This case study examines Environmental Management Accounting (EMA) using Neumann Gruppe Vietnam Ltd. as an example. Neumann Vietnam is a medium-sized Vietnamese coffee refiner and exporter. The study analyzes the relevance of supply chain environmental information for corporate environmental and financial decision making. It also explores opportunities to improve eco-efficiency at the company's operations and within its coffee supply chain. Vietnam is a major robusta coffee producer and exporter, but faces low prices and quality challenges from the international commodity market. Neumann Vietnam adds value through multi-step refinement processes before export.

1. Issues in Social and Environmental Accounting
Vol. 1, No. 2 December 2007
Pp 296-310
Supply Chain Information in Environmental
Management Accounting – the case of
a Vietnamese Coffee Exporter
Tobias Viere
Stefan Schaltegger
Centre for Sustainability Management
Leuphana University of Lueneburg, Germany
Jan von Enden
EDE Consulting Americas, Costa Rica
Abstract:
This case study discusses Environmental Management Accounting (EMA) which are illustrated
with the case example of Neumann Gruppe Vietnam Ltd., a medium-sized coffee refining and
exporting enterprise in Southern Vietnam. It examines the relevance of environment-related
supply chain information for corporate environmental and financial decision making and re-
veals possibilities for improving eco-efficiency at the site level and for its supply chain.
Keywords: Environmental management accounting, coffee supply chain, eco-efficiency, supply
chain management, supply chain costing, material and energy flow costing, environmental cost
accounting, life cycle assessment
1 Introduction sion making and reveals possibilities for
improving eco-efficiency at the site level
This case study discusses the use, con- and for its supply chain.
text and application issues of Environ-
mental Management Accounting (EMA) All company related information pro-
using the case study example of Neu- vided in this case study has been dis-
mann Gruppe Vietnam Ltd., a medium- closed by Neumann Gruppe Vietnam
sized coffee refining and exporting en- Ltd. and cross-checked by the authors.
terprise in Southern Vietnam. It exam- The information is partly simplified to
ines the relevance of environment- ensure both, confidentiality and a better
related supply chain information for cor- understanding of the case.
porate environmental and financial deci-
Tobias Viere is an EMA lecturer and researcher at the Centre for Sustainability Management (CSM), Leuphana Univer-
sity of Lueneburg, Germany, email: viere@uni.leuphana.de. Stefan Schaltegger is full professor for Management and
Business Economics, head of the Centre for Sustainability Management and the MBA Sustainability Management, and
Vice-President research of the University of Lüneburg, Germany, email: schaltegger@uni.leuphana.de. Jan von Enden
is Representative of EDE Consulting Americas, San Jose, Costa Rica, email: vonenden@ede-consulting.com

2. T. Viere, S. Schaltegger, J.v. Enden / Issues in Social and Environmental Accounting 2 (2007) 296-310 297
2 Initial situation modities in the world. Until the late
1990s it was even the second most valu-
Neumann Gruppe Vietnam Ltd. (called able commodity after oil (see Ponte
Neumann Vietnam in the following) is 2004). Vietnam is a newcomer on the
refining and exporting coffee. Eighty international coffee market and has ex-
employees work at their plant in Binh perienced a rapid growth of coffee farm-
Doung Province, near to Ho Chi Minh ing for the last two decades. This rise
City. Neumann Vietnam is a subsidiary has not only made Vietnam the second
of the German Neumann Gruppe GmbH, biggest coffee exporter of the world after
one of the world´s largest coffee trading Brasil, but it has also contributed to de-
companies. clining prices and ever increasing com-
petition in the world market. Since 1970
Refining and exporting coffee is only a the average annual price decline has
small part of the international coffee been 3% for arabica and 5% for robusta
supply chain, both in terms of environ- coffees (see Lewin et al. 2004).
mental as well as financial importance.
Therefore, attention is paid to the com- Globally, the low prices are associated
pany’s performance in relation to value with rising unemployment and poverty
chain and the system of dependences in in some of the coffee exporting coun-
which it operates. tries. At the same time the profits made
in the coffee importing countries have
Neumann Vietnam is situated at the in- remained stable or even increased due to
terface of smallholders and local compa- the introduction of new brands and
nies on one side and multinationals and blends and other value-adding activities
global competition for commodities on (see Lewin et al. 2004). Thus Ponte
the other. Neumann’s sales follow the (2004) characterises the coffee supply
demand and rules of international mar- chain as a buyer-driven or more specifi-
kets, while their procurement depends cally “roaster-driven” one.
on the availability and quality of the lo-
cal supply from farmers and middlemen. Vietnam is a mass producer of coffee,
The same appears true for environmental not a quality leader. Robusta, the main
and social issues: International require- type of coffee produced in the country,
ments for more sustainable coffee pro- is considered less valuable than arabica,
duction meet the local, not necessarily which is the main type of coffee pro-
congruent perception of environmental duced in most other countries. Robusta
importance. In the following, the eco- achieves lower prices in the world mar-
nomic and environmental situation of ket and is mostly used as an ingredient
Neumann Vietnam and the Vietnamese of downmarket coffee products. Most
coffee supply chain are further elabo- consumers prefer the taste of arabica,
rated upon. except for certain types of espresso.
Hence, Vietnam’s current competitive
2.1 Low quality, low price: The eco- situation is a purely price-driven one; it
nomic situation of the Vietnamese cof- needs to produce a cheap type of coffee
fee supply chain for the mass market at lowest possible
costs. It should be noted though, that
Coffee is one of the most traded com- there are initiatives to change this situa-

3. 298 T. Viere, S. Schaltegger, J.v. Enden / Issues in Social and Environmental Accounting 2 (2007) 296-310
tion. The Vietnamese Ministry of Agri- • Colour sorting: Further value is
culture, for instance, is planning to in- added to the coffee beans if they do
crease the production of arabica coffee, not only consist of the same size
to improve the quality of coffee process- but also of the same colour. Beans
ing and to participate more actively in that are too dark are sorted out as
international coffee trading (see People’s otherwise the quality of the roasted
Daily Online 2006). This might lead to coffee at the customer’s site would
the development of higher quality grades deteriorate.
in the future, which are less dependent
• Wet polishing: This final step pro-
on the fluctuating world market prices.
duces the highest quality robusta
coffee beans by improving and har-
2.2 Economic situation and refine-
monising the bean’s surface.
ment process at Neumann Vietnam
The selling price for the different quali-
Neumann Vietnam purchases and refines ties of robusta and the purchasing price
coffee to export it to roasters overseas. for robusta beans depend on the world
Their customers expect a coffee quality market and the local supply. It varies
which is above average and they pay from season to season or even shorter
premiums for certain quality grades. time scales due to international com-
Competitors of Neumann Vietnam are modity trading. Assuming a rather high
various Vietnam-based international, purchasing price of €1000 per metric
private and state-owned coffee export- tonne (t), the per tonne premium for re-
ers. The company is not aiming at a finement ranges from less than €5 for
huge market share; rather it is focusing cleaned beans up to €60 for wet polished
on higher qualities. robusta.
Neumann Vietnam exports coffee beans
2.3 Coffee and the environment
of different quality grades. To produce
these grades, the coffee beans are proc- Coffee is a typical example of a global
essed once or twice through the follow- commodity. Mainly produced in devel-
ing refinement steps: oping nations in tropical areas, the ma-
• Coffee cleaning: This basic clean- jority of consumers are found in indus-
ing step produces the lowest export- trialised countries. Highly efficient con-
able quality grade of robusta coffee sumer markets and the large corporate
beans. The step ensures that no for- wholesalers, roasters, and traders buy
eign matter (e.g. stones, leaves, soil coffee from agricultural smallholders
particles) is included in the ex- and middlemen. The widely spread per-
ported products which could harm ception of the global value chain of cof-
the customers’ roasting devices. fee is one where profits are made in in-
dustrialised countries at the expense of
• Gravity sorting: Neumann Viet-
environmental and social problems in
nam’s customers pay a premium for
the developing world (see Ponte 2004).
deliveries of homogeneous coffee
This has lead to initiatives promoting
beans. This step allows Neumann to
fair trade and sustainable coffee farming
produce export coffee beans within
including organic, shade-grown and bird
a determined range of size.
-friendly coffee products. The market

4. T. Viere, S. Schaltegger, J.v. Enden / Issues in Social and Environmental Accounting 2 (2007) 296-310 299
share of organic and fair trade coffee is that another crucial step of coffee pro-
continuously increasing, however, it is duction is coffee consumption.
still less than 2% of the world market
(ibid.). 3 Decision situation and company's
motivation for using EMA
Doubtlessly, the cultivation and process-
ing of coffee has severe environmental For several commodities, Blowfield
consequences. Deforestation, loss of (2003) observed a gap between the sus-
biodiversity, eutrophication, depletion of tainability or ethical standards of parts of
water and energy resources, and erosion the demand side and the values and pri-
are examples of environmental impacts orities of producers in the chain. This is
associated with the first steps of the cof- particularly true for the Vietnamese cof-
fee supply chain. Plentiful measures to fee chain. Neumann Vietnam’s custom-
reduce these impacts are available, for ers, international coffee roasters and
instance shade grown and organic culti- traders, are exposed to environmental
vation, diversification and alternating and sustainability concerns in the coffee
vegetation, fallowing, planting of grass consuming countries. Many of the inter-
under the coffee plants, recycling of national roasters and traders have re-
wastewater, composting of other waste, sponded by establishing CSR depart-
etc. These measures are perceived as ments, launching of codes of conduct,
costly. Therefore, the reasoning is that and offering fair trade and sustainable
the fierce price competition drives harm- coffees. Neumann Vietnam’s suppliers,
ful practices (see Clay 2004). in contrast, face almost no direct pres-
sures and get little incentives to change
Admittedly, it can not be concluded that their current way of mass production of
less intense competition would automati- coffee.
cally lead to less harmful practices. On
the contrary, high world market prices Neumann Vietnam’s options to increase
and profit margins encouraged Vietnam- its business performance are related to
ese authorities to promote coffee farm- the margin between the purchase price
ing since the late 1980s and stimulated and the selling price of coffee. Three
the interest of many Vietnamese to take basic options to increase the value added
their chance in coffee farming. Without can be distinguished and are linked to
knowing much about coffee cultivation, environmental issues:
harvesting and processing, this boost
lead to deforestation, soil degradation, a) Obtain premiums for better quali-
over-fertilisation and further environ- ties of coffee: Neumann Vietnam is
mental impacts (see Johnston 2001). already refining robusta coffee to
benefit from premiums. The export
While coffee cultivation, the supply of sustainable coffees might be a
chain’s first step, is often in the spotlight further option to receive premiums,
of environmental attention, later stages however, the supply and demand
in the value chain tend to be disregarded. for sustainable, organic or fair trade
However, life cycle analyses (LCA) of robusta coffee from Vietnam is
coffee production, conducted by Diers et negligible. Thus Neumann Vietnam
al. (1999) and Salomone (2003) show would have to stimulate the de-

5. 300 T. Viere, S. Schaltegger, J.v. Enden / Issues in Social and Environmental Accounting 2 (2007) 296-310
mand and the supply at the same 4 Applying EMA at Neumann Kaf-
time. Alternatively, Neumann Viet- fee Vietnam Ltd.
nam could also try to export sus-
tainable arabica coffee from Viet- As elaborated above, the EMA applica-
nam. tion at Neumann Vietnam is expected to
support two different decision making
b) Reduce company-internal costs:
situations: It needs to provide environ-
Considering the purchasing and
ment-related cost information on the
selling price of coffee as fixed,
refinement processes and eco-efficiency
Neumann Vietnam could increase
potentials within the supply chain.
profits by reducing its costs of re-
fining and exporting coffee. This
includes measures to increase en- 4.1 Material- and energy flow based
ergy- and material-efficiency. cost accounting of the refinement
processes
c) Purchase price reduction: Assum-
ing unchanged selling prices, lower
The business of refining and exporting
purchase prices of course add value
coffee is not known for environmental
to Neumann Vietnam’s operations.
problems like air and water pollution or
Eco-efficiency improvements in the
intensive energy and resource consump-
supply chain might enable suppliers
tion. A rough analysis of Neumann’s
to reduce their productions costs
operations validated this presumption.
and prices.
Perceivable environmental issues at
The company’s motivation for using Neumann’s site are energy consumption
EMA is to identify if and how environ- (electricity), solid waste and water con-
mental aspects are relevant for the busi- sumption. Transportation has not been
ness success (for a more general discus- considered for internal accounting as it
sion of the business case for sustainabil- is outsourced to suppliers. The low im-
ity see e.g. Schaltegger & Wagner pacts of the on-site environmental issues
2006). Option a) has not been consid- are highlighted by the following com-
ered further as the company is consider- parisons: For refining and exporting a
ing itself not to be in a strong enough metric tonne of green beans, Neumann
position to foster the development of a Vietnam uses 40 kWh of electric energy,
market for sustainable coffee from Viet- while a Vietnamese company that culti-
nam. Neumann Vietnam’s interest in vates and processes coffee consumes
analysing the relevance of environ- roughly 50 times more per tonne (see
mental aspects on the production costs Doan et al. 2003). The water demand for
(option b), can be characterised as an ad- one tonne of green beans is 35 litres on
hoc, short-term focused analysis of average, while the water demand for
available information, while option c) traditional wet processing of coffee can
requires external, supply chain related amount up to 70,000 litres per tonne (see
information. Influencing the eco- ICO 2001). An overview of material and
efficiency of the suppliers requires a energy inputs and outputs can be found
strategic, long-term focussed approach in Table 1.
(for a comprehensive characterisation of
different decision making situations un- The consideration of inputs and outputs
der EMA see Burritt et al. 2002). shows rather low raw material losses;

6. T. Viere, S. Schaltegger, J.v. Enden / Issues in Social and Environmental Accounting 2 (2007) 296-310 301
Table 1 Physical input/output table for 1 t of green bean input
Input Output
item Physical amount item Physical amount
green beans 1000 kg green beans grade A 430 kg
water 0.035 m3 green beans grade B 370 kg
electric energy 40 kWh green beans grade C 60 kg
green beans grade D 55 kg
green beans for local market 75 kg
dust 2 kg
weight loss 8 kg
waste water 0.035 m3
dust and weight losses due to further lower than the purchasing price. There is
drying of the beans account for one per- no value added for these products. Neu-
cent of the total output only. Neverthe- mann Vietnam should therefore aim at
less, the financial relevance of these reducing the amount of these products as
losses is not to be neglected. One per- far as possible. To better understand the
cent loss equals one percent of the pur- refinement process for the different
chasing costs of green beans, which ac- grades, a product-specific material and
count for more than 95% of the total energy flow related cost accounting has
production costs. Furthermore, green been carried out to trace energy and wa-
beans grade D and green beans for the ter consumption as well as material
local market need to be considered as losses to the different quality grades (see
unwanted products, as the selling price Table 2).
for these products is not higher or even
Table 2 Physical and monetary flows of green beans grade B
current situation best case scenario
physical monetary physical monetary
amount equivalent amount equivalent
green beans grade
wanted product B 1000 kg 1.040 € 1000 kg 1.040 €
green beans grade
D 60 kg 60 € 0 kg 0€
unwanted product
green beans for
local market 10 kg 10 € 0 kg 0€
dust and weight
waste loss 10 kg 0€ 0 kg 0€
raw material input green beans 1080 kg -1.080 € 1000 kg -1.000 €
further input electric energy 25 kWh -1,50 € 23 kWh -1,40 €
profit/loss* 28,50 € 39 €
*) not including depreciation, labour costs, and overhead costs like general administration costs,
management salaries, etc.

7. 302 T. Viere, S. Schaltegger, J.v. Enden / Issues in Social and Environmental Accounting 2 (2007) 296-310
As expected, energy and water demand Figure 1 Coffee production chain
do not affect the profitability signifi-
cantly. Material losses and the genera-
tion of lower quality grades do have fi-
nancial implications, though. Assuming
that it would be possible to produce
grade B without producing lower quality
grades and wastes, the profit would in-
crease by 37% or 10,50€ per tonne of
final product (see best case scenario in
Table 2). These figures are fictional as it
is not possible to fully eliminate lower
quality grades and waste. Nevertheless,
the results imply that paying premiums
for high quality supplies, which lead to
less unwanted products and wastes, is
profitable within a certain margin. Fur-
thermore, the results imply that only
grade A and B coffee beans contribute to
Neumann Vietnam’s profits substan-
tially.
The material and energy flow based cost
accounting has confirmed most of Neu-
mann Vietnam’s assumptions, in par-
ticular that the financial importance of
energy and water consumption is rather
low and that the quality of the purchased
coffee affects the profitability of the
business.
4.2 The coffee supply chain’s state of
the environment
The coffee supply chain starts with agri-
cultural processes in tropical countries
and ends with the consumption and dis- harvest coffee cherries. These activi-
posal stages, predominantly in industri- ties are associated with soil erosion
alised countries in cooler regions of the and loss of biodiversity due to the
world. The main steps comprise (see extension of agricultural land use;
ICO 2001 and Figure 1): eutrophication, eco-toxicity and
greenhouse effect due to fertilisation;
• Coffee farming: Coffee farmers and mammal and aquatic life toxicity due
hired workers plant coffee trees, ap- to pesticide use; and resource deple-
ply fertiliser, pesticides and herbi- tion due to the fuel and water con-
cides, irrigate the plants and finally sumption required for farming.

8. T. Viere, S. Schaltegger, J.v. Enden / Issues in Social and Environmental Accounting 2 (2007) 296-310 303
• Dry/wet processing: The coffee cher- are glasses with screw caps for solu-
ries have to be processed to release ble coffees. Roasting does not neces-
the green coffee beans. Robusta cof- sarily happen after export, it is also
fee cherries are usually treated by common to export roasted coffee.
using the dry processing method; • Consumption: Energy consumption is
most arabica coffees are wet proc- the most important environmental
essed. Dry processing can be issue of this step of the coffee life
achieved by solar power (sun-drying) cycle. The making of coffee requires
or by the use of fuels; the latter one is energy, mainly electricity, for the
more common in Vietnam. After dry- percolator. The habit of leaving cof-
ing the coffee cherries are hulled and fee on the hot plate of the percolator
grinded to release the green coffee to keep it warm increases the energy
bean. The leftovers of this process, demand further. Of course, coffee
dried pulp and parchment skin, can making involves a certain amount of
be composted. Wet processing is water input as well.
more harmful from an environmental • Disposal: Consumers need to dispose
point of view, but gains higher selling of coffee grounds and filters as well
prices for the coffee beans. The tradi- as the packaging. Coffee grounds and
tional wet processing method requires filters are often composted, but have
40,000 to 70,000 litres of water input a comparably long and unsmooth rot-
per t of green bean, the mechanical ting process. Packaging as well as
mucilage removal method reduces jute and plastic bags from previous
this demand down to 1,000 litres. The supply chain steps are recycled, in-
organic pollutant load of the gener- cinerated or dumped. The common
ated waste water is similar in both environmental problems related to
cases. BOD and COD of wet process- waste treatment like energy consump-
ing waste water are extremely high, tion, acidification and greenhouse gas
while the pH is low. Untreated waste emissions are therefore present.
water of wet processing is therefore a • Transportation: Transportation is not
major driver of environmental prob- depicted in Figure 1, as it happens in
lems caused by the production of cof- between almost all steps of the coffee
fee. life cycle. The biggest transportation
• Coffee refinement and export: This distance concerns the shipping of
part of the coffee life cycle has been green beans or roasted coffee from
described above. the producing to the consuming coun-
• Coffee roasting and retail: To roast tries. Transportation is associated
the green coffee beans, thermal en- with the depletion of natural re-
ergy is required. Its generation causes sources, in particular fossil fuels, and
air emissions including greenhouse the environmental impacts of com-
gases. Decaffeinated and soluble cof- busting the fuels, most prominently
fees in particular require water in the global warming.
roasting process as well. After roast-
ing, coffee needs to be packed, Poly- From a decision making point of view it
ethylene foil (PET) ensures that no is important to know at which steps of
oxygen reacts with the coffee to the coffee life cycle environmental im-
avoid ageing. Other packaging types provements are most promising. Energy-

9. 304 T. Viere, S. Schaltegger, J.v. Enden / Issues in Social and Environmental Accounting 2 (2007) 296-310
efficiency optimisation of the refinement cultivation (ibid.). This does not lower
processes might reduce Neumann Viet- the relevance of substantial environ-
nam’s production costs slightly but it has mental impacts in the farming areas, but
almost no impact on the overall environ- it highlights the importance of improv-
mental performance of the supply chain ing coffee cooking procedures.
(see chapter .(4.1)
In the analysis of Diers et al. (1999),
Life-cycle assessments (LCA) are a coffee cultivation and processing ac-
common tool of environmental account- count for 49%, whereas consumption
ing, conducted by companies as well as and disposal account for 41% of the en-
research organisations, governments, viron-mental impacts (see Figure 2).
etc. (see Schaltegger and Burritt 2000). Furthermore, a comparison of best case,
An LCA can be used to highlight the worst case and the current situation
environmental importance of different places the current situation near to the
steps of a product’s life cycle. Two worst case scenario, meaning that the
LCAs have been conducted for coffee improvement potential of the coffee life
production (Diers et al. 1999; Salomone cycle is rather high (see Diers et al.
2003). Looking for the highest overall 1999). The coffee processing step has a
improvement potential of the coffee life higher impact in this analysis due to the
cycle, the conclusion of both LCAs is fact that wet and dry processing has
similar: The first and the last steps of the been considered, while Salomone (2003)
life cycle matter most. considers dry processing only. Similarly,
the analysis of Diers et al. (1999)
Salomone (2003) identifies consumption stresses the waste disposal issue more
as the single most important step fol- than Salomone (2003) does which leads
lowed by cultivation. Cultivation ac- to a slightly higher importance of the
counts for more than 97% of coffee’s disposal stage. Both LCAs do not ex-
total eco-toxicity and eutrophication, plicitly consider loss of biodiversity,
while consumption, comprising mainly which is likely to increase the environ-
the water use and energy demand for mental importance of the cultivation step
preparing coffee, accounts for more than even further.
two thirds of total air acidification,
greenhouse effects, photochemical oxi- The results of the two LCAs help deci-
dant formation, depletion of ozone layer, sion makers to prioritise options for en-
human toxicity and aquatic eco-toxicity. vironmental improvements of the supply
The importance of the consumption step chain (see Diers et al. 1999, Salomone
for the overall environmental perform- 2003):
ance of coffee production is supported • In cultivation, avoidance or reduc-
by the results of a sensitivity analysis. It tion of fertiliser use is the most im-
reveals that in terms of total weighted portant impact followed by meas-
environmental impacts, the impact of ures to avoid erosion. Preservation
changing the coffee making process, e.g. of biodiversity has not been consid-
gas stove coffee making instead of an ered in the LCAs, but is likely to be
electric coffee machine, is substantially of importance in the Vietnamese
higher than the impact of avoiding pesti- coffee farming context as well.
cides or applying organic fertilizers in
• The impacts of wet processing can

10. T. Viere, S. Schaltegger, J.v. Enden / Issues in Social and Environmental Accounting 2 (2007) 296-310 305
Figure 2 Environmental impacts along the coffee value chain (adapted from
Diers et al. 1999)
% of total environmental impact
50%
40%
30%
20%
10%
0%
g
l
e
g
il
a
in
ta
f fe
ti n
os
ss
Re
co
isp
as
ce
Ro
D
&
ro
w
de
&
.p
a
fr
n
a
cl
ti o
to
Tr
in
p
or
n
m
p
tio
su
ns
uc
on
a
Tr
od
C
Pr
be substantially reduced by proper on average and the use of thermos
waste water treatment and reduc- cans or bottles instead of leaving
tion of water consumption. In wet the coffee on the hot plate for sev-
and dry processing, fuels are con- eral minutes.
sumed for drying. Energy-efficiency
• Coffee ground and coffee filters are
measures could reduce environ-
the biggest contributors to environ-
mental impacts like global warming
mental impacts of the disposal
and resource depletion.
stage. Measures to ensure proper
• Refinement, export, roasting, retail composting are likely to reduce
and transportation are not the high- these impacts.
est priority for environmental im-
provements of the coffee life cycle.
4.3 Environmental supply chain cost-
• In consumption eco-efficiency can ing and management
be improved by using electricity
from renewable resources or by Neumann Vietnam Ltd. operates in a
substituting the coffee machines highly competitive market, thus finan-
run by electric energy with differ- cial implications of environmental sup-
ent devices, e.g. plunger pots, ply chain improvements are of great in-
which can make use of other and terest. Gathering, analysing and using
less polluting energy sources like supply chain cost information for mana-
gas. A big improvement potential is gerial decision making is not widely
the change of consumer habits covered in the general management ac-
which includes the avoidance of counting literature. At least some au-
pouring one cup of coffee per can thors have elaborated upon this topic in

11. 306 T. Viere, S. Schaltegger, J.v. Enden / Issues in Social and Environmental Accounting 2 (2007) 296-310
detail, in particular in the context of lo-
Figure 3 Composition of coffee culti-
gistics (see LaLonde & Pohlen 1996;
Cullen et al. 1999). vation costs (Source: EDE 2003)
further
investment/
Supply chain costing provides informa- depreciation
1%
tion to determine the overall effective- 16%
ness of the supply chain, identify im-
provement opportunities, evaluate alter- fertiliser
38%
native supply chain structures, and select
supply chain partners. The implementa-
tion of supply chain costing is a difficult
task as its benefits do not necessarily
occur evenly throughout the chain (see
LaLonde & Pohlen 1996). “The sharing
of cost information may give away a hired labour irrigation
hard-earned competitive advantage or 43% 2%
provide negotiating leverage to their
supply chain partners” (LaLonde and
Pohlen 1996, 4). EDE 2003). If farmers manage to use
fertilisers in the best possible way they
The environmental improvement priori- can reduce the costs for purchasing fer-
ties elaborated in chapter 4.2can be used tiliser by almost 50%. This reduces their
to analyse supply chain costs. As Neu- total production costs by roughly 20%
mann Vietnam is not considering itself and doubles the average farmer’s profits.
in a position to affect the consumer be- Looking at these facts from a customer’s
haviour or the disposal stage of the cof- perspective, the purchasing price for
fee life-cycle, the environmental supply harvested coffee could be reduced sig-
chain costing focuses on upstream nificantly without compromising the
stages, namely cultivation and process- farmer’s profits.
ing. Robusta coffee processing applies
dry processing, i.e. in environmental An environmental supply chain costing
terms the processing step is less impor- can also be used to reveal the additional
tant than the cultivation stage. benefits and costs of alternative, less
damaging cultivation methods, for in-
In cultivation, the use of fertilisers is stance by comparing the premiums paid
costly and harmful for the environment. for organic, shade-grown coffee and the
Figure 3 shows the 2003 composition of consequent reduction of production costs
production costs at an average robusta with the reduced yields. In processing,
coffee farm in Dak Lak Province of the saving potential of more energy-
Vietnam as investigated by one of the efficient drying devices could be of in-
authors (see EDE 2003). Fertilisers ac- terest, too.
count for 38% of total production costs.
Moreover, the majority of farmers have The availability of supply chain cost
been found to use fertilisers ineffi- information does not solve one major
ciently. Many farmers use more than problem: “Restructuring the supply
twice as much fertiliser as necessary (see chain to exploit efficiencies or seize

12. T. Viere, S. Schaltegger, J.v. Enden / Issues in Social and Environmental Accounting 2 (2007) 296-310 307
competitive advantages requires a For Neumann Vietnam, the supply chain
mechanism capable of equitably allocat- management challenge is to foster eco-
ing cost benefits and burdens between efficiency improvements, in particular
supply chain partners” (LaLonde & Poh- reduced use of fertilisers, at the coffee
len 1996, 8). Obviously, most Vietnam- farming stage and to ensure participation
ese farmers have not adapted methods in the financial benefits. According to
for efficient fertiliser use by themselves. Williamson (1975 and 1985) the three
If one supply chain actor, like Neumann basic options for co-ordinating supply
Vietnam, starts to train farmers on a chains are price (market arrangement),
more efficient use it is not necessarily command and control (hierarchical ar-
Neumann Vietnam who benefits. The rangement), and negotiation (co-
farmers may as well sell their coffee to operative arrangement):
other middlemen and exporters or just
keep the farmgate price on the same • Neumann Vietnam could use mar-
level to make more profit. At first ket arrangements to provide incen-
glance, the incentive for Neumann Viet- tives, or more precisely premiums,
nam to facilitate eco-efficiency improve- to its supplier to receive higher
ments within the supply chain is rather qualities or special types of coffee,
low. (Environmental) supply chain man- for instance organic, fair trade cof-
agement is considered to be a solution fees if there is a customer demand
for this problem. for it. For the reduction of fertiliser
use or other eco-efficiency meas-
For Cooper et al. (1997a, 68) supply ures in the upstream supply chain,
chain management is “an integrative market arrangements are no prom-
philosophy to manage the total flow of a ising option.
channel from earliest supplier of raw
• Establishing hierarchical arrange-
materials to the ultimate customer, and
ments is nearest to the original un-
beyond, including the disposal process”.
derstanding of supply chain man-
When taking the perspective of one
agement, where rather large enter-
company within the chain, the challenge
prises purchase key suppliers and
is slightly different, though. In this per-
own or control distribution chan-
spective, according to the author of the
nels. However, Neumann Vietnam
definition above, the supply chain looks
does not intend to buy suppliers
not like a chain, but rather like an up-
and is also not in a position to
rooted tree. The company needs to de-
dominate the chain.
cide how many of the roots and branches
it wants to manage (see Cooper et al. • Co-operative arrangements are the
1997b, 9). In this connection, Seuring most promising option for Neu-
(2004) has compared different concepts mann Vietnam. For instance, the
of environmental management that ad- company can offer its suppliers
dress the flow of material and informa- training and support on implement-
tion along life cycles or supply chains. ing eco-efficiency measures. In
He concludes that environmental supply return, the suppliers need to agree
chain management is the most manage- to either pay Neumann Vietnam for
ment-oriented approach of all the ap- these services or to share their fi-
proaches assessed. nancial benefits. This kind of verti-

13. 308 T. Viere, S. Schaltegger, J.v. Enden / Issues in Social and Environmental Accounting 2 (2007) 296-310
cal co-operation is yet difficult to the reciprocal dependence” (Cullen et al.
achieve as it requires monitoring of 1999, 31).
the success of eco-efficiency meas-
ures and the adherence to contracts
for all partners involved. Middle- 5 Conclusions
men or farmers might take the op-
portunity to underestimate the sav- Neumann Vietnam is one of many ac-
ings or to sell parts of the harvest to tors, however a large one, in the Viet-
other traders and exporters without namese coffee industry and supply
Neumann Coffee’s knowledge. chain. Neumann Vietnam’s business, the
Thus, horizontal co-operation refinement and export of green robusta
seems to be the best available op- coffee beans, does not cause huge envi-
tion. Higher energy-efficiency in ronmental impacts. EMA has been used
dry processing and appropriate use to confirm this presumption, but it has
of fertilisers lead to higher profit- also ascertained the financial relevance
ability and/or competitiveness of of even small raw material losses like
the Vietnamese coffee industry as a dust and weight loss due to evaporation.
whole. Having this in prospect,
Vietnamese coffee exporters, trad- In contrast to the rather low environ-
ers and related organisations like mental importance of its refinement and
the Vietnam Coffee and Cocoa As- export operations, the supply chain in
sociation (VICOFA) could share which Neumann Vietnam operates is
the costs of training programs for exposed to various substantial environ-
coffee farmers and companies of mental concerns. Using LCA informa-
the processing step. Neumann Cof- tion in the context of EMA has helped to
fee could try to initialise and lobby identify those steps within the coffee
such an eco-efficiency programme. supply chain that have highest environ-
mental impacts and highest options for
The findings above are in line with the environmental improvement measures.
results of a comprehensive analysis of Cultivation and consumption are the
sustainable cotton supply chains con- most important steps from an environ-
ducted by Goldbach et al. (2003). The mental perspective. Some of the envi-
authors have observed that the initial ronmental concerns in the supply chain
phase of environmental and sustainabil- have direct financial consequences. En-
ity supply chain management is charac- ergy inefficiencies and the overuse of
terised by co-operative or even hierar- fertiliser diminish the overall supply
chical arrangements, while at later stages chain profits or lead to higher market
market arrangements gain importance. prices. Neumann Vietnam can get a bet-
Furthermore, they conclude that envi- ter understanding of these interdepend-
ronmental supply chain management encies by applying supply chain costing.
cannot be viewed as a technical matter Measures to increase the supply chain
only. Instead it is an inter-organisational eco-efficiency need supply chain man-
concept (see Goldbach et al. 2003). It agement efforts, in particular horizontal
implies a “change from managing sup- co-operation.
ply chains based on serial dependence
and power to recognising and managing Besides Neumann Vietnam, further ac-

14. T. Viere, S. Schaltegger, J.v. Enden / Issues in Social and Environmental Accounting 2 (2007) 296-310 309
tors within the supply chain can contrib- ing. Links Between Business
ute to environmental and related finan- Actors and Environmental Man-
cial improvements. Coffee consumers agement Accounting Tools”,
have an even bigger role in this than ex- Australian Accounting Review,
pected. By demanding alternative types Vol. 12, No. 2, pp. 39-50.
of coffees like organic, fair trade or sus- Clay, J. (2004) World Agriculture and
tainable coffee, consumers influence the the Environment. A Commodity-
supply chain indirectly, in particular the By-Commodity Guide to Impacts
cultivation step. But consumers can also and Practices. Washington
directly reduce the environmental bur- D.C.: Island Press.
dens of the coffee life cycle, for instance Cooper, M.C., Ellram, L.M., Gardner,
by not making more coffee than is con- J.T. & Hanks, A.M. (1997a)
sumed, by using insulated coffee pots “Meshing multiple alliances”,
rather than leaving coffee on the perco- Journal of Business Logistics,
lator stove, by purchasing electricity Vol. 18, No. 1, pp. 67-87.
from renewable sources or by substitut- __________, Lambert, M.L. & Pagh,
ing their electricity-run coffee machine. J.D. (1997b) “Supply Chain
Management: More Than a New
This case study reveals the importance Name for Logistics”, Interna-
of environment-related supply chain in- tional Journal of Logistics Man-
formation for corporate decision- agement, Vol. 8, No. 1, pp. 1-
making. EMA can make use of tools like 14.
LCA to satisfy this demand. In combina- Cullen, J., Berry, A.J., Seal, W., Dunlop,
tion with concepts like supply chain A., Ahmed, M. & Marson, J.
costing this analysis leads to the identifi- (1999) “Interfirm Supply Chains
cation and prioritisation of eco- – the contribution of manage-
efficiency improvements along the ment accounting”, Management
chain. In contrast to the still growing Accounting, June 1999, pp. 30-
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organic coffee farming, supply chain eco Diers, A., Langowski, H. C., Pannkoke,
-efficiency measures show a potential to K. & Hop, R. (1999) Produkt-
directly enter the mass market of Viet- Ökobilanz vakuumverpackter
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Informa.
Doan, T., Sturm, A. & Enden, J.v.
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