Measures of Environmental Performance and Ecosystem Condition (1999) / Chapter Skim
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Information for Managers:
Information for Managers:
Environmental Measures: Developing an Environmental Decision-Support Structure
Pages 175-188
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Information for Managers
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Environmental Measures: Developing an Environmental Decision-Support Structure REBECCA TODD Given ever-present resource constraints, a substantial proportion of business managers' time and effort is devoted to maximizing output and profitability and minimizing risk and loss. In the increasingly competitive international markets where many firms operate, the choices about resource allocation have become ever more important to both the short term profitability and the long-term survival of the firm.
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As a consequence, we see relatively sophisticated measurement and control efforts being made over incineration and waste-water treatment processes, while little or no effort goes toward processes to handle the flows going into the facilities other than, perhaps, engineering estimates required for recharges of facilities' costs. Previous studies have examined some of the qualitative environmental inadequacies of typical business accounting systems (Todd, 1989, 1994)
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From page 179... ...
More and more frequently in recent years, these goals have had environmental aspects, such as developing processes that eliminate toxic or highly reactive compounds or reduce air emissions, such as volatile organic compounds. With these investments, the manager may be able to achieve several major objectives at once: increase profitability, improve compliance with environmental regulations, and reduce the firm's long-term imbedded risk by decreasing or eliminating sources of future liabilities.
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From page 180... ...
The reason is simple: The rewards system by which managers chart their own progress speaks only to profits, not pollution prevention or long-term risk reduction. The difficulty of measuring environmental "progress" is a common reason cited for the omission of environmental concerns in the direct incentive and rewards scheme.
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From page 181... ...
In traditional cost accounting, reasonably precise measures may be obtained for the direct materials and labor expended to manufacture a product. Other cost sources are measured with substantially less precision, including such overhead items as depreciation, the allocation of the historical cost of fixed assets to each of the periods in which the asset is used in production.
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Managers are likely to use less-precise information for internal managerial environmental decisions than for reports required by regulations. For example, managers frequently rely on estimates of individual process waste streams and component volumes developed either in process research and development or in early stages of implementation.
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From page 183... ...
In terms of the criteria for measurement quality in the foregoing section, a full-absorption number for a make-or-buy decision will likely contain a large proportion of systematic error that will be evident only after considerable investigation. If a manager wants to determine the proportion of a product's cost that has environmental implications, most information systems in use probably could not generate that information without considerable additional analysis.
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, waste treatment treatment and disposal, B by-products, direct labor, by-products (air) , waste regulatory profile, legal Quantitative waste relevant overhead, (nonenvironmental)
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For example, raw materials may be toxic, highly reactive, or have other environmental implications, but only those with direct knowledge of the processes will have this information. Moreover, many items highly relevant to the environment, for example organic solvents, may disappear into overhead pools in the accounting process (Todd, 1994)
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From page 186... ...
For example, among the system's environmentally relevant outputs that may require waste recycling, reprocessing, or treatment may be a hazardous input that is only partially consumed in the process, thereby generating a hazardous waste. The resulting waste costs, including any incurred by regulatory monitoring and oversight, are commonly treated by accounting systems as if they arose in category IV.
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From page 187... ...
DEVELOPING AN ENVIRONMENTAL DECISION-SUPPORT STRUCTURE 187 REFERENCES Allenby, B
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