Environmental cost accounting: The bottom line for environmental quality management

Recent years have seen the environment emerge as one of the most pressing issues facing American business. Eventually, environmental costs will affect the bottom line of every American company. A recent study in the National Law Journal estimates that cleanup of the nation's known hazardous wastes sites will cost $752 billion over thirty years under current environmental policies. Environmental legislation and regulations impose annual compliance costs estimated by the Environmental Protection Agency at more than $30 billion. In the near future, environmental expenses for cleanup, regulatory compliance, and management are anticipated to grow to between 2.5 and 3 percent of GNP. Corporations that wish to be competitive must successfully manage these costs while maintaining or improving their role as responsible corporate citizens. Implementing a comprehensive system for identifying and managing environmental costs requires a multidisciplinary team effort. Environmental costs impact product selection, design and pricing, capital budgeting, and future strategic direction. In order to make informed and meaningful managerial decisions on environmental programs, real cost data are vital. An environmental management systems (EMS) requires information to set goals and then monitor progress towards those goals over time. This article will discuss the current cost accounting systems (CASs) available to support the myriad goals of environmental management systems. In addition, the article will outline a framework for plotting the location of your current EMS on a matrix of regulatory and information requirements and evaluating whether your corporation's CAS is adequate to support the goals and objectives set by your environmental management program. By anticipating future regulatory and information requirements, flexible systems can be developed to adapt to new and more stringent regulations and more complex information requirements.     

管理会计方法与环境成本核算刍议

本文分析了传统财务会计方法核算环境成本的缺陷，并运用管理会计中的作业成本法与生命周期成本法对环境成本核算等问题进行了探讨。     

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.     

Program efficiency analysis within the environmental landscape

The aim of this paper is to demonstrate the importance of accounting for environmental impacts in project feasibility. Cost–benefit analysis, a germane tool for measuring a project’s feasibility, can be utilized for projects with environmental consequences. This paper first provides a background on cost–benefit analysis as well as a background on environmental cost–benefit analysis. It then provides the steps taken in order to perform this type of analysis. With this cost–benefit analysis and environmental cost–benefit analysis framework in mind, six international case studies are reviewed to demonstrate how cost–benefit analysis is applied to various environmental projects around the world using different methods and from both a public and private sector viewpoint. Recommendations are then put forward to address the need for continued consideration and implementation of environmental impacts on cost–benefit analyses.     

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.     

Reducing life-cycle environmental impacts: An industry survey of emerging tools and programs

Corporate environmental practices have been evolving quite rapidly in recent years, as consumers express their preferences for environmentally friendly products and practices, as manufacturers look “upstream” and inquire into their suppliers' environmental practices due to liability and marketing concerns, and as company operating costs increase as a result of new environmental regulations. New corporate efforts are made to anticipate (rather than respond to) outside environmental pressures, to internalize costs, and to find strategic opportunities or competitive advantages based on company or product environmental performance. This article describes a survey and research project designed to explore one aspect of these evolving corporate practices—the use of analytical tools and associated programs, such as life-cycle assessment and design-for-environment—by companies to account for impacts throughout a product'S life-cycle.     

Comparing Green and Grey Infrastructure Using Life Cycle Cost and Environmental Impact: A Rain Garden Case Study in Cincinnati,OH

Green infrastructure (GI) is quickly gaining ground as a less costly, greener alternative to traditional methods of stormwater management. One popular form of GI is the use of rain gardens to capture and treat stormwater. We used life cycle assessment (LCA) to compare environmental impacts of residential rain gardens constructed in the Shepherd's Creek watershed of Cincinnati, Ohio to those from a typical detain and treat system. LCA is an internationally standardized framework for analyzing the potential environmental performance of a product or service by including all stages in its life cycle, including material extraction, manufacturing, use, and disposal. Complementary to the life cycle environmental impact assessment, the life cycle costing approach was adopted to compare the equivalent annual costs of each of these systems. These analyses were supplemented by modeling alternative scenarios to capture the variability in implementing a GI strategy. Our LCA models suggest rain garden costs and impacts are determined by labor requirement; the traditional alternative's impacts are determined largely by the efficiency of wastewater treatment, while costs are determined by the expense of tunnel construction. Gardens were found to be the favorable option, both financially (~42% cost reduction) and environmentally (62‐98% impact reduction). Wastewater utilities may find significant life cycle cost and environmental impact reductions in implementing a rain garden plan.     

TQM and strategic environmental management

Beyond the avoided costs for noncompliance lies an area of economic opportunity. Strategic approaches are necessary to tap these opportunities, but only recently have the principles of Total Quality Management been considered for environmental applications. This article identifies common principles in strategic environmental planning and thematic bridges to TQM philosophies. By applying TQM to strategic environmental planning, an environmental manager can thus address both avoided cost and environmental opportunity to improve overall corporate strategic advantage.     

Making sense of environmental accounting

Much as Total Quality Management (TQM) has helped companies decrease waste and enhance value, environmental accounting offers an approach and a suite of tools that can help organizations improve both environmental quality and bottom-line business performance. Its focus is to bridge the world of finance and economics with the world of environmental management. Companies in all sectors have discovered that they can increase profits by meeting and even surpassing environmental regulations. Through environmental accounting, companies can discover more of these opportunities and, ideally, bring environmental concerns earlier into planning, decision making, and operations. This article introduces environmental accounting and some basic principles that should guide organizations' thinking on environmental accounting and environmental accounting systems. It also describes several different objectives for environmental accounting that imply different requirements and orientations. Although the focus of this article is on environmental accounting as an aspect of forward-looking management and decision making in companies, much of the discussion applies to nonprofits and government units as well.     

企业环境管理中政府和企业作用分析

我国的经济发展伴随着日益严重的环境问题。在引起环境问题的诸多因素中,来自企业方面的因素对环境的影响最为深远,因此改善环境首先就需要加强企业的环境管理。在推动企业进行环境管理的各种因素中,既有如政府的管制等外部因素,也有如减少成本、产品差异化等企业自身内部因素。外部因素和内部因素对推动企业环境管理都具有重要作用,但也有其局限性。本文通过政府管制及企业自身因素对驱动企业进行环境管理的作用机制的研究,分析各个驱动因素优缺点,寻求各驱动因素的最佳的组合,促使企业更好地加强环境管理。     

A disclosure of social and environmental results/economy resulting from the implementation of reverse logistics and final disposal of the post‐consumption product: The case of computer peripherals industry

This research was conducted with the objective of determining and evidencing the social and environmental/economic results from the implementation of a reverse logistics program providing for the recycling, reuse, and, when necessary, final, environmentally correct disposal of post‐consumption products and product wastes by a multinational manufacturer of computer peripherals with an operation based in the city of São Paulo, Brazil. The reverse logistics process (logisticareversa, or, in this paper, LR) was intended to meet the objectives and principles of the regulatory framework defined in the National Solid Waste Policy (PNRS) in Brazil. A single case study was carried out. The results showed that after the adoption of the solid waste management policy, the study company no longer disposed of 1,413,552 kilograms (kg) of materials classified as mixed iron, polystyrene, cardboard, toner powder, and plastic in landfills. The LR process made a profit in two companies: the company surveyed made, in Brazilian reais (R), R$ 9,188,185.51, and the company contracted to carry out the process made, R$ 411,325.97. This latter profit is called by us the “social profit.” The measurement of the environmental/economic, social, and financial results by internalizing the expenses of the LR program into the costs of production shows that reuse and recycling better meets the needs of society and the company than landfilling these post‐consumption materials. Furthermore, the use of cost accounting allows the verification of other goals not indicated in the current model, such as the generation of employment, income, mitigation of environmental problems, and the profit earned by the company contracted to implement the LR process. We also conclude that cost accounting makes it possible to obtain necessary information for decision makers, who are seeking to neutralize environmental impacts and promote sustainable development, thus harmonizing the economic, social, and environmental aspects, to understand the impacts of the LR process.     

Proactive environmental management is the key to full compliance

There are two key elements to achieving full and complete regulatory compliance: cost-efficient management of current regulatory requirements under existing environmental law and the capability to anticipate and analyze the impact of future regulations on the facility. The author provides step-by-step advice on how to develop a program to accomplish a corporate goal of zero violations.     

Measuring Corporate Sustainability

Although sustainable development has been interpreted primarily as a national (or global) goal, there is increasing discussion of the 'sustainable city', the 'sustainable sector' and the 'sustainable business'. In this paper, the notion of corporate sustainability is explored and developed. We argue that one of the keys to understanding corporate sustainability is full cost accounting, that is, valuing pollution in corporate green accounts. Defining and measuring corporate sustainability is more than just an academic concern. Corporate entities are increasingly under pressure to demonstrate how they contribute to the national sustainability goals outlined by government. Hence, this paper seeks to provide practical advice on how businesses might adapt and improve current environmental accounting and reporting practice.     

Shareholder activism on environmental issues: A study of proposals at large US corporations (2000–2003)

Socially Responsible Investing (SRI) has carved out a niche in the financial world, and each year a large number of shareholder proposals are filed at public companies in the US related to issues of corporate social responsibility (CSR). While the primary interests of CSR activists remain distinct from those of traditional corporate governance (CG) activists, the two groups do share an interest in minimizing the risk of negative environmental or social impacts from the operations of the corporation. They also share the objective of achieving transparency and accountability in corporate decision‐making. In relation to this latter objective, they both face similar challenges concerning conflicts of interest among key institutional shareholders. This article examines the record of shareholder proposal filing and voting from 2000–2003 for 81 large US public corporations to determine the relative prominence of CSR shareholder activism and the prospects for effective CSR shareholder activism on key environmental issues. The analysis of these data finds that nearly half (45%) of all shareholder resolutions are related to CSR, and that those resolutions which combine issues of CSR with traditional CG activism appeal to slightly more shareholders than issues of CSR alone. The article also examines shareholder activism at the micro level with a case study of the voting record at ExxonMobil. The article finds that CSR‐related shareholder activism represents the majority of shareholder activism within that firm and that resolutions targeted at climate change are particularly well supported. These resolutions draw a connection between environmental risk and risk to shareholder value. While numerous challenges remain for both CG and CSR activists, the article concludes that reforms that strengthen shareholder rights and corporate governance more generally will also benefit CSR activists and the environmental policies they promote in particular. The article ends with some proposed solutions for addressing the perceived conflicts of interest in corporate governance and the shareholder voting process.     

The link between 'green' and economic success: environmental management as the crucial trigger between environmental and economic performance

The link between environmental and economic performance has been widely debated in the literature for the last ten to fifteen years. One view is that improved environmental performance mainly causes extra costs for the firm and thus reduces profitability. However, also the opposite has been argued for: improved environmental performance would induce cost savings and increase sales and thus improve economic performance. Theoretical and empirical research have provided arguments for both positions and have not been conclusive so far. This article discusses reasons for the different views and the differences in empirical research and presents a theoretical framework to explain the coexistence of the conflicting views. It is argued that not merely the level of environmental performance, but mainly the kind of environmental management with which a certain level is achieved, influences the economic outcome. The model presented provides implications for both empirical research and company management in practice. Research and business practice should focus less on general correlations and more on causal relationships of eco-efficiency, i.e. the effect of different environmental management approaches on economic performance.     

环境风险规制的经济成本及次生影响——决策中需要重视的向度

环境风险是社会经济发展的副产物,是市场外部性的表现,需要公共部门的参与解决.然而环境风险的应对并非没有代价,这种代价既包括规制的经济成本,也包括其带来的次生影响.我国经济发展到目前的阶段,政府和公众都非常关注环境风险,并出台了大量的规制性政策对其进行治理.如何在实现环境治理目标的同时,合理控制经济成本、尽量减少次生影响是提升环境治理效能的重要命题,本文针对这一问题进行了探讨.主要对规制的经济成本和次生影响等关键概念做了辨析,对规制的经济成本和次生影响在我国被忽略的可能原因进行了分析,对他国应对这一问题所采取的措施开展了讨论.最后提出在我国针对重大环境规制性政策开展规制影响评估的建议.     

Corporate environmental management study shows shift from compliance to strategy

The Abt study of forty-one mostly Fortune 200 nonservice firms forms a new picture of environmental management. We present data indicating that environmental management is becoming central to corporate strategy and is being managed as an arena of competition rather than as a compliance-driven function. We look at environmental management's new role through four lenses: its relationship to strategic planning; its evolving management structures that show environment increasingly integrated into the main functions of the business; innovation in corporate environmental investments reflecting new drivers beyond compliance; and new management systems and measures of firm-wide performance that demonstrate that environment is being seen increasingly as an arena of competitive concern. We argue that much of the change is driven by three realities. First, as customers integrate environmental values into their conceptions of product quality, they are buying more products with identifiably environmental attributes. This change translates environmental management, historically a cost center, into a potential source of sales revenue, a change which cannot be underestimated. Second, recent life-threatening damage to the global ecosystem and atmosphere reframes environmental management. This moves firms toward a systemic and global approach matched to the globalization of competitive and market concerns, and it places environmental management in the strategic sphere. And third, pollution prevention in its cross-fertilization with total quality management is driving firms to focus on managing environment as an integral part of product management, and is helping them to reassess environmental performance as a contributor to productivity and innovation.     

Case study: Sonoco's materials reclamation improves environmental performance through quality-based management

Multinational corporations are facing increasing pressures and finding stronger incentives to integrate environmental management into their overall business strategies. National and local environmental regulations are becoming more stringent in Europe, Japan, East and Southeast Asia, Latin America, and many developing countries, and international voluntary standards of environmental management are being endorsed by a growing number of governments. Multinational firms are embracing these standards not only to assure the public of their concern for environmental protection, but also to enhance their competitiveness in international markets. The British Standard 7750, the European Eco-Management and Audit Scheme (EMAS), and the ISO 14000 series are setting new guidelines for effective corporate environmental management. Beyond complying with local and national laws, corporations now have wider latitude in how they adapt their business practices to these emerging environmental management standards. In order to capitalize on that creative latitude, companies must have corporate cultures and internal management systems that allow them to respond quickly and effectively to changing environmental requirements. Exemplary corporate environmental performance is usually related to strong and progressive leadership, a culture that recognizes the importance of environmental protection, and the willingness to operate by quality-based management principles. This article describes how one international corporation, Sonoco, in responding successfully to changing environmental pressures to reclaim and recycle its products in the wake of the solid waste crisis in the United States and more stringent environmental regulations in Europe, used its management competencies and corporate culture to turn what could have been serious barriers to expansion of its core businesses into new opportunities. By adopting a bold materials reclamation program, Sonoco was able to overcome potential limitations on its operations in the United States and abroad and to develop new business segments that benefited the company and the environment.     

Achieving environmental excellence through TQEM strategic alliances

Generally speaking, today's TQEM initiatives do not improve a firm's activities beyond the shipping dock and onto consumer and postconsumer use and reuse. Although internal TQEM efforts do improve environmental impacts of a firm's operations, most firms remain focused on the traditional bottom-line objective of increasing throughput. For these reasons, most firms implementing TQEM miss the many opportunities to improve environmental performance (including cost and quality) through asset recovery, resource sharing, and reuse. However, by taking the advantages of teamwork beyond corporate boundaries, firms can close the loop on environmental improvements. Inter-firm teaming for environmental advantage, which we define as TQEM alliancing, initiates a cyclical approach to environmental performance improvement. It does so by forging strategic relationships among firms that can leverage each other's environmental weaknesses. TQEM allying is a round-robin game plan. In this article, the authors show how it allows firms to take their environmental improvement initiatives beyond regulatory compliance (and into proactivity), beyond pollution control (to total pollution avoidance), and beyond profitability (for a quantitative as well as qualitative bottom line), because firms will be integrating external as well as internal functions across different business domains.     

Product life cycle: The key to integrating ehs into corporate decision making and operations

A consensus is emerging that traditional environmental health and safety (EHS) programs—characterized by EHS professionals serving a support function to a company's main operations—represent only part of effective EHS management. In order to be truly successful, EHS management must go beyond this format and integrate EHS considerations into the corporation itself, from its strategic corporate decision making to its everyday operations on the manufacturing floor. Only when EHS becomes part of the fabric of a business's activity will EHS risks and costs be truly minimized—and the many potential benefits fully realized. This article discusses how to make this goal a reality by use of the manufacturing and product life cycle (PLC) perspective. It will first stress the importance of integrating EHS considerations into corporate decision making and operations. It will then trace the critical steps for achieving such integration through the use of the PLC, concentrating particularly on a General Electric Company (GE) chemical management process that weaves EHS concerns into every stage of day-to-day operations.