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Efficient green control (EGC) encouraging environmental investment and

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Article in Journal of Environmental Protection and Ecology · January 2017

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Journal of Environmental Protection and Ecology 18, No 1, 191–201 (2017)

Environmental protection and sustainable protection

EFFICIENT GREEN CONTROL (EGC) ENCOURAGING

ENVIRONMENTAL INVESTMENT AND PROFITABILITY

D. I. TOPORa, S. CAPUSNEANUb*, A. S. TAMASa

a
Faculty of Economics, ‘1 Decembrie 1918’ University, 11–13 Nicolae Iorga
Street, Alba-Iulia, Romania
b
Dimitrie Cantemir Christian University, Bucharest, Romania
E-mail: sorinelcapusneanu@gmail.com

Abstract. The purpose of this article is to highlight the efficiency of the control in stimulating green
investment environment, sustainability and profitability of an economic company of aluminum
industry. Based on theoretical and empirical research methodology was conducted presentation of
environmental sustainability in the vision, objectives and strategy of the economic company in the
aluminum industry. It was focused on planning, monitoring and controlling investment activities and
the performance indicators used in highlighting the economic company based aluminum industry
investments. The results of the inspection were presented and analysed the documents synthesis
and reporting of green cost: sustainability balanced scorecard and sustainability dashboard. The
two situations provide a set of financial and non-financial useful economic company management.
The article concludes by emphasising the control efficiency in stimulating green investment activi-
ties of environmental, sustainability and profitability of an economic company aluminum industry.
Keywords: control, management accounting, sustainability balanced scorecard, sustainability dash-
board, aluminum industry.

AIMS AND BACKGROUND

In the context of sustainable development as a necessity of modern society, envi-
ronmental component gained the same amount of importance as a component of
economic, technological or social. Any industrial economic company that has an
environmental policy viable, meets our customer needs by delivering quality prod-
ucts consistently good, paying particular attention to management control impacts
on the environment or green products. The main objectives of this study focus on
achieving the environmental objectives and sustainability consisting of planning,
monitoring and control through control investment in green economic company
aluminum industry. The green controlling is through data taken from managerial
accounting and retrieved as financial and non-financial indicators in the sustain-
ability dashboard or eco-dashboard, the sustainability balanced scorecard and other
environmental documents provided by business company aluminum industry.

*
For correspondence.

191
 The concept of control system for the decision is proposed by Johnson and
Kaplan in 1987. Four years later, Kaplan says that the system of management
control makes it possible to adapt to environmental changes, providing feedback
on performance, enables measurement of profit on products and customers and
helps in decision making capital investments1. During this period debut of the
concept of control, those responsible for inspection were composed of account-
ants or quality controllers who were only simple information about differences in
negative territory and did not provide precise and complete information manage-
ment carefully analysed. These issues had a negative impact on the management
control system. Research conducted subsequently focused on the need to reduce
costs, increase profits and eliminate waste. Thus, emerged methods of costing such
as economic value added2,3, costing activities4 or dashboard balanced containing
non-financial indicators5.
Other specialists project a control lever to highlight the effectiveness of a
company business strategy, providing a complete picture of a wide range of pos-
sible control types. In this regard, they offer two landmarks (interactivity and
diagnostics) underlying the use of management control system. Interactivity is
found especially in the case involving senior management or operational manag-
ers, while the diagnosis rests with accountants or quality controllers who must
provide their information. In other words, operational managers do not engage in
diagnostic component, while accountants and quality controllers takes on the role
of intermediaries managers without increased compensation component necessary
to achieve the goals set by operational managers. These issues leading to better
results, but does not reduce costs or loss. Considering all previous approaches and
Otley6 agrees with the use of non-financial indicators to measure progress to achieve
two goals: to report the company results and to motivate the people involved. In
his opinion, management control system has five main components: key objectives
and strategy plan, the level of performance rewards, feedback and future expecta-
tions7. These components were added other eight criteria that have been linked to
performance management: vision and mission, key success factors, strategies and
plan successful implementation, organisational structure, performance measure-
ment key level of performance, processes performance, financial and non-financial
indicators of performance8. The four remaining components were related to the
environment, context and culture: feedback flows and future expectations, types of
users, performance management and control system, the links between components
of performance management and control system. These issues have contributed
to the development of control system management, but the flow of information
obtained was solid and the report of management was too technical.

192
EXPERIMENTAL
The purpose of the research methodology was to reveal the scientific approach
designed to give an answer to the main question that we decided to go on this
path of knowledge: effective control work is stimulating investment in green
environmental, sustainability and profitability? Entire research process consisted
succession of very strict rules such as objectivity, rigor and probity, who helped
obtain valid results that can be reproduced. In research conducted, methodology
consisted of both theoretical research: (1) on concepts, approaches and existing
regulations in this area so far and customise their level of economic entities in the
aluminum industry and in empirical research (2) on the application of research
methods was done through an inductive approach as a result of deducing some
general conclusions, based on the results recorded by the data provided by the
economic company in the aluminum industry. Document analysis was done through
reading the literature very carefully selected which were based approaches and
fundamental principles of green and sustainability control, and accounting summary
documents provided by business company aluminum industry. Besides research
methods specified was widely used and comparative method to study different
approaches to the concepts and theories in the research area chosen different rules
and provisions of international regulations, to identify similarities and differences
between the analysed elements.

ENVIRONMENTAL SUSTAINABILITY IN THE VISION, OBJECTIVES

AND STRATEGY OF THE ECONOMIC COMPANY IN ALUMINUM
INDUSTRY
Vision, objectives and strategies of the economic company in aluminum industry.
Control activities are diversified and incorporate green vision, goals and strategies
of the economic company in the aluminum industry and affect the whole system
of control. Green controlling has a dual purpose: justification interest of share-
holders to invest in the future and holding economic and environmental stability.
The vision of the economic company refers to the continuous improvement of
activities, processes, products and environmental performance. For translating
this vision into goals related to control activity, it can be summarised as follows:
(1) conducting a strategic concentration in the environment; (2) identification of
strategic objectives for environmental sustainability; (3) the operationalisation of
strategic goals of sustainability.
Strategic analysis of concentration in the environment plays a key role in
strategic planning. In SWOT analysis (Table 1) were examined environmental
factors, internal factors and the expectations of shareholders. On this occasion it
identified some potential opportunities and risks which increase environmental
changes of the economic company analysed.

193
Table 1. SWOT analysis of the environmental performance of an economic company in aluminum
industry
Strengths Weaknesses
• System-monitoring of environmental • Reduced number of environmental pro-
factors; tection officers in each sector (section,
• System procedures to prevent or intervene workshop, office) with well-defined tasks
in cases of accidental pollution; in this area;
• Laws and regulations on environmental • Lack of a monitoring program by which
protection require a high level to improve information is transmitted instantaneous
environmental conditions, based on the values of the parameters or block diagram
best available techniques in the aluminum form of charts in real time.
industry.
Opportunities Threats
• Opportunities to bring technology and • Local government tends to destroy the
equipment; activity of the operator control without of-
• The interests of shareholders and local fering and effective support;
governments to solve environmental prob- • Communication with stakeholders, includ-
lems according to local environmental ing claims are intended to be transparent.
action plan that is based on the concept
of sustainable development.
Recommendations
Continuous improvement of activities, processes, products and environmental performance;
Continuous training and development of staff involved in the implementation of environ-
mental issues;
Environmental performance evaluation based on the proposed environmental objectives
and targets, indicators selected for evaluation so as to be relevant;
Participation in the environmental audit scheme (EMAS) which envisages the development
of Environmental Management Systems standards at European level.

Identification of strategic objectives for environmental sustainability. According

to ICV (2014) there are four types of strategies sustainable green: green holistic
strategy, green manufacturing strategy, strategy and compliance strategy observa-
tories green. Economic company aluminum industry we analyze opted for green
compliance strategy that involves minimal legal compliance. Schematic vision
transposition economic company aluminum industry policy goals can be rendered
so when used as a tool for monitoring environmental performance, sustainability
balanced scorecard (Fig. 1).

194
Fig. 1. Mission and strategic goals of the economic company in aluminum industry

Operationalisation of strategic goals of sustainability. It is a significant step towards

control. Appropriate tools for integrating the objectives of environmental sustain-
ability used by the business company aluminum industry are: Dashboard balanced
sustainability (Sustainability balanced scorecard, Fig. 2) and cross-instrument
panel or dashboard of sustainability (Sustainability dashboard, Fig. 3). In the four
perspectives (finances, customers, processes, learning and development) of sbsc in
environmental sustainability issues were integrated directly relevant performance
indicators, objectives and achievements. Environmental sustainability strategy is
anchored in the four BSC known: (a) identify strategic goals for environmental
sustainability; (b) the definition of relevant performance indicators of sustainability
(in accordance with GRI guidelines); (c) the agreement to which it aspires target
values with a corresponding time reference; (d) the adoption of implementing meas-
ures to achieve environmental sustainability strategy. If Scoreboard sustainability
(CDS) on issues related to environmental sustainability are integrated relevant
performance indicators, targets, achievements and deviations2.
Planning, monitoring and controlling investment activities. A significant part of
the cost of green is the work of environmental protection investment aimed at both
mitigating the effects on environmental quality and improving technology for the
products, taking into account the best available techniques in the aluminum industry.
195
The atmosphere is the broadest driver of pollution, affecting directly or indirectly
all components of the environment, so we will analyse the costs of green economic
company aluminum industry needed to improve environmental conditions and air
and the opportunity to prevent or intervene in cases of accidental pollution.
Sectors necessary basic flowsheet electrolytic aluminum production and pro-
cessing into finished products are anodes station, polling station electrolysis and
foundry. For each polling target were set for investments that reduce the negative
environmental impact of air systems, which is the cost of the economic company
green aluminum production. These investments aimed at reducing emissions of
pollutants in the workplace and in free atmosphere, ensuring optimised combus-
tion, flame stable, low emission, reducing the consumption of gas, improving the
working environment of staff and economic efficiency9. In each section, these
investment objectives are as follows:
• Section anodes – automation pulp tower by featuring an installation made
up of three computers process related control both the technological parameters
and filter operation being carried out online monitoring them; installing a filter
cartridge crushing plants anode scrap effect on harm reduction in the work envi-
ronment; treatment plant for dry vapour pitch; detention facilities of air pollutants
from smoke treatment centre;
• Section electrolysis – casting machine Wagstaff plates that reduce the risk
of pollution and nuisance lubricants chimneys and furnaces through the use of
regenerative burners improve the system sealing doors; capotarea electrolysis pots
led to the capture of gases and dry scrubbing them with a yield of 99.5% recovery
of fluorine, aluminum industry specific pollutant; detention facilities of air pollut-
ants from gas electrolysis treatment centres;
• Division foundry – Tape saw for cutting aluminum bars that design and func-
tionality has the ability to reduce impact on the environment. Statement of invest-
ment budgets allocated to reduce emissions of pollutants is as follows (Table 2).

Table 2. State investment expenditures of the economic company in aluminum industry in 2014–2015
Year Gross profit Gross profit percent- Investment expenditure
(thousands RON) age allocated (%) (thousands RON)
provided realised
2014 460725.00 6 27643.50 27643.50
2015 518140.00 5 25907.00 25907.00
Source: Data provided by business company in aluminum industry.

The evolution of consumption of methane, carbon dioxide, methane resulting

from the period 2010–2015 to ward anodes, and process emissions of fluorine in
the period 2014–2015 are presented in Tables 3, 4 and 5.

196
Table 3. Development of consumption and costs with methane (CH4) the economic company in
alumina industry in the period 2010–2015 (section anodes)
Explanations Year Deviations
2010 2011 2012 2013 2014 2015 2015/2014
Consumption of CH4, $/t anode 15.4 14.4 19.6 19.6 14.7 18.9 + 4.2
Consumption of N, m³/t anode 190 186 212 159 85 92 + 7.0
Costs of CH4, $/1000 m³ 81 78 92.4 123.4 173.3 205.2 + 31.9
Source: Data provided by business company in aluminum industry.

Table 4. CO2 emissions from natural gas consumption of the economic company in the aluminum
industry in the period 2014–2015 (section anodes)
Environmental Calorific Total consumption Deviations
effect marsh gas (GJ/m³) (thousands nm³)
0.0363 2014 2015
64 350 59 810 –4.540
Greenhouse effect CO2 Pollution (t)
(Pollutant) 2014 2015
131 040 121 800 –9.240
Source: Data provided by business company in aluminum industry.

Table 5. Evolution of fluor total process emissions (mg/m³) the economic company in alumina
industry for the period 2014–2015 (all 3 sections)
Explanations Quarter I Quarter II Quarter III Quarter IV ELV
Section anodes 0.67 0.59 0.54 0.58 5
Section electrolysis 0.37 0.36 0.37 0.39 5
Casting Department 0.06 0.02 0.04 0.03 5
Quarterly average 1.06 0.96 0.92 0.98 5
ELV – emission limit value; Source: Data provided by business company in aluminum industry.

Indicators used in highlighting the economic company performance based on

aluminum industry investments.
profit
return on investment (ROI) = (1)
assets
economic value added (EVA) = gross profit – the cost of capital (2)

Based on the data in Table 2, ROI and EVA were determined as demonstrated
in Table 6.

197
Table 6. Calculations of ROI and EVA for 2014 and 2015
Year
Explanations Deviations
2014 2015
Gross profit (thousands RON) 460725.00 518140.00 57415.00
Profit generated by investments 6225.00 4114.50 –2110.50
(thousands RON)
Assets (thousands RON) (invested 2002840.00 2370138.00 367298.00
capital)
Investments (thousands RON) 27643.50 25907.00 –1736.50
The cost of capital (%) 15.00 15.00 –
ROI (%) 22.99698569 21.79652302 –1.200462673
EVA (residual profit) 160299.00 162619.30 2320.30
ROI (2014) = 460 725 + 6225/2 002 840 + 27 643.50 = 22.996%; ROI (2015) = 518 140 + 4114.50/2
370 138 + 25 907 = 21.796%; EVA (2014) = 460 725.00 – (15% × 2 002 840.00) = 160 299.00
thousands RON; EVA (2015) = 518 140.00 – (15% × 2 370 138.00) = 162 619.30 thousands RON;
Δ EVA = 162 619.30 – 160 299.00 = 2320.30 thousands RON.

Following the calculation shows the following:

– In 2015 21 796% ROI is 1.2% lower than the 2014 ROI which means that
your investment is more profitable in 2015 than in 2014 even though the investment
rate was lower, but the assets are big. In each of the two years the rate of return
on investment exceeds the cost of capital (%): (2014) 22 996% > 15% (2015) 21
796% > 15%;
– Indicator of economic value added means the same thing mentioned above,
namely that the investment made in 2015 is more profitable generating a positive
residual profit of 2320.30 thousands RON.
Use of appropriate tools and performance reporting for green verification. In Fig. 2
are presented the four perspectives of the aluminium company pointing the financial
strategy, customer strategy, internal process strategy and organisational strategy.
In Fig. 3 is presented the sustainability dashboard reflecting the eco-performance
indicators and profitability of the aluminium company.

198
Fig. 2. Sustainability balanced scorecard of the aluminium company

DISCUSSION
Investments in environmental protection were made in financing its own economic
company aluminum industry in 2015 being 822900 thousands RON, representing
5% of the turnover of 413 214 thousands USD for a production of 218 429 t in
2015 and 2014 is the 1245 thousands RON, representing 6% of the turnover of
500 030 thousands USD, for a production of 240 010 t in 2014.
In all production sections through the equipment and technologies which
allow modern furnaces for automatic control of thermal process and ensure their
optimum thermal insulation it was reduced the specific consumption of gas with at
least 50%. This aspect is exemplified by station modernised anode furnaces where
the specific consumption of methane (CH4) is 642.07 m³/t anodes and upgraded to
the specific consumption of natural gas is 227.43 m³/t anodes.

199
Fig. 3. Sustainability dashboard of the aluminium company

CONCLUSIONS
Protecting the environment is ensured through investments made by companies and
entities interested in promoting compatibility between goods produced and financial
performance, thereby ensuring transparency of the image company and investor
behaviour. Together with organisations dedicated to environmental protection and
ensuring sustainable, economic entities aluminum industry began investing in en-
vironmental remediation and manufacturing greener products. Green controlling
intervenes is a guarantor of efficiency of environmental investments to help verify
green and cost analysis, and proposals for remedial actions necessary at a time.
Support, compliance and corrective measures lead to efficient process control,
quality and environmental investments, including practicing a good management
and obtaining notable financial performance. Reporting tools of sustainability are
key documents to ensure environmental performance, profitability of economic
entities, especially in substantiating the investment decisions of shareholders and
managers of economic entities.

200
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