Improving environmental management with full environmental cost accounting

Based on the most comprehensive field research ever conducted in corporate environmental management, this article reports on the integration of environmental impacts into product costing and cost management practices in organizations. It examines approaches for identifying and tracking current environmental costs related to both current and past production. It also develops the need and prospects for a complete analysis of future environmental impacts, including both costs and benefits, and the integration of these elements into a life-cycle costing or full environmental cost accounting model. The prospects for full environmental cost accounting and the related accounting issues are analyzed. Finally, the importance of full environmental cost accounting for improving corporate environmental performance, reducing corporate environmental impacts, and increasing long-term corporate profitability is discussed.     

Getting started with environmental cost accounting

Proactive corporations have been looking at methods to determine the real costs of doing business, including environmental costs using environmental cost accounting (ECA) methodology. Many companies do not track or measure environmental costs and therefore do not know their true environmental costs. Unfortunately, conventional accounting practices rarely tease out environmental costs, and the costs associated with environmental compliance remain hidden in general overhead accounts. ECA can bring the world of business and the environment closer. When we have a better handle on environmental costs, we can use this information to better prioritize environmental projects, identify cost improvement projects, and allocate environmental costs to products. In this article we explore how some companies approach ECA and show how to initiate an ECA program.     

Environmental performance indicators for enhancing environmental management

Traditionally, environmental issues and concerns have been viewed as a constraint to businesses. This has resulted in environmental managers relying heavily on a reactive, compliance-based approach to justify change. Businesses are now recognizing that efficient management in the environmental arena can benefit the entire company and open new opportunities for increased profits. Managers have acknowledged that environmental issues can be integrated into daily business trends and activities. Not only does sound environmental management decrease liability, but also in current markets a “green” image can attract investors and customers. This article shows how one tool that progressive companies are focusing attention on—environmental performance indicators—is being used to convey the current status of environmental issues and improve the management of these issues for the benefit of the company as well as the environment.     

TQM and the cost of environmental quality

Because management is driven largely by financial concerns, determining the cost of environmental quality is a critical step in developing an environmental TQM program for which management will actively demonstrate commitment and support. Costs of environmental quality can be grouped into three categories: failure, prevention, and appraisal. The total cost of environmental quality can be used as a benchmark to monitor the level of environmental quality and to justify the redirection of resources.     

Environmental accounting for waste management: A study of local governments in Australia

Local governments in Australia, especially in large urban areas, have faced a challenge of the growing quantity of waste generated and the diminishing space for waste disposal in recent years. The central government has demonstrated the importance of developing strategies to make full environmental costs and impacts of waste disposal and material recovery accountable for waste management decision-making. However, research into this field is limited. This paper investigates environmental accounting practices in local government waste management. From a survey conducted with local government authorities in New South Wales (NSW) Australia, it is found that overall the level of direct waste flow and activity accounting is higher than the level of hidden and external environmental cost accounting, though local governments tend to identify and use more physical information associated with waste flows and activities than relevant monetary information. External environmental impacts of waste disposal are often overlooked and show the lowest level of practices. The survey results also indicate that urban local governments have taken more environmental information into account than rural local governments, but such difference is not significant between local governments of different sizes. The complexity of waste technical services and operations is confirmed to have a positive and significant effect on the level of environmental accounting for waste management across local governments surveyed.     

企业环境管理会计核算框架与方法研究

企业环境管理会计从环境的角度,将企业的环境影响纳入到环境会计的核算范围之内,构建一些实物型或价值型的环境业绩指标,表达企业对环境造成的影响或损害。本文立足于国际环境会计应用案例,结合财务会计特征和我国目前的环境数据基础,研究提出了中国企业环境管理会计的基本内涵和方法框架,并就如何加强企业环境管理会计的应用进行了讨论。     

Environmental history: A piece in the puzzle for establishing plans for environmental management

Establishment of plans for environmental planning and management requires that a number of natural and societal factors must be taken into consideration. Insights into the inherent dynamics of nature as well as the role that past human activities have played for establishing the current condition of the landscape and the natural environment in general are essential. Many natural and man-made changes occur over time scales of decades or centuries, and these are difficult to comprehend without a historical perspective. Such a perspective can be obtained using palaeoecological studies, i.e. by geochemical and biological analyses of lake sediment and peat deposits. To illustrate the long-term dynamics of nature and particularly the role of man, we present here five case studies from Sweden concerning pollution, lake acidification, lake eutrophication, biodiversity, and landscape dynamics and conservation – topics of broad interests – and discuss benefits of including a longer time perspective in environmental management.     

Environmental portfolio analysis: An integrated strategic approach to environmental management

As businesses strive to reduce costs and become more competitive, environmental costs and potential future liability issues continue to raise overhead expenses. The decision process is further challenged by the various interpretations of existing laws and the uncertainty of future applicable regulations and their interpretation. To make more informed business decisions and bridge the gap between the environmental and business perspective, organizations need to be able to see the overall environmental picture and how it affects the current and future business operation. This article presents a systematic approach to developing an organization's integrated baseline “environmental portfolio” with various business risk levels and expected costs. Utilizing computer simulation, sensitivity iterations are performed to show the results of different scenarios. These scenarios can include various probabilities of cost levels, permitting strategies, and litigation, as well as the success of new technologies. Management can then focus attention on the main driving factors and avoid spending too much attention on lesser items. An additional benefit to this process is that communication between the various segments of an organization are enhanced since their perspectives are clearly articulated as part of the analysis. Sensitivity analysis also provides the framework for a sanity check of the process and results. Are projected levels of success reasonable? What levels would be required to change the decision, and how likely are they to occur? What level of overall business risk associated with environmental issues is prudent? In addition this article shows how computer modeling and simulation can bring a valuable perspective to the decision-making process.     

Environmental audit: III. Improving the management of environmental information for toxic substances

Environmental programs have been commonly driven by a preoccupation with the collection of data in the mistaken belief thatdata is synonymous withinformation. The distinction between data (that is, the quantified and qualitative attributes of a particular environment) and information (specifically, data processed so as to focus upon a particular environmental problem) will become far more important to environmental managers. They will increasingly manage their information through use of what has become known as information resource management (IRM) and the attendant use of critical success factors methodology. Environmental managers will thereby move away from concerns about data and specific EDP hardware and applications toward managing information as a valuable agency resource. In applying IRM, they will find it helpful to include a number of planning elements and to resolve early a number of issues critical to its successful use.     

Environmental marketing's new relationship with corporate environmental management

Issues of environmental marketing track back to issues of environmental management—i.e., to issues of overall corporate environmental commitment and responsibility. It is absolutely essential that a commitment to corporate environmental improvement be in place before an environmental marketing program is launched. Additionally, marketers can and should play a central role in the greening of the corporation. The marketer brings at least two important skills or strengths to the environmental improvement process—strengths of perspective and strengths of skill set.     

Environmental risk management and the role of environmental insurance

Environmental insurance—especially the newer types of coverage introduced in recent years— can help protect your company from a range of potential liabilities. © 2000. Environmental Insurance Underwriters Agency, Inc. Used with permission.     

Environmental hazards,neighbourhood quality,and neighbourhood environmental activism

summary This article presents a study of the association of perceived neighbourhood hazards, neighbourhood quality, and resident behavioural responses in two New Jersey, USA, communities that contain multiple technological hazards and populations that are relatively poor and racially homogeneous. The number of neighbourhood problems was highest among residents who engaged in activities to protect their neighbourhood and perceived that their neighbourhood was of poor or fair quality. These respondents perceived three to five times as many hazards as their counterparts who were passive and perceived that their neighbourhood was of excellent or good quality. Respondents' age, education, gender, type of residential unit occupied, and length of residence in the neighbourhood, were not associated with their evaluation of neighbourhood hazards. The authors argue that multiple-hazard neighbourhoods are excellent environments to learn about perception of hazards.Professor Michael Greenberg is Head of the Department of Urban Studies and Community Health where Professor Dona Schneider and Jim Parry are associates.     

The importance of training for environmental management

Conclusion I wish to conclude as I began, with a quotation from a newspaper on the potential damage and the attendant costs of not applying sound environmental management: The Guardian, Wednesday, 5 October 1983: “The Shell Oil Company which admitted yesterday that it had allowed dangerous pesticides to escape near Denver, Colorado has received a demand from the US Army for $1 8 billion to help to stop pollution from reaching the city ... Shell and the US Army research, which includes experiments with nerve gas, may have caused far more serious pollution in the area.” The need for sustainable development and for training in environmental management in Third World countries, should ensure that reports on environmental damage, such as the one above, do not become a common occurrence in developing countries in the next decade or hopefully forever after. This paper was presented at the conference “The Environmental Dimension in World Development, the contribution that British Companies can make”, organized by the Centre for World Development Education, London, UK, during October 1983. Dr Jose I. Furtado is Professor of Zoology in Malaysia, and is seconded as Science Adviser with the Commonwealth Secretariat in London.     

An environmental sustainability based budget allocation system for regional water quality management

A budget allocation system for regional water quality management to achieve environmental sustainability was developed in this study to assist a local authority with making appropriate budget allocations for improving Regional Water Environmental Sustainability (RWES) in an efficient manner. The system consists of visions and goals, RWES indicators, and an analysis of budget allocation versus RWES. Visions and goals define task priorities for improving water environmental sustainability. Indicators are used to measure the progress of related tasks toward RWES goals. These indicators are classified by the Driving Force-State-Response (DSR) framework to facilitate the analysis of relationships among indicators. Linkages between budget allocation and indicators are also analyzed, and the result is used to assess whether the available budget is allocated properly to raise the RWES. The applicability of the system is demonstrated by a case study involving a local environmental protection authority.     

Industry's role in air quality improvement: Environmental management opportunities for the 21st century

More than 200 years ago, Adam Smith, the founder of modern economics, wrote in the Wealth of Nations that “…consumption is the sole end and purpose of all production; and the interest of the producer ought to be attention to…that of the consumer.” In recent years, the rapid growth of the world economy has given Adam Smith's maxim new meaning. The age-old desire for consumption grows unabated and increasing numbers of consumers around the world are attaching new value to the environmental quality of goods and services and expressing concern over the environmental impacts of industrialization. That concern is growing because more than 70 percent of the world's urban population live in areas where the air is seriously polluted and as many as 750,000 people—the majority in developing countries—die each year of ailments caused by air pollution.¹ Over the past 25 years, corporations throughout the world have made dramatic changes in the way they do business as more people come to understand how the ecological system works and how polluted air and water endanger human health. The key to increasing industry's participation in the drive for higher standards of air quality is the growing realization that effective environmental management, technological development, and technology dissemination are cost-effective and profitable business strategies. Global competition is making firms around the world more customer-conscious and, to the extent that consumers demand products that minimize environmental degradation and enhance the quality of their lives, businesses in every industry must respond in order to survive.² This article examines how changes in business practices, driven by a better understanding of how natural environments function, are converging to provide new opportunities for environmental management that go beyond regulatory compliance to reduce air pollution. Although sound and well-enforced environmental regulations are an essential foundation for improving air quality, command-and-control systems alone are unlikely to achieve the lower levels of pollution that will be necessary to achieve sustainable development in the 21st century. In cooperation with government, businesses in every industry can play crucial roles in achieving higher standards of air quality while at the same time maintaining acceptable levels of economic growth. We explore three ways in which corporations can contribute to environmentally sustainable development: (1) by adopting proactive environmental management systems that focus on air pollution prevention; (2) by developing new technologies for air pollution control and reduction; and (3) by transferring air pollution control and prevention technologies through international trade and investment.     

Business-oriented environmental performance metrics: Building consensus for environmental management systems

Today, environmental managers are learning new ways of adding value to their organizations. Before, the environmental department was an overhead expense—an indirect support group required for complying with burdensome regulations. Now, such departments add insights and value during strategic planning sessions, identify efficiency improvement opportunities, provide a superior return on investment, and—bottom line—improve profits. The primary approach to meeting the challenge is a new environmental management system (EMS) that identifies, measures, and manages a diverse set of internal and external customer needs. These needs include environmental cleanups, regulatory compliance, pollution prevention, and design for the environment—and each represents a potential improvement opportunity. Unfortunately, most organizations have so many such needs that all cannot be addressed at once, given the resource constraints of a competitive business climate. Thus, priority is a key concept of an effective EMS. This article describes an innovative application of consensus-building tools that quickly identify and set priorities for diverse environmental programs. The article also shows how appropriate performance measures will align these programs with corporate goals and objectives.     

ANSI/ASQC E4: A unified management standard for quality assurance of environmental programs

The need for a national consensus standard for quality assurance (QA) for environmental programs emerged from efforts to clean up sites contaminated by hazardous chemical and/or radioactive wastes. The waste management community has been using several different standards or sets of requirements for establishing the QA and quality control (QC) procedures for use during the cleanup of contaminated sites. Some of these requirements have been imposed by federal agencies, including the Department of Energy (DOE), the Department of Defense (DOD), the Nuclear Regulatory Commission (NRC), and the Environmental Protection Agency (EPA). Often, requirements have been chosen to fit a particular mission or regulatory requirements. The remediation and restoration of federally owned or operated hazardous waste sites has created a situation in which multiple organizations (including federal and state regulators, site operators, and remedial contractors) are overseeing or addressing the same technical problem, often at the same site, and using different QA requirements. The occurrence of multiple QA/QC requirements has resulted in costly and time-consuming duplication of effort. In addition, the perception of inconsistent and often conflicting requirements has created confusion and frustration. The need for a single set of QA/QC criteria to bring order and consistency to the application of QA in the environmental waste management area became increasingly clear, and led to the development of ANSI/ASQC E4, which may be approved and issued by this year.