Steve,
obviously the quite significant break down of costs that I provided are both
quantitative and qualitative. In the situation where a firm is carrying out
capital budgeting, analyzing business cases, and procurement decisions then
it becomes very important to consider any contingent and hidden costs in the
overhead budget and to assign them costs based on business case studies,
estimates that are in existence [either published or in house]. The goals of
the firm will to some extent be the driver that management accounting and
financial analysts hired or within the firm use to allocate costs. A P2
opportunity is "any environmental concerns brought forward by a Public
Advisory Committee (eg. noise, traffic flow, light or visual effects)."
Total Cost Assessment Guidelines, Draft June 1997, Assessing the Business
Case of Environmental Investments, BC Ministry of the Environment, Lands and
Parks; Environment Canada; Industry Canada.
So as you can see it is very important to prepare a total cost assessment
that includes all costs, not just costs that are internal to a firm, but all
costs, even in an qualitative sense where light pollution is a community
concern. The recommended approaches for making decisions therefore are:
holistic approach - trade offs are made implicitly [i.e. a reduction in
future risk will probably outweigh any apparent financial advantage];
critical value analysis - decision makers calculate the minimum value a
qualitative tradeoff or set of trade-offs would have to make the project
financially feasible [i.e. is the improvement in worker safety and corporate
image worth more than a slightly negative NPV?]
rating and weighing - assigning weights to each criteria [i.e. multiple
accounts analysis type of weighing] with a relative importance pooled to
estimate an average for each case or decision [i.e. alternate locations for
facilities and outputs]
mutli-criteria decision making techniques - "more structured approaches can
be used as an aid to decision making."
The whole purpose of environmental accounting is to improve profitability
and to prevent pollution. Obviously this last idea stems from core
management goals the organization has fostered, not just to maintain or
improve it's public image and relationships but because of a reasoned
approach to combating waste and pollution that involves regulatory
instruments, the application of voluntary standards [ISO 14000], and
personal beliefs of management [ethical, religious, and moral].
Pollution prevention [P2] and [3R] are also indications within the
organization of the firm that there is an authentic interest in the local
community to drive effective change
John Foster
For some total cost assessment therefore a firm will have to be creative in
this practice.
In the case of light pollution for instance the common practice is to
conduct an attitude survey, in the case of clearcutting in a visually
sensitive landscape unit, the practice of direct measurement is pretty
straightforward, and various economic estimates can be derived, some of
which are called contigent travel cost approaches, hedonistic pricing,
shadow pricing, etc. These are the old standbys in carrying out the pricing
of non-market goods. Attitude and perception surveys are also very good
examples of the qualitative methods for carrying out a total cost
assessment. Of course in any econometric treatment the value that is
assigned to each potential unit of non-market good or cost must reflect a
reasonable 'land economic' value and be based on consensus to be relevant.
>>
>> This is an example of traditional economic thought that is no longer
>> relevant to many potentially polluting organizations. Full cost
>accounting
>> encorporates external costs into it's assessment practices. It is
>
>I am skeptical of this. Primarily because how does one measure what
>one does not observe. How can a company incorporate my welfare losses
>for an increase in the air pollution from its factory? How does one
>measure Steven Bissel's welfare loss when there is more light
>pollution in the area he lives in and can't sit on his porch and look
>at the stars with his dog? Personally I don't have a clue as to how
>such a thing can be measured.
>
><Another big snip>
>
>Steve
>_________________________________________________________
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>
>
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