Environmental Accounting: Principles for the Sustainable Enterprise, 1995 Environmental Conference Proceedings

A.L. White, Ph.D., D.E. Savage, Ph.D., & A. Dierks - Tellus Institute

Three case studies from large manufacturing firms illustrate the importance of good environmental cost accounting in the realm of project financial analysis for capital budgeting. The environmental projects described encompass capita1 budgeting initiatives on three levels: 1) the facility level; 2) the divisional level; and 3) the corporate level. Although the original motivation for each case study was recognition of the need for a comprehensive, accurate capital budgeting analysis for the environmental proposal under consideration, two of the analyses also identified and quantified, in dollar terms, the strong connections that exist between environmental projects and broad issues of integral interest to firms, such as production flexibility and capacity, and environmental liabilities. As such, these studies provide valuable insights into the scope, sources, and application of environmental cost information within the firm, and how improvements in each of these areas can play an important role in supporting rational management decision-making. Key conclusions emphasize the necessity for good materials accounting as a basis for good cost accounting, and the importance of adequate treatment of probabilistic costs.