must capture currently hidden and unaccountable costs, for example, product-related legal expenses, regulatory costs, public relations expenses, and the opportunity costs of clean technologies not adopted.

Unfortunately, severe institutional impediments serve to hinder managers who would otherwise pursue optimal environmental waste reduction strategies. First, traditional accounting systems were not designed to capture much of the engineering and accounting data required for environmental decision making. Second, the data that are collected and processed are almost always aggregated in such a fashion as to lose their environmental (as well as managerial control) information content. Third, line managers are rarely made responsible for environmental costs. As managers' compensation is routinely based at least partially on profitability, including reduction of controllable costs, managers have strong disincentives to seek "full environmental costing" methods that would cause additional costs to enter their control domains. Simply put, managers can't act if they don't have adequate information, and they won't act voluntarily if they will bring harm to themselves by doing so. Thus, our ultimate goals must be (1) to develop techniques for removing or minimizing the most important institutional barriers managers face in their role as environmental stewards, and (2) to provide incentives to motivate the aggressive and creative development of solutions to promote current and future waste reduction and elimination.

The specific immediate goal is to revise our traditional production accounting methods, which capture and apply to products the costs that occur in production but fail to capture any costs arising after the finished product leaves the shop floor. In this way these accounting methods disassociate the costs of waste treatment, reprocessing, and disposal (as well as regulatory costs, disposal site remediation, and contingent liabilities) from the products that produced them. We must generate feasible methods for (1) corporate accounting system capture of the costs of manufacturing wastes and effluents, and (2) the application of such costs to the individual products giving rise to them. The methods should be both specific enough to provide a basis for management decision making and sufficiently general to be applicable across a broad range of industries and national accounting systems.

In recent years, the legal, regulatory, and accounting domains have undergone significant changes that greatly enhance the likelihood that these objectives can be achieved. Indeed, certain of the changes make such change essential to the continued viability of many firms.

Application of these methods will require short-term adjustments in cost information gathering and allocation and in corporate decision making based on cost reports. However, the long-run payoffs to firms operating in the increasingly competitive global markets are higher profitability as a result of selecting the most cost-efficient products and production methods, and much lower firm risk from potential product and environmental liability. The techniques being developed



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