Monday, August 30, 2010

Full Cost Environmental Accounting

Manufacturers concerned with lean production and environmental compliance now have the opportunity to improve them in parallel through full cost accounting methods. Full cost accounting allows companies to recognize environmental costs as specific costs related to a product or process, and not as overhead in a facility as with traditional accounting systems.

Accounting for the environmental costs of an individual product allows the manufacturer to evaluate the efficiency of the production and persuade more environmentally aware decisions such as materials substitution, process efficiency, and waste reduction. Because these costs were lumped into overhead accounts in the past, locating such in efficiencies would not have been possible.

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