The Risk Management of Organic Products along the Value Chain

Looking at the dynamics of the worldwide organic market value registered upward trends in the last years. Just as an example, the USA organic market surpasses $ 31 billion in 2011, growing by 9.5% since 2010 [1]. While the organic market in Europe reached € 21.5 billion in 2011, increasing 9% compared to 2010 [2]

Looking in more detail at what fuels the growth, we can see that in the EU-27 there are 9.6 million ha organically cultivated in 2011, out of which 86% of which in EU-15 [3]. This implies a growth rate of 500.000 ha/year on average [3].

Most experts agree that the organic market is expected to continue to grow in the following period!

Risk assessment for organic producers

In an ever growing organic market, in an ever growing number of international transactions, the issue of the relevance of the risk assessment of organic producers has become truly important for any intermediary on the market.

For any trader in the organic market, the trust and reputation are essential, especially in the organic trade.

The article is focused on an online trading platform of organic raw materials. From the perspective of this online trading platform which aims to facilitate commerce, the assessment of the risk of farmers / producers is a vital business strategy.

Source: Munteanu A.R. (2014) 

So the main research question is “How to design a framework to assess risk before a transaction takes place?”

References 

[1] Oganic Trade Association’s (OTA’s) 2012 Organic Industry Survey, quoted at http://www.organicnewsroom.com/2012/04/us_consumerdriven_organic_mark.html [accessed April 2014]

[2] Schaack, D., Lernoud, J., Padel, S., & Willer, H. (2013). The Organic Market in Europe 2011-Nine Percent Increase Compared with 2010. The World of Organic Agriculture-Statistics and Emerging Trends 2013, 224-229.

[3] European Commission (2013). Facts and figures on organic agriculture in the European Union. DG Agriculture and Rural Development, Unit Economic Analysis of EU Agriculture 

[4] Munteanu, A.R., 2014. The Risk Management of Organic Products along the Value Chain, Proceedings of The International Conference on Production Research - ICPR - QIEM 2014, 1-5 July, Cluj-Napoca

Environmental Management Accounting (EMA) Implementation in a Company: Motivation and Expected Results from a Business Perspective

It is no news that managers are interested in high profits, and when it comes to cost reductions, they miss no opportunity. Lately, the environmental performance of a company has gained importance not only due to increasing interest of internal and external stakeholders and pressures on the supply chain, or regulatory pressures. The environmental performance of a company is like to the overall business performance.

The idea of environmental performance is also a matter of costs incurred by a company. Optimizing the environmental performance is more and more views as a business optimization strategy in some industries.

Please note that for the purpose of this post I am aiming at companies that have a significant environmental impact, and that I not discussing the reputational aspect of the issue. The main focus is on the actual accounting practices that provide the necessary information for an informed decision making process.

Let’s start by reviewing the definition of EMA. I will provide here the definition given by the EMA Expert Working Group of the United Nations Division of Sustainable Development (UNSDS) focuses on both the physical and monetary nature of EMA:

“EMA is broadly defined as the identification, collection, estimation, analysis and use of physical flow information (i.e., materials, water, and energy flows), environmental cost information, and other monetary information for both conventional and environmental decision - making within an organization” (UNSD, 2001 p. 4)

Therefore, EMA should be viewed as a tool in the decision making process. Just like the classic management accounting is a tool for specific decisions regarding the inner workings on a company.

Therefore, as a tool, first of all, EMA needs to make business sense. This means strictly that the potential benefits of the implementation need to outweigh the costs (e.g. the financial and human resources, time involved).  The main benefit is that EMA implementation means that an organization becomes more efficient and more environmentally friendly at the same.  

The literature presents several categories of reasons for implementing EMA:

•       Eco-efficiency. EMA allows for the use of eco-efficiency indicators as it uses both physical and monetary information.  The calculation of these indicators should help to simultaneous reduce costs and environmental impacts via more efficient use of resources. 
•       Cost-effectiveness. Increasing internal efficiency by clearly identifying and allocating of environmental costs and implicitly adequate pricing of products.
•       Investment appraisal. EMA can be used for sound investment project decision making as it allows for better assessment of the economic impacts of the environmental performance of the business. 
•       Strategic positioning and compliance. EMA could very well serve as a cost-effective tool to aid with compliance with the environmental legislation and environmental reporting standards.

Companies with a significant environmental impact have multiple sound reasons to consider implementation of the appropriate tool such as EMA in order to achieve their business performance targets. 

References:
UNDSD (2001) – Environmental Management Accounting, Procedures and Principles – United Nations Division for Sustainable Development, Geneva 

For citing the article:
Munteanu, A.R., 2013. Environmental Management Accounting (EMA) Implementation: Motivation And Expected Results From A Business Perspective. Romanian Journal of Economics, 37(2 (46)), pp.164-173.

Mission

This blog is dedicated to my PhD research, the full four years journey in academic research land!

It aims to facilitate the dissemination of my research, so on this blog will be featured only those articles and studies for which I am the sole author.

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