ACCOUNTING AND CONTROL
16-1

16
16-2

Defining, Measuring, and Controlling
Environmental Costs
Ecoefficiency essentially maintains that organizations can produce more useful goods and services while simultaneously reducing negative environmental impacts, resource consumption, and costs.
1
16-3

Defining, Measuring, and Controlling
Environmental Costs
(1) Reduce the consumption of resources
(2) Reduce the environmental impact
(3) Increase product value
(4) Reduce environmental liability
1
16-4

Defining, Measuring, and Controlling
Environmental Costs
Ecoefficiency Relationships
1 continued
16-5

Defining, Measuring, and Controlling
Environmental Costs
Ecoefficiency Relationships continued
1
16-6

Defining, Measuring, and Controlling
Environmental Costs
1
Environmental costs are costs that are incurred because poor environmental quality exists or may exist.
Environmental costs can be classified in four categories: prevention costs, detection costs, internal failure costs, and external failure costs.
16-7

Defining, Measuring, and Controlling
Environmental Costs
Classification of Environmental Costs by Activity
Prevention Activities
Evaluating and selecting suppliers
Evaluating and selecting pollution control equipment
Designing processes
Designing products
Carrying out environmental studies
Auditing environmental risks
Developing environmental management systems
Recycling products
Obtaining ISO 14001 certification
1
16-8

Defining, Measuring, and Controlling
Environmental Costs
Classification of Environmental Costs by Activity
Detection Activities
Auditing environmental activities
Inspecting products and processes
Developing environmental performance measures
Testing for contamination
Verifying supplier environmental performance
Measuring contamination levels
1
16-9

Defining, Measuring, and Controlling
Environmental Costs
Classification of Environmental Costs by Activity
Internal Failure Activities
Operating pollution control equipment
Treating and disposing of toxic waste
Maintaining pollution equipment
Licensing facilities for producing contaminants
Recycling scrap
1
16-10

Defining, Measuring, and Controlling
Environmental Costs
Classification of Environmental Costs by Activity
External Failure Activities
Cleaning up a polluted lake
Cleaning up oil spills
Cleaning up contaminated soil
Settling personal injury claims
(environmentally related)
Restoring land to natural state
Losing sales due to poor environmental reputation continued
1
16-11

Defining, Measuring, and Controlling
Environmental Costs
1
Classification of Environmental Costs by Activity
External Failure Activities
Receiving medical care due to polluted air
Losing employment because of contamination
Losing a lake for recreational use
Damaging ecosystems from solid waste disposal
Societal costs
16-12

Defining, Measuring, and Controlling
Environmental Costs
Environmental Cost Report
1
16-13

Defining, Measuring, and Controlling
Environmental Costs
Relative Distribution: Environmental Costs
1
16-14

Defining, Measuring, and Controlling
Environmental Costs
Environmental Financial Statement
1 continued
16-15

Defining, Measuring, and Controlling
Environmental Costs
Environmental Financial Statement
1
16-16

Environmental Costing
Unit-Based Environmental Cost Assignments —
 Environmental costs are separated into a cost pool
 Costs are assigned to individual products using unit-level drivers
 Best for a homogeneous product setting
2
16-17

Environmental Costing
ABC Environmental Costing
2
16-18

Life-Cycle Cost Assessment
Life cycle assessment identifies the environmental consequences of a product through its entire life cycle and then searches for opportunities to obtain environmental improvements.
3
16-19

Life-Cycle Cost Assessment
Product-Life
Cycle Stages
Raw
Materials
Production
Recycling
Packaging
Product Use and
Maintenance
Controlled by Customer
3
Controlled by Supplier
Controlled by
Manufacturer
Disposal
16-20

Life-Cycle Cost Assessment
(1) Inventory analysis
(2) Impact analysis
(3) Improvement analysis
3
16-21

Life-Cycle Cost Assessment
Inventory analysis specifies the types and quantities of materials and energy inputs needed and the resulting environmental releases in the form of solid, liquid, and gaseous residues.
3
16-22

Life-Cycle Cost Assessment
Inventory Analysis
3 continued
16-23

Life-Cycle Cost Assessment
Inventory Analysis
3
16-24

Life-Cycle Cost Assessment
Impact analysis assesses the environmental effects of competing designs and provides a relative ranking of those effects.
3
16-25

Life-Cycle Cost Assessment
Cost assessment determines the financial consequences of the environmental impacts identified in the inventory and improvement steps of life-cycle assessment.
3
16-26

Life-Cycle Cost Assessment
Improvement analysis has the objective of reducing the environmental impacts revealed by the inventory and impact steps.
3
16-27

Strategic-Based Environmental
Responsibility Accounting
Five core objectives for the environmental perspectives:
1) Minimize hazardous materials
2) Minimize raw or virgin materials
3) Minimize energy requirements
4) Minimize the release of residues
5) Maximize opportunities to recycle
4
16-28

Strategic-Based Environmental
Responsibility Accounting
Objectives and Measures: Environmental Perspective
4
16-29

Strategic-Based Environmental
Responsibility Accounting
Non-Value-Added Cost Trends: Environmental Costs
4
16-30

Strategic-Based Environmental
Responsibility Accounting
Environmental Cost Trend Graph
4
16-31

Strategic-Based Environmental
Responsibility Accounting
Bar Graph for Trend Analysis
CFC Emissions
100
80
60
40
20
0
2004
Pounds emitted
2005 2006 2007
4
16-32

Strategic-Based Environmental
Responsibility Accounting
Hazardous Waste Management Pie Chart
4
16-33

16-34