Environmental Cost Accounting

Description

For the flexographic printer, environmental cost accounting is a managerial tool for making internal business decisions. The term environmental cost has at least two major dimensions: it can refer solely to costs that directly impact a company’s bottom line (private costs), or it also can encompass the costs to individuals, society and the environment for which a company is not accountable (societal costs). The following discussion will cover private costs. Much of the material is applicable to societal costs as well.

It can also refer to tangible/measurable costs such as material, labor, and real estate costs (cost/ft) versus intangible costs such as avoided fines, lower liability and workman’s compensation insurance costs, etc.

Environmental costs are one of the many different types of costs businesses incur as they provide goods and services to their customers. Environmental cost accounting may entail a new way of looking at a company’s environmental costs, performance and decisions. Top management commitment can set a positive tone and articulate incentives, which help ensure business success.

Environmental costs (and, thus, potential cost savings) may be obscured in overhead accounts or otherwise overlooked. Many of these costs, once identified, can be significantly reduced or eliminated as a result of strategic business decisions, ranging from operational and housekeeping changes to investment in greener process technology, or redesign of processes/products.

Accounting for environmental costs performance can also support a company’s development and operation of an overall environmental management system. Environmental cost accounting can be employed by flexo printing firms of any size. It can be applied on a large or small scale, systematically or on an as-needed basis.

Best Management Practices & Pollution Prevention

Many companies have discovered that environmental costs that cannot be eliminated through pollution prevention activities can be offset by careful management, generating revenues through sale of some waste products, transferable pollution allowances (i.e., emission reduction credits), or licensing of clean technologies.

Understanding the environmental costs and performance of processes and products can promote more accurate costing and pricing of products and can aid companies in the design of more environmentally preferable processes, products and services for the future. Competitive advantage with customers can result from processes, products and services that can be demonstrated to be environmentally friendly.

Companies will likely want to assemble cross-function teams to implement environmental accounting, bringing together designers, chemists, engineers, production managers, operators, financial staff, environmental managers, purchasing personnel and accountants who may not have worked together before. Because environmental accounting is not solely an accounting issue, and the information needed is split up among all of these groups, these people need to talk with each other to develop a common vision and language and make that vision a reality.

For access to vendors who may supply alternative materials and equipment, see the PNEAC Vendor Directory.