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.     

A Framework for Sustainability Transition: The Case of Plant-Based Diets

Societal and technological development during the last century has enabled Western economies to achieve a high standard of living. Yet this profusion of wealth has led to several outcomes that are undesirable and/or unsustainable. There is thus an imperative need for a fundamental and rapid transition towards more sustainable practices. While broad conceptual frameworks for managing sustainability transitions have been suggested in prior literature, these need to be further developed to suit contexts in which the overall vision is arguably clear, such as in the case of consuming animal-originated foodstuffs. In this article we introduce a novel transition management framework that is based upon the dimensions of sustainability. The suggested transition management process includes the identification of objectives and obstacles, the listing of options and their opportunities and threats as well as the evaluation of the outcomes (the Five O’s). We argue that sustainability transition management should be a process in which the identification of the relevant dimensions of sustainability and related objectives forms the foundation for strategic, tactical and operational governance activities. We illustrate the practical applicability of the framework in the case of transition towards plant-based diets.     

Beyond pollution prevention: A vision for an integrated environmental business management strategy

In this article the authors assert that successful long-term pollution prevention will require changes in the culture and business practices of an organization such that the term “pollution prevention” eventually becomes obsolete. They envision firms evolving to a point where actions that today are referred to as pollution prevention will simply be part of standard business practices and thoroughly embedded in the firms' culture. Although pollution prevention projects and programs need to be highly visible at the outset to communicate throughout the organization and to demonstrate the benefits that can be gained, companies should adopt a long-term strategy aimed at making fundamental changes in the way they do business, rather than relying solely on piecemeal projects and special plans or programs. Such evolution of the firm will maximize the chances of meeting the dual challenges of business competitiveness and environmental stewardship. This article presents a vision for integrating environmental performance with business objectives and suggests practical steps to begin moving toward that vision.     

On accounting for sustainable development and accounting for the environment

Economic sustainability or intergenerational equity entails maintaining social well-being by decisions about investments in different types of assets. Under certain conditions, consumption can be sustained by depleting resources, or various kinds of natural capital, while building up other kinds of capital. Theoretically, the choices involve the use of a set of accounting prices. The question becomes one of finding and implementing accounting prices that express the roles of the various capital goods in achieving the objective of the economy.Hartwick's rule holds that an economy can be sustained if the value of the total, net investment in the economy, evaluated at those accounting prices, is zero. The rule applies to a special, abstract economic model which expresses a social objective different from the discounted-utilitarian objective on which national accounting is based. Different objectives give rise to different accounting prices. Because the prices may not be right, the zero net-investment rule using available national-accounting prices cannot generate a condition for sustaining an economy.Still, environmental accounting is a tool which, used prudently, can make an important contribution to social decision-making. This paper expands upon these ideas by discussing the incorporation of natural resource and intangible environmental costs and benefits into green accounting at the firm as well as the economy level. Common techniques of mine valuation and standard corporate accounting are the bases for this extension to the valuation of and accounting for decisions concerning the environment.     

The practice of participatory research and gender analysis in natural resource management

Stakeholder participation is expected to improve the efficiency, equity, and sustainability of natural resource management research and development (R&D) projects by ensuring that research reflects users’ priorities, needs, capabilities, and constraints. Use of participatory methods and tools is growing rapidly; however, there is little systematic evidence about what participation actually means in practice, or about what difference it makes. Based on an inventory of 59 self‐described participatory R&D projects in the area of natural resource management, this article characterizes the typical project and analyzes how stakeholders are selected, how they participate in the research process, and what their involvement means for project costs and impacts. The results suggest that, while projects are generating a range of direct and indirect benefits for participants, more careful attention needs to be paid to achieving equitable impacts. Current practices may lag behind best practices in key areas, such as power sharing and participant selection, and may therefore be missing important contributions from women and other marginalized groups.     

Case studies of ISO 14001: A new business guide for global environmental protection

The intention of this article is to clarify the current status of ISO 14001, the internationally accepted voluntary environmental management system (EMS) standard, which is an effective means to generate continuous environmental performance improvement in an organization as well as significant financial benefits such as operational efficiency improvements (e.g., energy and water savings), reduction in environmental risks and liability expenses, protection of corporate asset value, and public image improvements. The number of “ISO 14001” companies in Europe and the Pacific Rim is steadily increasing with customer and governmental pressure as the driving forces. In the United States, ISO 14001 implementation has lagged behind due to the fact that, so far, the EPA has not supported ISO 14001 as being sufficient for guaranteeing a reliable environmental performance record. Most ISO 14001 certified companies in the United States have been driven by overseas demand, particularly in the microelectronics industry because customers in this industry, especially those in Europe, will simply not do business in the future with companies that are not registered to ISO 14001. It is expected that European demand will continue to push ISO 14001 certification in the United States. Six ISO 14001 case studies in the U.S. chemical, electronics, and plastics industries, along with EPA's attitude toward ISO 14001 are described in this article. The case studies contain the reasons, steps taken, costs, benefits, problems, and future trends of ISO 14001 implementation and certification.     

Public policy, private landholders: perspectives on policy mechanisms for sustainable land management

A variety of tools can be employed in support of environmental policy objectives, but achieving preferred outcomes also requires the cooperation of private landholders and others with vested interests in the land. The Land Stewardship project in the state of Victoria, Australia, is an initiative devoted to exploring the ways in which private landholders could be encouraged towards more sustainable land management. Following the view that the success of policy initiatives is contingent on effective stakeholder engagement, a component of the Land Stewardship project involved a dialogue with landholders about policy tools (e.g., regulation, economic instruments) that might be deployed to encourage improved land management practices. This paper provides an account of the views and attitudes of landholders, as revealed in a series of three workshops, which consisted of discussions about the factors influencing agriculture, participants' interpretations of sustainability, and policy methods. The focus of the paper is on what landholders believe to be the strengths and limitations of standard policy tools, and the essential requirements for these tools to deliver the best land management outcomes. One of the main findings of the project was a 'preference hierarchy' in respect of policy methods, according to which the strongest support was expressed for voluntary and education-based tools, followed by market-based instruments, with command-and-control regulation identified as a measure of 'last resort'. In the paper we reflect also on how the views and outlook of landholders should be positioned relative to other inputs in the design of policy interventions.     

Value chain for next-generation biofuels: resilience and sustainability of the product life cycle

Multiple factors including climate change, price uncertainties, and geopolitical instability have prompted many industries to investigate the feasibility of replacing traditional petroleum-based fuels with biofuel alternatives. However, to make this transition successful, these new biofuels must be environmentally sustainable and the necessary support infrastructure must be in place to make the production, distribution, and storage of these biofuels technologically feasible and cost effective. Developing a value chain, spanning from feedstock production to distribution to end users, requires garnering buy-in from multiple stakeholders by demonstrating environmental, economic, and social benefits and incentives. Two critical factors are the environmental benefits achieved from the use of the biofuel technology and the degree of resilience of the value chain to emergent conditions to ensure steady supply to consumers. Moreover, different biofuel pathways have different costs, benefits, and risks which must be compared. In this paper, we describe how environmental sustainability can be modeled using life cycle assessment (LCA) and how the resilience of value chain initiatives can be modeled using a scenario-based decision model. We then describe how sustainability and resilience assessments can be integrated in an iterative, anticipatory LCA framework. These assessments can be used as the basis for a business case for various investments, as well as a means for promoting responsible innovations, with the aviation industry used as a case study.     

Emerging drivers and business models for equipment reuse and remanufacturing in the US: lessons from the biotech industry

While regulations have advanced product take-back in some markets, challenges to increasing product reuse and remanufacturing remain. Most research to date has focused on original equipment manufacturers taking back and remanufacturing their products, which is often problematic. The present study demonstrates that there are emerging opportunities for small companies with innovative business models to enter the market and advance product end-of-life (EoL) management. The paper examines the biotechnology industry – a growing sector with high spending on lab equipment and relatively short lifespans of research and development instruments. Building on previous research and analysis of industry practices and emerging drivers for product reuse and remanufacturing, the authors propose a framework for sustainable EoL management that includes five managerial drivers: financial benefits, space, ease/convenience, information, and sustainability goals. The paper concludes with discussion of the lessons learned and practical implications for managers in charge of purchasing or disposing of surplus equipment.     

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.     

Environmental accounting—making it work for your company

There is no simple recipe for success in implementing environmental accounting. Day-to-day needs and strategic objectives will determine how an organization can benefit from environmental accounting. Our previous article listed many potential applications of environmental accounting and discussed common environmental accounting objectives.¹ This article is geared toward organizations that want to start implementing environmental accounting and create a foundation of success on which to build. In this context, the questions are (1) What are some logical starting points? and (2) Where do companies go from there? This article first describes some paradigms that may guide companies as they think about how to implement environmental accounting, then it presents a series of critical activities that are needed to make environmental accounting an integral part of ongoing business management functions.     

Outsourcing sustainability: a game-theoretic modeling approach

As a response to stakeholders’ interest in sustainable products and services, an organization may change its approach to sustainability issues, from isolated social and environmental projects to corporate sustainability strategies and practices that are part of their core business. However, many of the efforts associated with these sustainability strategies cannot be directly exerted by focal organizations. We consider the situation in which a focal organization (sustainability buyer) outsources sustainability efforts to another organization (sustainability seller). While buyers cannot directly exert sustainability efforts, they can provide economic or technical support to their sellers in order to incentivize these efforts. We investigate how the effort and support decisions change according to characteristics of stakeholders, buyers, and sellers. Additionally, the presence of sustainability-minded stakeholders may lead to buyers’ competition on the sustainability effort exerted by their sellers. Therefore, we extend our analysis of sustainability efforts and incentives to the case of two competing buyers, and we determine conditions under which sharing a seller is preferred by the buyers to having a separate seller for each buyer.     

Corporate social responsibility, partnerships, and institutional change: The case of mining companies in South Africa

Internationally and in South Africa, mining companies are increasingly referring to corporate social responsibility (CSR) and partnerships in terms of the business case, or the expectation that being responsible and collaborating with stakeholders is good for profits. Based on a case study of platinum and chrome mining in South Africa, this article argues that the business case is circumscribed by companies’ institutional context. In the past, mining companies’ dominant interpretation of CSR has been in terms of charitable donations and support to good causes. These efforts have not alleviated the contribution of mining companies to growing social problems around the mines, primarily because they have not impacted on core business practices and have not contributed to necessary cross‐sectoral collaboration. Recently, however, there has been an important transition involving the broadening of the interpretation of CSR and increasing commitment to these issues amongst corporate leadership. Though market‐based incentives have contributed to this, the key driver has been the State's legislated transformation programme premised on State sovereignty over mineral resources. Hence, while the interrelationship between companies and their institutional context has, in the past, brought about a vicious cycle of irresponsibility and minimal collaboration, this cycle may be reversed into a virtuous one, driven in particular by the State. The broader implication is that references to a business case for CSR and partnerships cannot be relied upon independently of continued efforts at shaping the public sector context of companies.     

Environmental management information systems: New tools for measuring performance

Successful implementation of environmental management information systems (EMIS) has become essential to the success of total quality environmental management (TQEM) programs. Effective TQEM programs will be early indicators of which companies survive and thrive in today's competitive business environment. Highly competitive industries such as chemicals, electronics, and oil and gas are becoming very effective in cooperating to develop metrics, models, and tools that are based on business processes rather than regulatory edicts. Now electric power companies, newly exposed to market competition, are starting to develop and implement these metrics, standards, and tools. That industry provides a model for joining TQEM and EMIS.     

Measuring an Organization's Performance: The Road to Defining Sustainability Indicators

This article proposes an integrated procedure to assess sustainability indicators that organizations can use to satisfy international requirements for sustainability. The indicators are related to key aspects of organizations, and their development includes comparing them to the results and policies of various other organizations that are seeking to achieve sustainability. The methodology we used is based on a bibliographic review, and it is intended to:

• Diagnose the state of the art of organizational sustainability,
• Provide organizations with tools to perform benchmarking based on the results, and
• Provide processes to identify best sustainability practices.

After benchmarking, organization managers will be able to adjust the methodology to quantify the sustainability indicators that are most suited to their organization's profile in regard to the activities, products, and services that it offers. Critical factors for organizational sustainability are identified and integrated into the systematic approach proposed in this article to assess indicators, communicate results, and make recommendations for corrective action and continual improvement considering the organization's baseline condition (the starting condition of the organization).     

Risk management is part of good management

As the use of hazard and risk assessments becomes more commonplace, the need for and importance of an overall risk management system become apparent. Such a system allows companies to prioritize both their efforts to identify and understand risks and their allocation of resources to manage and control risks. In the future, the most effective risk management systems will be integrated into other business processes and management systems, to ensure that their value as well as their costs are recognized and measured by line operations. For example, chemical and petrochemical companies such as BP Exploration, Monsanto, and Union Carbide are improving on well-established risk management systems by increasing their businesses' involvement in and ownership of the process. This article summarizes the key elements of a risk management system and uses the lessons learned by various companies to define best existing and emerging practices.     

Brave new words: The financial value of environmental communications

Corporations have made great strides toward improving environmental performance and working toward sustainability and socially responsible business practices. Yet surprisingly few take advantage of the full value of leveraging their performance in communication and marketing initiatives. Emerging investment trends, and growing supply‐chain management and consumer demand, all indicate that communicating environmental or socially responsible practice is opening up opportunities‐opportunities that are proving lucrative for companies strategically spreading the word. © 2000 John Wiley & Sons, Inc.     

Justifying the cost of EMIS: Piloting lessons from Rhone-Poulenc

Two worlds are colliding as many companies are integrating environmental management with business management. Nowhere is this more evident than in the hundreds of companies that are now working to upgrade their environmental management information systems (EMIS), which are a critical component of business integration. Building a business case for EMIS requires crossing many disciplinary boundaries—knowing the language of information systems, accounting, business management, and environmental management. Hence, it is a very valuable skill for environmental managers to develop in order to build their function and their own careers. Some environmental and information systems professionals are attempting to develop a general set of guidelines for justifying the cost of EMIS—in particular, the useful emerging work of the Environmental Health and Safety Software Development Group. This article relates the experience of an EMIS development effort at Rhone-Poulenc, Inc.     

Mining and social development: Refocusing community investment using multi-criteria decision analysis

This paper addresses the question: How can mining companies assess social investment projects so that projects create value for the company and communities in which they operate? Mining companies are still wrestling with the limits of their responsibility in relation to social development even though they accept the business case for community investment at a general level. Fully aware of the practical hazards involved in taking an active role in facilitating local development, companies increasingly avoid methods that are overly paternalistic or assume the functions of the national or local governments. Gaining senior management's commitment to long-term social projects, which are characterised by uncertainty and complexity, is made easier if projects are shown to benefit the site's strategic goals. Case study research on large global mining companies, including interviews with social investment decision makers, has assisted in developing a Social Investment Decision Analysis Tool (SIDAT), a decision model for evaluating social projects. Multi-criteria decision analysis techniques integrating business planning processes with social impact assessment have proved useful in assisting mining companies think beyond seeking reputational benefits, to how they can meet their business goals and contribute to sustainable development.