mahm6e ch12.ab.az
TRANSCRIPT
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Environment
Cost
Management
CHAPTER
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1. Discuss the importance of measuring
environment costs.
2. Explain how environmental costs are
assigned to products and processes.
3. Describe the life-cycle cost assessment
model.
4. Compare and contrast activity- and strategic-
based environmental control.
Objectives
After studying this
chapter, you should
be able to:
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Ecoefficiency essentially
maintains that organizations
can produce more usefulgoods and services while
simultaneously reducing
negative environmental
impacts, resourceconsumption, and costs.
The Benefits of Ecoefficiency
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Incentives and causes for increased
efficiency:1) Customers are
demanding products
that areenvironmental
friendly
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Incentives and causes for increased
efficiency:1) Customers are
demanding products
that areenvironmental
friendly2) Employees prefer to
work forenvironmentally
respective firms
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Causes andIncentives for
Ecoefficiency
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12-7Customer Demand
For Cleaner Products
Cost Reduction and
Competitive
Advantage
Lower Cost of
Capital and LowerInsurance
Innovations and
New Opportunities
Better Employees
and Greater
Productivity
ECOEFFICENCY
Significant Special Benefits
Leading to Improved Image
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Environmental Quali ty
Cost ModelEnvironmental costsare costs that are incurred
because poor environmental quality exists or may
exist.
Environmental costs can be classified in four
categories: prevention costs, detection costs, internal
failure costs, and external failure costs.
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Evaluating and selecting suppliers
Evaluating and selecting pollution control equipment
Designing processes
Designing products
Carrying out environmental studies
Auditing environmental risksDeveloping environmental management systems
Recycling products
Obtaining ISO 14001 certification
Classif ication of Environmental
Costs by Activity
Prevention Activities
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Classif ication of Environmental
Costs by Activity
Auditing environmental activities
Inspecting products and processes
Developing environmental performance measures
Testing for contamination
Verifying supplier environmental performance
Measuring contamination levels
Detection Activities
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Classif ication of Environmental
Costs by Activity
Operating pollution control equipment
Treating and disposing of toxic waste
Maintaining pollution equipment
Licensing facilities for producing contaminants
Recycle scrap
Internal Failure Activities
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Numade Corporation
Environmental Cost Report
For the Year Ended December 31, 2004Percentage of
Environmental Costs Operating Costs
Prevention costs:
Training employees $ 60,000Designing products 180,000
Selecting equipment 40,000 $280,000 1.40%
Detection costs:
Inspecting processes $240,000
Developing measures 80,000 320,000 1.60
Continued
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Internal failure costs:
Operating pollution
equipment $400,000
Maintaining pollution
equipment 200,000 $ 600,000 3.00%
External failure costs:
Cleaning up lake $900,000
Restoring land 500,000
Incurring propertydamage claim 400,000 1,800,000 9.00
Totals $3,000,000 15.00%
Percentage of
Environmental Costs Operating Costs
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Environmental benefits:
Cost reductions, contaminants $ 300,000
Cost reductions, hazardous waste disposal 400,000Recycling income 200,000
Energy conservation cost savings 100,000
Packaging cost reductions 150,000Total environmental benefits $1,150,000
Numade Corporation
Environmental Financial Statement
For the Year Ended December 31, 2004
Continued
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Numade Corporation
Environmental Financial Statement
For the Year Ended December 31, 2004Environmental costs:
Prevention costs $ 280,000
Detection costs 320,000Internal failure costs 600,000
External failure costs 1,800,000
Total environmental costs $3,000,000
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Environment Product Costs
The environmental costs of
processes that produce,
market, and deliver products
and the environmentalpostpurchase costs caused by
the use and disposal of the
products are examples of
environmental product costs.
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Ful l environmental
costingis the
assignment of allenvironmental costs,
both private and
societal, to products.
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Ful l pr ivate
costingis theassignment of
only private cost
to individual
products.
Private costing is probably a good starting pointfor many fi rms.
Pr ivate costs can be assigned using data created
inside the f irm.
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Evaluate and select suppliers $0.20 $ 0.05
Design processes (to reduce pollution) 0.10 0.10
Inspect processes (for pollution problems) 0.25 0.15
Capture and treat chlorofluorocarbons 0.05 1.00
Maintain environmental equipment 0.00 0.50
Toxic waste disposal 0.10 1.75
Excessive materials usage 0.08 0.25
Environmental cost per unit $0.78 $ 3.80
Other manufacturing costs (nonenvironmental) 9.02 16.20
Unit cost $9.80 $20.00
Units produced 100,000 100,000
ABC Environmental Costing
Activities Cleanser A Cleanser B
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Product stewardshipisthe practice of
designing,manufacturing,
maintaining, andrecycling products to
minimize adverseenvironmental impacts.
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L ife-cycle assessmentidentifies the
environmentalconsequences of a product
through its entire lifecycle, and then searches
for opportunities to obtain
environmentalimprovements.
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L ife-cycle cost
assessmentassignscosts and benefits to
the environmentalconsequences andimprovements.
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Raw
Materials
Packaging
DisposalRecycling
Controlled
by Supplier
Controlled by
Manufacturer
Production
Controlled by Customer
Product
Use and
Maintenance
Product-Life
Cycle Stages
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Inventory analysis
Impact analysis
Improvement
analysis
Assessment Stages
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I nventory analysis
specifies the types and
quantities of materials
and energy inputs
needed and the resulting
environmental releases
in the form of solid,liquid, and gaseous
residues.
Inventory Analysis
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Materials usage per cup:
Wood and bark (g) 33.0 0.0
Petroleum (g) 4.1 3.2
Finished weight (g) 10.0 11.5
Utilities per mg of material:
Steam (kg) 9,000-12,000 5,000
Power (GJ) 3.5 0.4-0.6
Cooling water (m3) 50 154
Water effluent per mg of material:
Volume (m3) 50-190 0.5-2.0
Suspended solids (kg) 35-60 trace
BOD (kg) 30-50 0.07
Organochlorides (kg) 5-7 0
Metal salts (kg) 1-20 20
PAPER CUP POLYFORM CUP
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Air Emissions per mg of material:
Chlorine (kg) 0.5 0
Sulfides (kg) 2.0 0
Particulates (kg) 5-15 0.1
Pentane (kg) 0 35-50Recycle potential:
Primary user Possible Easy
After use Low High
Ultimate disposal:
Heat recovery (Mj/kg) 20 40
Mass to landfill (g) 10.1 11.5
Biodegradable Yes No
PAPER CUP POLYFORM CUP
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PAPER CUP POLYFORM CUP
Material usage $0.010 $0.004
Utilities 0.012 0.003
Contaminant-related
resources 0.008 0.005Total private costs $0.030 $0.012
Recycling benefits
(societal) -0.001 -0.004Environmental cost
per unit $0.029 $0.008
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Impact analysis
assesses theenvironmentaleffects of competingdesigns and provides
a relative ranking ofthose effects.
Impact Analysis
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Five core objectives for the environmentalperspectives:
Minimize the use of raw or virgin mater ials
M inimize the use of hazardous mater ials
M inimize energy requirements for production and
use of the product
M inimize the release of solid, l iquid, and gaseous
residues
Maximize opportunities to recycle
Environmental Perspective
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Inspecting processes $ 200,000 $ 240,000
Operating pollution equipment 350,000 400,000
Maintaining pollution equipment 200,000 200,000
Cleaning up water pollution 700,000 900,000
Property damage claim 300,000 400,000
Totals $1,750,000 $2,140,000
NONVALUE-ADDED YEAR
ENVIRONMENTAL ACTIVITY 2004 2003
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Environmental Cost Trend Graph
1 2 3 4 5 6 7 8
Environmental
Costs/Sales
Periods
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0
20
40
60
80
100
2001 2002 2003 2004
Pounds emitted
Bar Graph for Trend Analysis
CFC Emissions
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Hazardous Waste Pie Chart
Incinerated
Deep-well injected
Landfilled
Recycled
Treated
Incinerated 35.0%
Deep-well injected
20.0%
Landfilled 25.0%
Recycled 5.0%
Treated 15.0%
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The End
Chapter Twelve