the next step incorporatesassigning values representing the amount of materials and energythat pass through or are stored within each step in the flow model.While it is clearly desirable to use actual figures for this purpose, it

Please cite this article in press as: Christ, K.L., Burritt, R.L., Material flowCleaner Production (2014), http://dx.doi.org/10.1016/j.jclepro.2014.09.005

is widely accepted that in cases where tangible quantities are un-available estimates can provide a suitable proxy provided there isno reason to suspect excessive inaccuracy (METI, 2007). Regardlessof how these values are obtained, it is important that all items beconverted into comparable measurement units (for example kilo-grams) necessary for the next step in the MFCA process.

The purpose for assigning values to the flow model is to estab-lish a material balance also referred to as a mass balance,inputeoutput balance or an eco-balance (IFAC, 2005). As noted inISO 14051 (ISO, 2011, p. 5):

Because mass and energy can neither be created nor destroyed,only transformed, the physical inputs entering a system shouldbe equal to the physical outputs from the system, taking intoaccount any inventory changes within the system.

The notion of a ‘balance’ described above borrows heavily fromthe law of conservation in physics (Huang et al., 2012; Victor et al.,1998). Thus, energy and mass are never lost and there is a well-established scientific basis for the development of a materialsbalance and it is important that any significant gaps in this data beinvestigated.

Once the material balance is complete it is necessary to assignmonetary values for every input and output contained for each stepin the flow model. MFCA has come to recognise several categoriesof costs. These include: material costs; system costs which incor-porate the expense associated with handling materials and energyin-house and includes labour, depreciation and transport costs; andfinally, waste management costs (Kasemset et al., 2013).4 There issome debate concerning the best way to account for energy withsome authors advocating recognition within a separate cost cate-gory, however, this decision is generally left to the discretion ofindividual organisations (Jasch, 2011; METI, 2007). Indeed, a 2005study by Kokubu and Nashioka reports organisations are morelikely to consider energy costs in their environmental accountingactivities as opposed to generic material costs (Kokubu andNashioka, 2005).

Further to the more basic issues associated with material useand cost allocation, ISO 14051 also includes explicit guidanceconcerning how to deal with costs that are carried from one

cost accounting: a review and agenda for future research, Journal of

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quantity centre5 to another (i.e. when output from one quantitycentre becomes an input for another) (ISO, 2011). This standardalso covers the treatment of internally recycled materials. The lastpoint is especially pertinent as materials that are recycled orreused within the system boundary limit the production of wasteas well as reduce the need for virgin resources. Therefore, inter-nally recycled materials can have a positive impact on both theeconomic and environmental performance of the entity (Jasch,2009; Sarkis, 2012). A common example of a material that isrecycled in this way is water which can sometimes be used forseveral processes, provided a certain level of quality is maintained,before leaving the system as wastewater. The above said, ISO 14051maintains that the fact materials have to be recycled at all repre-sents evidence of inefficiency within the original process (ISO,2011). Nonetheless, it is acknowledged the realisation of zero-waste is not always possible and as such the development of aclosed-loop system that limits demand for resources is likely topresent the most realistic option for many entities (Burritt et al.,2009; Jasch, 2009; Staniskis, 2012).

While the development of a mass balance flow model and theallocation of relevant costs are without doubt important stepswithin the MFCA process, they are not an end in themselves. Thus itis necessary for management to summarise, evaluate and interpretthese results. It is also important that this data be communicated torelevant managers and staff who are likely to be familiar with theactivities undertaken within individual cost/quantity centres. Oncethis is done potential improvement opportunities can be identifiedand appropriate action taken (ISO, 2011; Schaltegger and Csutora,2012). It is then necessary to re-evaluate material flows, stocksand costs on a regular basis as this allows for the comparison ofplanned activities to actual results, as well as facilitating a programfor continuous improvement which will improve eco-efficiency,and reduce both costs and adverse environmental impacts (Lang-Koetz et al., 2006; METI, 2007). This may involve the use of envi-ronmental budgeting or environmental key performance indicators(KPIs) (Burritt and Schaltegger, 2001; Schaltegger et al., 2012). Theaforementioned process is well articulated in ISO 14051 which, likemany other standards within the ISO 14000 and 9000 series, en-courages commitment to a PDCA cycle of continuous improvement(ISO, 2011; Kokubu et al., 2009).6

In summary, when used in conjunction with appropriate plan-ning and a program for continuous improvement, the preparationof a flow model, quantification of material and energy inputs,outputs and stocks, and allocation of relevant costs as requiredunder MFCA seeks to serve several important purposes. These mayinclude:

� Allowing areas of inefficiency to be identified and understood;� Improved efficiency and a reduction in direct material costs;� A reduction in the amount of waste generated and reducedecological impact;

� A reduction in other manufacturing costs (e.g. waste handling,treatment and associated infrastructure costs);

� More accurate product costing;� Incentives for innovation;� Improved inter-departmental communication concerningresource use; and

� Improved management control.

5 A ‘quantity centre’ is defined in the ISO 14051 standard as “selected part of partsof a process for which inputs and outputs are quantified in physical and monetaryunits” (ISO, 2011, p. 4).

6 PDCA is an acronym which represents Planning, Doing, Checking and Acting(ISO, 2011).

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(IFAC, 2005; Kokubu and Tachikawa, 2013; METI, 2007; Onishiet al., 2009; Scavone, 2005; Schaltegger et al., 2002, 2012;Scheide et al., 2002).

Drawing on the list of potential benefits presented above, thereseems ample incentive for business entities to engage with MFCA.Nonetheless it has also been observed that take up of the tool inpractice has generally been quite limited. In order to understandthis paradox there is a need to consider existing studies and theresults from empirical investigation.

Before proceeding it should be clarified that the main purpose ofthis section was to provide an overview by which the ensuingdiscourse can be more easily understood by those unfamiliar withMFCA and its development. Readers interested in a more detailedunderstanding of the MFCA process than that provided here areadvised to consult one of the many publications available on thetopic (e.g. ISO, 2011; Jasch, 2009; METI, 2007). The following sec-tion will now extend the review by considering extant evidence ofMFCA in practice, the purpose being to determine patterns inadoption, shortcomings in current knowledge and areas in whichfurther information is required to move the understanding of MFCAforward. This informationwill then be used to inform developmentof the research agenda which is presented in Section 7.

6. Empirical evidence on MFCA in practice

As previously suggested, thus far empirical evidence concerningMFCA in practice has primarily centred on action-based projects. Inthis context ‘action-based’ is used to describe study in which theprincipal researchers have taken an active role in providing theexpertise and oversight required for the development of MFCAwithin the organisation(s) being studied. It can be argued this is notunexpected given the contemporary and somewhat normativenature of the MFCA literature. Nonetheless, in order to move theMFCA agenda forward, organisations need to be sufficientlyconvinced on the merits of the practice and prepared to pursueimplementation in the absence of academic assistance. In order tounderstand how this can be achieved empirical evidence isrequired and there remain many questions in need of answers.Hence this section presents an overview of prior research, which ispredominantly case-based.

Although the purpose of this section was to provide a detailedoverview of current work in the MFCA area, the discussion alsocomes with a caveat. The literature reviewed for this paper waslimited to those studies available in English. While acknowledgingadditional publications may exist, especially in German and Japa-nese, these resources were not considered within this review.

6.1. Evidence of low engagement in practice

The first thing that becomes apparent upon reviewing theliterature is that, thus far, essentially all empirical work has beenconfined to action-based case studies. Indeed, the authors wereunable to locate a single survey or interview-based quantitative orqualitative study in which MFCA was the primary focus. Survey-based research in which MFCA is mentioned has been primarilyconcerned with attempts to establish knowledge and the use ofEMA tools in general. For example, a 2005 survey of Japanesecompanies conducted by Kokubu and Nashioka (2005) revealedthat, although 73.5% of companies had knowledge of MFCA as anEMA tool, only 6.5% had partially implemented it in their opera-tions, and none had totally implemented the practice (n ¼ 185,response rate ¼ 21.27%). The authors attribute the high awarenessof MFCA among business to publicity efforts in Japan undertaken byMETI. Nonetheless, it is of concern that so few organisations hadstarted experimenting with MFCA.

cost accounting: a review and agenda for future research, Journal of

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In contrast, a German study conducted in 2010 by Schalteggeret al. (2011) revealed that only 51.6% of study respondents re-ported knowledge of material flow analysis (MFA) and, of these,only 56.3% actually applied the technique within their businessoperations (n ¼ 31, response rate ¼ 25.8%). Interestingly, thesefigures represent a relative decrease of 33% and 32% from a similarstudy undertaken in 2002 (n ¼ 44, response rate ¼ 36.7%). Thesefindings may offer support for the observation of Schmidt andNakajima (2013) who suggest that since the state promotion offlow cost accounting was phased out in Germany, the technique hasbecome obsolete and is hardly used. Furthermore, it is possibleMFA(and subsequently MFCA given MFA constitutes a necessary pre-cursor to MFCA activity) may be less prominent in respondentcompanies, not because the technique itself is not useful, butbecause organisations do not know it exists. While certainly notencouraging, the results from the aforementioned studies are alsoconsistent with Australian evidence collected by Burritt andTingey-Holyoak (2012). In reporting on a survey of professionalaccounting firms located in South Australia, these researchersfound that while 50% of the sample report using sustainability-related cost accounting, not one used MFCA (Burritt and Tingey-Holyoak, 2012) (n ¼ 12, response rate ¼ 10%). Dobes (2013, p.255), in discussing a Czech initiative, concurs suggesting fewcompanies monitor the “efficiency of energy usage and materialflows within their processes” and, as a result, have difficulty inmanaging their resource efficiency.

The evidence presented above suggests MFCA may not be a toolthat is able to sell itself in the manner suggested within thenormative literature. Furthermore, even when organisations knowabout MFCA, this does not guarantee they will adopt the practice.Interestingly, Schaltegger et al. (2011) suggest knowledge andapplication may in fact be closely related and present evidence thatthe more well-known an environmental accounting tool is, thegreater the likelihood of adoption (i.e. the knowledge-applicationgap becomes smaller). This observation is consistent with theliterature on diffusion of innovation (Rogers, 2003). Nonetheless,the nature of this relationship when applied specifically to MFCAcannot be assumed and further investigation is required.

6.2. Case-based research

Extant survey-based evidence from generic EMA studies doesnot present an overly positive picture for those who would advo-cate for the increased implementation of MFCA by business. Yetthese findings are in stark contrast to the generally positive resultsreported in the action-based case research upon which most of theMFCA literature is based. Since the early 2000s the literature hasconsidered case studies in which the integration of cost informa-tion with flow management techniques has been examined. Thesecase studies generally present arguments related to the significanceof costs associated with residual materials and substances that arenot turned into products (Scheide et al., 2002; Thurm, 2002).Empirical evidence suggests the monetary cost associated withnon-product output can be as high as 90% of an organisation's totalenvironmental expense (Gale, 2006; Jasch et al., 2010; Jasch andDanse, 2005; Jasch and Lavicka, 2006). When taken in light ofprevious evidence which has found areas of environmentalexpense can be as high as 22% of total operating costs (Ditz et al.,1995), the potential benefit associated with controlling and/orreducing non-product output is expected to be significant in manycompanies (Burritt, 2004; Jasch and Lavicka, 2006).

Existing case studies demonstrate substantial potential for or-ganisations to reduce their overall environmental expenses via amore systematic approach to flow cost accounting (Kokubu andTachikawa, 2013). While many studies empirically support the

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potential for significant cost reductions and environmental im-provements through what is commonly referred to as “goodhousekeeping” activities (Jasch and Danse, 2005, p. 362; Scavone,2006), in certain cases it may also be necessary to consider thepotential benefit that may accompany investment in new capitalequipment (Kokubu and Tachikawa, 2013). For example, in a casestudy from Argentina, Scavone (2006, p. 1285) shows how MFCAled a sugar cane company to invest USD 350,000 in new equipmentto improve efficiency. As a result of this decision the company wasable to save USD 72,000 each year with the overall payback periodbeing five years. Staniskis and Stasiskiene (2006) also offer Lithu-anian evidence from a number of case studies in which it is clearlyshown that capital investment in cleaner production generallyresulted in vastly improved economic and environmental perfor-mance with all items having payback periods of 3 years or less (alsosee Staniskis and Stasiskiene, 2005). Moreover, beyond the merepurchase of new equipment, Hyr�slov�a et al. (2011) suggest MFCAmay even provide a catalyst for the development of new and moreefficient technologies.

As can be gathered from the preceding discussion, much of thecurrent work investigating MFCA has been concerned withmanufacturing operations and, in cases where flow charts areprovided, these generally represent a simple linear manufacturingprocess, i.e. materials in, work in process, waste and product out(for example, see Heupel and Wendisch, 2003; Staniskis andStasiskiene, 2006; Schaltegger et al., 2012). While these studiesare no doubt important, they do little to demonstrate whetherMFCA is useful in non-manufacturing settings and, if so, howMFCAcan best be applied in these organisations. When viewed in light ofarguments that MFCA can be applied in any business that uses en-ergy or materials (ISO, 2011; Jasch, 2009), the lack of data on mul-tiple sectors would appear to represent a major shortfall in currentknowledge.

As discussed in the previous paragraph, to the current timeMFCA has been primarily applied in the manufacturing sector(Papaspyropoulos et al., 2012). Nevertheless, it has also been sug-gested MFCA can be applied in both the service and not-for-profitsectors (Jasch, 2011; Papaspyropoulos et al., 2012). While thismay be true, evidence to support this proposition with regard toeither sector is not well developed. One notable exception is thestudy of Papaspyropoulos et al. (2012) which considers the case ofthe Hunting Federation ofMacedonia and Thrace (HFMT), a not-for-profit organisation located in Greece. The authors conclude thatMFCA “can support the operation of the sector and provide usefulindications for […] policy decisionmaking” (Papaspyropoulos et al.,2012, p. 141). Recommendations were also made to complementthe use of environmental cost accounting and MFCA in the caseorganisation with additional EMA tools, in particular those with afuture-oriented and/or long-term focus.

6.3. How is MFCA implemented in practice?

The actual manner of MFCA implementation is another arearequiring further study. To date, while European studies havegenerally advocated company-wide application and the integrationof MFCA data into existing practice via advanced IT options andEnterprise Resource Planning (ERP) systems (an approach also seenin select Japanese case studies (Onishi et al., 2009) and morerecently in research to emerge from South Africa (Fakoya and vander Poll, 2013)), it is accepted not all organisations have access tosuch sophisticated systems. For example, Heupel and Wendisch(2003) discuss the implementation of flow cost accounting in agroup of SMEs (small and medium-sized enterprises) and concludethe practice can be applied using more simple programming sys-tems. This was noted as being especially important in countries like

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the Czech Republic and Poland where, as of 2003, as few as 15% ofall SMEs had access to ERP technology (Heupel and Wendisch,2003).

Deegan (2003) also observed the potential role for flow costaccounting in SMEs. This potential was specifically demonstrated ina project undertaken in collaboration with the Institute of Char-tered Accountants in Australia and EPA Victoria, in which EMApractices were introduced in four different case organisations, all ofwhich included some form of material flow analysis and environ-mental costing. Like Heupel and Wendisch (2003), Deegan (2003)advocates the potential importance of flow cost accounting inSMEs and also makes the following observation:

Existing accounting systems might be well accepted and havebeen in place for many years, and therefore it is important thatthe strengths and weaknesses of existing systems are knownbefore suggesting changes. What was found to be useful was toconstruct diagrams to understand how costs are currently beingallocated or treated. It was useful to then ask: does what iscurrently being done from an accounting perspective actuallymake sense if one also considers the physical flow of resources?

In presenting evidence from Costa Rica, Jasch and Danse (2005)concur with Deegan's observation and Jasch (2003a, p. 76), drawingon pilot studies from Austria, suggests that a “critical review ofexisting information systems” is an important step at thecommencement of any MFCA pilot study (also see Herzig et al.,2012; Staniskis and Stasiskiene, 2005).

Recent years have seen further statements suggesting MFCA canbe applied in any organisation irrespective of existing accountingand/or environmental management systems (ISO, 2011). This po-sition would seem to imply MFCA is a standalone system, however,it has also been suggested that in many cases the informationrequired for MFCA may already be available from existing sources(Scavone, 2005, 2006; Schaltegger et al., 2012).7 Thus the way inwhich MFCA information can (or should) be integrated into otherorganisational systems remains unclear and offers a potentiallyfruitful area for future study (Lang-Koetz et al., 2006; Strobel andRedmann, 2002).

6.4. Evidence from developing economies

As discussed in Section 4, MFCA is a management innovationthat emanated from projects undertaken primarily in developednations. Nonetheless, there is growing interest in how MFCAtechniques can be applied in developing economies. Schalteggeret al. (2012) explored this potential in the context of a beer brew-ing facility in Vietnam and were able to demonstrate, via an action-based case study, that MFCA has enormous potential for identifyingareas of inefficiency and to help ensure improvement efforts weredirected towards areas where they would make the greatestimpact. Jasch and Danse (2005) reveal similar findings in acomparative study of EMA activity in Austria and Costa Rica andsuggest MFCA may assist in identifying opportunities for ‘goodhousekeeping’ which are more common in emerging economiesgiven environmental regulations tend to be less stringent in thesesettings. Burritt et al. (2009) further demonstrate the potential formaterial and energy flow cost assessments as a post-hoc tool forenvironmental investment appraisal at a rice mill located in the

7 Note: while many references suggest much of the data required for MFCA mayalready be available, this is not always the case. Gale (2006) for example, found at apaper mill in Canada that the necessary information from existing accountingsystems was more difficult to obtain than expected, especially in the case of energyand waste costs (Gale, 2006).

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Philippines (e.g. material and energy flow cost assessment wasused to evaluate previous investment decisions in retrospect).Indeed, as developing nations move to compete in a globalmarketplace that is demanding increasingly stringent forms ofenvironmental management, MFCA may offer organisations inthese countries a means of controlling resource use and a way todemonstrate their commitment to economic and environmentalefficiency. With high levels of economic growth in recent years, itcan be argued this is likely to be especially important in countrieslike China and India (Xiaomei, 2004).

6.5. How does MFCA relate to other EMA tools?

It is interesting, given the well-cited work of Burritt et al. (2002)who suggest MFCA is but one in a framework of possible EMA tools,that there has been scant research investigating the comparability,and compatibility, of MFCA with alternate EMA tools (Lang-Koetzet al., 2006). One of the few studies in this area was conducted byLang et al. (2005) who, within the context of several pilot studies,considered the interrelationship between Environmental Perfor-mance Indicators (EPIs), inputeoutput balance (otherwise knownas a material or mass balance e see Section 5) and flow cost ac-counting. The authors conclude that despite being a potentially“powerful instrument”, flow cost accounting is also “less common”in practice (Lang et al., 2005, p. 148). For example, in the case ofSchott Glass, Lang et al. (2005, p. 161) observe that EPIs wereimplemented, and in fact preferred, over flow cost accounting, therationale being that the organisation already had a good under-standing of material costs and losses, and that the complexity of theorganisation's material flows was not high. Whether this assump-tion represents an accurate reflection of Schott Glass's positionmaybe questioned, however, it is nonetheless concerning that thecompany failed to see the benefit associated with MFCA activities.When combined with other pilot studies, Lang et al. (2005, p. 165)conclude:

For many companies, Environmental Performance Indicatorsprovided regularly and the set up of an inputeoutput balanceevery two or three years seems to be a good combination forambitious environmental management. For some companies,flow cost accounting can be an interesting option to improve theexisting cost accounting system.

In a related vein Japanese pharmaceutical company, TanabeSeiyaku, offers an example for how MFCA data can be used forperformance evaluation and improvement (Burritt and Saka, 2006;Onishi et al., 2009), and the potential role for MFCA in investmentappraisal and post-hoc investment evaluation has been observed inboth Schaltegger et al. (2012) and Burritt et al. (2009). In addition tothese studies, Scavone (2006) offers evidence from Argentina tosuggest there may be a role for an environmentally focusedbalanced scorecard in material flow cost management. Nonethe-less, as with many topics within the MFCA literature, knowledgeconcerning this proposal is limited and additional evidence isrequired to support these claims.

Drawing on the discussion presented above, MFCA wouldappear compatible with a number of supplementary EMA tools(also see Burritt et al., 2002; Jasch, 2006). Thus it would be inter-esting to examine the incremental performance benefit that isattained when different tools are used in combination, and withindifferent contexts (i.e. in large versus small or medium sized or-ganisations). It may be that in certain situations MFCA is useful inits own right whereas in other contexts a combination of tools isrequired to produce equivalent improvements in economic andenvironmental performance. Likewise, it may be that in certain

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contexts MFCA is less effective than other EMA tools, or combina-tions of tools, as was found in the study of Lang et al. (2005).

6.6. Proposed extension of MFCA as a supply chain managementtool

Finally, there has been substantial interest in recent years indeveloping a greater understanding of how EMA, and more spe-cifically MFCA, can be used to assist with Supply Chain Environ-mental Management (IFAC, 2005; ISO, 2011; Jindrichovska andPurc�area, 2011). The METI Guidebook for MFCA describes thetransfer of MFCA data to the supply chain as one of the mostadvanced topics in the hierarchy of MFCA activity (METI, 2007). Inaddition, if used within the supply chain the data provided byMFCA could then be used to support further analysis via life cycleassessment (LCA) (Jasch, 2011; Nakano and Hirao, 2011) and mayhelp to support the development of closed-loop supply chainswhich place less demand on virgin resources as described byWeigand and Elsas (2013). While limited case studies do supportthe potential for MFCA information to assist with environmentalsupply chain management (Kokubu and Tachikawa, 2013; Viereet al., 2007, 2011), problems with the collection of informationand confidentiality of data are also acknowledged (Weigand andElsas, 2013) and more research on this topic is required.

The above section constitutes a comprehensive coverage ofextant evidence on MFCA in practice. While it can be observed thatthe literature in this area is increasing, it could also be argued thatthere remain more questions than answers. Hence the need nowexists to move this debate forward. The next section explicitlyconsiders this need, the purpose being to articulate an agenda forfuture research in the MFCA field.

7. Discussion and the way forward

7.1. Implications from existing research

The previous section clearly demonstrates that while knowl-edge regarding MFCA is certainly increasing, the overall under-standing of the topic remains limited and further research isrequired. Numerous studies draw attention to the potential asso-ciated with MFCA and a number of action-based case studies haveprovided evidence that would seem to suggest ‘it works’. None-theless these studies are at odds with additional evidence in whichit has been demonstrated MFCA is not well used in practice. Thus, ifwe accept the positive results obtained from case-based research,there would appear to be a role for academic study in seeking tounderstand and resolve this paradox. Furthering the understandingof MFCA in this way is essential to finding ways to encouragediffusion of the practice in diverse organisations.

Drawing on the discussion presented above the most logicalquestion with which to commence this agenda would seem to be‘When does MFCA work?’ Are we, as academics, to assume that thebenefit associated with MFCA implementation will be equivalentacross all sectors and in organisations of all sizes? Or is thissomething that needs to be empirically examined? Who is usingMFCA in different sectors and, more to the point,why are they usingit? What are the key drivers of MFCA implementation? What arethe barriers to MFCA adoption? Are they actual or perceived? Arebarriers to MFCA adoption the same across different organisations?How well do the realised benefits associated with MFCA adoptionreflect the benefits that were expected? These are just a few of thequestions that extant evidence does not answer (see Table 1). Whilenormative claims suggest MFCA is useful in all organisations, theyare just that, normative, and without a body of evidence to supportthese claims there is ample reason to doubt their validity. Answers

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to these questions will be required if MFCA is to be successfullypromoted and diffused to a larger population.

It has also been observed, especially in Germany, there are noworganisations that had once engaged with the flow cost accountingagenda that no longer do so (Schaltegger et al., 2011; Schmidt andNakajima, 2013). It would be of interest to investigate one or moreof these organisations and find out why this decision to withdrawwas made. Was the information provided by MFCA not useful?Were the costs involved in managing the system in excess of thebenefits that were received? Given state promotion of MFCA hasbeen noted as among the main catalysts of MFCA adoption inGermany (Schmidt and Nakajima, 2013), can it be that the reasonfor initial adoption was in fact institutional pressure as opposed tothe belief that the system would fulfil a valid organisational need?

It might also be interesting within this context to examine theorganisational functions in which MFCA is used and likely to pro-vide the greatest benefit. Burritt et al. (2002), for example, suggestdifferent functions and their managers rely on different types ofenvironmental accounting information. Furthermore, Kokubu andTachikawa (2013) suggest the successful implementation of MFCAis reliant on expertise being provided by multiple departmentsincluding: accounting, operations, environmental, engineering, andquality control. Thus it would be interesting to investigate who, inorganisations where MFCA is implemented, actually uses the in-formation provided and who is involved with its preparation. Itmay then be that efforts to promote MFCAwould be more effectiveif targeted towards individual managers engaged in particularfunctions.

Drawing on the literature analysed for this review, themanufacturing focus which dominates extant research also pre-sents an area of potential concern. It has sometimes been suggestedthat MFCA is likely to be more useful in traditional manufacturingsettings (IFAC, 2005), and in organisations where material flows arecomplex and potential costs high (Lang et al., 2005; Loew, 2003).Nonetheless, we are also led to believe that MFCA can provideuseful information to organisations operating in all sectors;including both the service and not-for-profits sectors (ISO, 2011;Jasch, 2009; Papaspyropoulos et al., 2012). The above said there islittle empirical evidence available to support this claimwith regardto either sector. It may be that MFCA is useful in these sectors, but itmay also be that service and not-for-profit organisations eachrequire different or slightly modified tools. Thus there is a need toextend the current focus of MFCA research beyond manufacturingoperations in order to examine this potential. Such research maylead to industry-specific guidance for MFCA being developed. Or,alternatively, it may support the development of new tools that aredeemed more appropriate for use within these organisations. Po-tential sectors which may be of interest include: service organisa-tions, not-for-profit concerns, primary production, mining andresources, and utilities. In addition, research methods that may beable to provide further insight in this area include: comparativecase studies, interviews and survey-based research in which sta-tistical analysis is employed.

A further avenue for future investigation would be to considerand compare the usefulness of MFCA as an ad-hoc tool versus onethat involves the routine generation of information. As discussed inSection 2, MFCA is generally viewed as falling under the umbrellaterm ‘environmental cost accounting’ (Papaspyropoulos et al.,2012). Burritt et al. (2002) suggest this implies the informationprovided should be routinely generated in the manner expected ofmost costing systems (Herzig et al., 2012). However, there is somesuggestion that MFCA can still provide valuable information whenused on an ad-hoc basis; that is as a tool that is used either for thepurpose of a one-off decision or from time to time in an irregularmanner that incorporates no set plans for future engagement or

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Table 1Possible directions for future research.

Proposed futureresearch questions

Possible associatedfuture sub-researchquestions

Possible method(s)

When does MFCAwork?

� What are the costsand benefits ofapplying MFCA to (i)not-for-profit, (ii)service and (iii) SMEorganisations?

� What issues arisewhen applying MFCAacross different in-dustry sectors?

� How does nationalculture affect theimplementation andeffectiveness ofMFCA inorganisations?

Case studies;comparative casestudy; survey basedstatistical research;interviews.

How widespread isMFCA adoption inpractice?

� What is the currentstate of knowledgeconcerning MFCA inorganisations acrossdifferent settings(e.g. industries,countries etc)?

� What are the keyfactors or driversassociated withMFCAimplementation?

� What are the barriersto MFCA adoption?

Survey based statisticaland qualitativeresearch.

Why do organisationschoose toincorporate MFCAinto their activities?

� What do organisa-tions see as theanticipated benefitsassociated withMFCA activities?

� To what extent doinstitutional pres-sures influence thedecision to experi-ment with MFCA?

Case studies; surveybased statisticalresearch; interviews.

Why do organisationschoose to abandonMFCA activities?

� What were the pri-mary factors thatencouraged earlyadopters to engagewith MFCA? (E.g.were they strategi-cally oriented orinstitutionallydriven).

� To what extent didthe early adopters ofMFCA experiencebenefit in the me-dium and long term?

Case studies;interviews.

To what extent do thebenefits associatedwith MFCA, aspresented in thenormative literature,manifest whenapplied to actualpractice?

� Under what condi-tions will MFCAresult in tangibleeconomic and envi-ronmentalimprovements?

Case studies; surveybased statisticalresearch; interviews.

Which functions areinvolved with MFCAin actualorganisations?

� Which functions areinvolved in preparingthe data for MFCA?

� How is MFCA dataused by managerswithin differentdepartments?

� How is MFCA infor-mation communi-cated betweendifferent organisa-tional departments?

Case studies; surveybased statisticalresearch; interviews.

Table 1 (continued )

Proposed futureresearch questions

Possible associatedfuture sub-researchquestions

Possible method(s)

To what extent does theway in which MFCAdata is collected andused relate toorganisationaloutcomes?

� How can MFCA data(which is primarilypast oriented) beused to supportfuture orienteddecisions?

� Under what condi-tions will the use ofMFCA on an ad-hocbasis be effective?

Case studies;comparative casestudy; interviews.

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adoption. For example, Lang et al. (2005) posit that the use of flowcost accounting as an isolated analysis will still provide useful in-formation on cost savings and environmental improvement po-tentials. When used in this way the authors suggest that theprocess “does not need too much effort” (Lang et al., 2005, p. 147).However, when MFCA is used for the purpose for which it wasdesigned, as an addendum to the existing cost accounting system,Lang et al. (2005, p. 147e8) suggest the process becomes muchmore difficult requiring “a lot of effort and know how”.

Many of the case studies that investigate MFCA as discussed inSection 6 are arguably based on a single cost assessment that isused to identify opportunities for both economic and environ-mental improvement (Jasch, 2006). This information is then usedfor benchmarking purposes and to initiate changes that improveboth material and energy efficiency (Schaltegger et al., 2012). Thusit may be that the value of MFCA will be realised, not as a routinetool, but as an ad-hoc process for assessing efficiency and costsavings potentials (Lang-Koetz et al., 2006). This could be under-taken on an annual or bi-annual basis or whenever it was deemednecessary by management (i.e. when considering investment innew plant or developing new products). While it can be argued thiswould impair the controlling function associated with MFCA (Lang-Koetz et al., 2006; Schaltegger et al., 2002), a number of benefitswould remain intact. This approach may also be useful whenapplied to the supply chain as it would remove the need for theongoing coordination of information between organisations(Weigand and Elsas, 2013). In order to understand this potential itwould be useful to conduct comparative, longitudinal casework inwhich both approaches are considered.

Finally, it may be useful to consider cross-national differences inMFCA application. Although limited, the survey-based researchreported in Section 6 suggests there may be differences in MFCAknowledge and adoption across cultures (Burritt and Tingey-Holyoak, 2012; Kokubu and Nashioka, 2005; Schaltegger et al.,2011), although it can be argued cross-national studies are largelyabsent within existing literature. Given that the development ofMFCA has been influenced by two distinct and disparate cultures inboth Germany and Japan (IFAC, 2005), as discussed in Section 4, itmay be that one size does not in fact fit organisations operating inevery country. For example, Section 6 discusses the application ofMFCA in supply chains as being potentially hindered by problemswith the collection of data and confidentiality (Weigand and Elsas,2013). It is possible this may be more problematic in certain cul-tures (Deegan, 2007). Thus existing guidelines may need to beamended via the inclusion of appendices targeted towards partic-ular cultures and countries. However, at this time such argumentsare only speculative and additional research is required to ascertainwhether such action would help or hinder the further adoption ofMFCA activities by companies.

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7.2. Recommendations for future research

As can be seen from the preceding discussion, there are manyareas in which the MFCA literature needs to be developed andmany questions that still need to be addressed. In order to do this,there are two primary recommendations that can be made bydrawing on the literature presented in Section 6.

First, it is evident that to the present time the research methodsused to investigate MFCA in practice have been extremely limited.While the focus on action-based case work is no doubt important, itoverlooks the vast array of methodological approaches and toolsthat are available to the contemporary researcher. In summary,survey-based research is scarce, interview based research non-existent, and the use of statistical analysis beyond basic percent-age counts of relatively small samples virtually absent. As may beexpected, the current one dimensional mindset severely limits thegeneralizability of research findings and may have contributed tothe rut in which the MFCA literature now finds itself.

Neuman (2006) argues that different research methods, as wellas qualitative and quantitative research designs, should not beviewed as being in competition with each other but rather asdifferent tools that complement each other. By observing MFCAfrom different research perspectives it is likely that a more accuratepicture of current development will be able to be ascertained; thismay include the identification of barriers and enablers to imple-mentation (Neuman, 2006). Survey-based statistical research inparticular may allow for more generalized findings as well as rec-ommendations for the use and promotion of MFCAwithin differentsettings. Thus, it is the recommendation of the authors that re-searchers in this field consider alternate research methods andresearch processes to complement existing approaches as this willultimately result in a more diverse and complete understanding ofMFCA as a topic.

Second, thus far theoretically informed research is virtually non-existent within the MFCA literature. Indeed, the authors could notlocate one theoretically informed study in which MFCA was theprimary focus. This situation is not unique to MFCA as theoreticalstudies are scarce across the entire EMA discipline (Burritt, 2005;Jalaludin et al., 2011) which raises the question for futureresearch of why this might be so. Parker (2005, p. 849), in discus-sing the state of environmental accounting research, notes thattheory and practice are “interrelated and arguably have the po-tential to be mutually contributing”, whereas in contrast Thomas(1997) argues that theoretical perspectives can constrain ratherthan enlighten further enquiry.

There are several reasons why development of a theoreticalfoundation for MFCA might be of use in this applied science. Givenits role in providing structure and a way to organise knowledge,theory can assist in answering many of the questions identifiedwithin this literature review. For example, it has been suggested alogical progression at this point in the development of MFCA as amanagement tool is to understand when MFCA works. Drawing onextant management and environmental accounting knowledgecontingency theory may provide a foundation by which the cir-cumstances under which MFCA is used and found to enhanceeconomic and environmental performance will be able to beidentified (Bouma and van der Veen, 2002; Christ and Burritt, 2013;Qian et al., 2011). Research drawing on diffusion of innovation canthen be used to understand howMFCA can be promoted to differentorganisations and business segments (Rogers, 2003). Diffusion ofinnovation can also be used to identify potential barriers to MFCAadoption as well as variables that may facilitate the implementa-tion process. Theory can then be used to answer why organisationsare or are not using MFCA. Potential frameworks that might beuseful in this regard include new institutional sociology (Bouma

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and van der Veen, 2002; Qian and Burritt, 2008), legitimacy the-ory and stakeholder theory (Deegan, 2007). While this list is notexhaustive and there are other theoretical approaches and para-digms that may be able to contribute to the further development ofthis field, it does offer a starting point based on established researchon related topics.

The information presented in this reviewwould seem to suggestthere is much that is not known about MFCA in practice. Yet inwhatcould be described as an interesting development, there has alsobeen increased work in recent years seeking to develop the toolbeyond its original purpose i.e. to incorporate a life cycle perspec-tive (for example, see: Jindrichovska and Purc�area, 2011; Nakanoand Hirao, 2011; Schrack and Prammer, 2013). Nonetheless it canbe argued these efforts may be premature. While it is important, asnoted in Section 6, to further the current understanding of howMFCA information interacts with other EMA tools and informationsystems (Lang-Koetz et al., 2006; Strobel and Redmann, 2002), thisdoes not mean it is necessary to reinvent the wheel; especiallywhen our understanding of MFCA in its original form is so limited,due in part to the narrow and underdeveloped nature of extantempirical evidence in this field. Thus it is the authors' belief that itis now necessary to consolidate what is already known about MFCAand what needs to be known before seeking to develop the toolfurther.

As it is, the recent release of ISO 14051 may represent a game-changing event in the MFCA field. Observation of how (or indeedif) this event alters perceptions and the overall take-up of MFCA bybusiness in both the short and long-terms is likely to become a focalpoint. The following section will now conclude the paper.

8. Conclusion

MFCA is a relatively new tool designed to support decisions thatwill lead to improved economic and environmental performancevia the explicit recognition of material and energy flows withinbusiness operations, as well as a greater understanding of howthese flows relate to different areas of business expense. The po-tential importance of MFCA as a business tool has recently beenrecognised with the release of ISO 14051: Material Flow Cost Ac-counting. Given this development it was suggested that the futurewill see increased interest given to MFCA by both academics andorganisations from around the world. Thus, this article takes stockof what is currently known about MFCA, and what needs to beknown, in order to ensure promotional and research efforts aredirected towards the areas where they will make the greatestdifference.

The review covered several areas. These include: a basic over-view of what MFCA is in the context of more generic EMA knowl-edge and development; the development of MFCA as amanagement tool; the MFCA process; and a review and synthesis ofempirical evidence concerning MFCA in practice. Finally, sugges-tions for a research agenda for the futurewere derived based on thecurrent state of play of evidence about the usefulness of the MFCAtool.

While every effort has been made within this review to providea comprehensive and balanced synthesis of available MFCA litera-ture, the observations made herein should be viewed in light ofseveral limitations. As noted in Section 4, MFCA was originallydeveloped in Germany and Japan. As a result much of the earlywork to emanate from these countries was designed for use bydomestic organisations. Thus it is acknowledged there are publi-cations, especially from the late 1990s and early 2000s, that areonly available in German or Japanese. These papers were notconsidered within this composition which, as noted in Section 6,was limited to publications available in English. While it is not

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believed the decision to exclude these papers would be sufficient toundermine the value of this review, it is possible some of the areasdiscussed, and some of the research questions that are proposed,may have been covered elsewhere.

The extant literature that was analysed within this reviewrevealed a sub-discipline of EMA that has been largely driven bynormative arguments and attempts to appeal to common sense.The review finds empirical evidence concerning MFCA in practice isunderdeveloped and existing knowledge has been curtailed bywhat could almost be described as a one-dimensional mindset onthe part of MFCA researchers. It was not the purpose of this reviewto either discourage action-based research or to impugn its value,however there would seem to be an unwillingness by researchersto move beyond action-based case studies in the further develop-ment of this field. In addition, there is a noticeable lack of theo-retical explanations for MFCA development and implementation.

MFCA research to date has made substantial inroads to justi-fying additional investment in the development of MFCA as aneconomic and environmental management tool. Indeed, there arenumerous case studies in which the value of MFCA to businessorganisations has been empirically supported. Nonetheless, itwould appear the time has come to complement and enhanceexisting knowledge with new perspectives and approaches. Thisundertaking should include, not only new research methods andtheories, but also asking different types of research questions asdeveloped in the paper.

Acknowledgements

The authors would like to thank participants at a workshop onMaterial Flow Cost Accounting held at the School of Commerce,University of South Australia, for their very useful comments. Inaddition, the authors are grateful to three anonymous reviewers fortheir constructive feedback which greatly improved the quality ofthe paper.

Abbreviations

EMA Environmental Management AccountingEPI Environmental Performance IndicatorsERP Enterprise Resource PlanningHFMT Hunting Federation of Macedonia and ThraceIFAC International Federation of AccountantsIMU Institut für Management und Umwelt (Institute of

Management and the Environment (Germany))ISO International Organization for StandardizationJISC Japanese Industrial Standards CommitteeKPI Key Performance IndicatorLCA Life Cycle AssessmentMETI Ministry of Economy, Trade and Industry (Japan)MFA Material Flow AnalysisMFCA Material Flow Cost AccountingPDCA Plan, Do, Check, Act (from ISO 14051)SME Small and Medium-sized EnterprisesUSD United States Dollars

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