1. MFCA – Popular concept in Environmental Strategy
Material Flow Cost Accounting (MFCA) is gaining momentum worldwide. Why ? This is because MFCA enhances companies competitiveness while meeting social demands - effective environmental management. We will write what is MFCA.
MFCA is one of the major tools for environmental management accounting and promotes increased transparency of material use practices through the development of a material flow model that traces and quantifies the flows and stocks of materials within an organization in physical and monetary units.
It is a method that simultaneously realizes “reduced environmental impacts” and “improved business efficiency.” MFCA is applicable to all industries that use materials and energy, of any type and scale, with or without environmental management systems in place. It can be seen as one alternative for organizations to consider environmental matters, including material scarcity, climate change, and increasingly stringent environmental regulations for any business decision and achieve sustainable development.
2. So what does MFCA do for you?
MFCA measures the flow and stock of all materials in the manufacturing process in both monetary and physical terms. The materials include raw materials, parts, and components. MFCA analysis provides an equivalent comparison of costs associated with products and costs associated with material losses, for example, waste, air emissions, wastewater, etc. In many cases, an organization is unaware of the full extent of the actual cost of material losses because data on material losses and the associated costs are often difficult to extract from conventional information, accounting, and environmental management systems. In this way, MFCA enables organizations to identify material use and their flows within a production process and assign costs to all of these materials.
Organizations are required to consider the environmental impact of their operations in every phase of their operations. Recycling, Reusing, and Reducing have been actively promoted in recent years and recycling has especially gained support among organizations trying to reduce the consumption of raw materials and their environmental impact. Although waste recycling is an effective measure for resource use, it is not always cost effective as substantial inputs of energy and other expenses are often required. From an MFCA perspective, it is essential to reduce waste generation itself to increase resource use and cost efficiency.
MFCA identifies quantities of each material and its costs (including material, processing, and waste treatment costs). This enables us to look at each of the sources of waste generation in a separate way and identify improvement opportunities that could lead to the reduction of waste generation itself.
Using this information, organizations can identify the costs of losses caused by waste and other emissions, as well as defective products, and calculate the quantities and resources used in each process and the costs associated with these processes. MFCA acts as a strong motivation for organizations to reduce waste and material inputs, leading to cost-reduction and increased productivity.
3. Why so popular – Benefit of MFCA
Reduction of waste generation leads to enhanced environmental performance in manufacturing process by highlighting the importance of reducing input of raw materials. Hence, MFCA becomes a tool that allows organizations to establish a link between the need to reduce resource procurement in order to increase process efficiency of the operations and the need to reduce environmental impact at the same time. Therefore, MFCA serves not only as a tool for environmental purposes but also as a general management tool that helps organizations find ways to reduce their environmental impact while increasing profitability through cost reductions.
I will write more about MFCA basic concept and its implementation approach.
Hiroshi Tachikawa, Managing director of Propharm Japan Co., LTd.
Mr. Tachikawa has been providing MFCA-related consulting and environmental risk management in various Asian countries for more than 10 years. In addition, Mr. Tachikawa has been providing MFCA-related trainings to more than 1,500 participants. The service contributed to higher performance in productivity, quality and environment for a number of Japanese and overseas companies in wide-ranging industries from manufacturing to service industries. Through the MFCA projects in Asia, cost-reduction amount reached more than USD 1,000,000. In addition, he has been leading the international standardization of Material Flow Cost Accounting (ISO 14051 and ISO 14052) as a technical expert for Japan and Assistant Secretary for the international standardization group.
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