Environmental Cost Accounting

Environmental Cost Accounting

Environmental Cost Accounting (ECA) is a process by which environmental costs are identified, evaluated, and allocated to specific aspects of a company's operation.  For example, departments or products are allocated environmental costs that reflect their contributions to those costs.  Traditionally, the focus of ECA has been on internal costs, composed of direct (e.g., waste disposal), indirect (e.g., training), and intangible costs (e.g., stakeholder investment decisions). However, external costs, such as those related to environmental impacts, are increasingly included.  Typically, the environmental costs of doing business are not tracked or are hidden in overhead within traditional management accounting systems yet these costs can be a significant component of a firm's overall cost structure. Actively managing these costs is an important aspect of maintaining a sustainable business.

CRA offers the expertise to identify and assess the source and magnitude of environmental costs in strategic initiatives and in relation to the potential environmental issues and impacts from both operational and development activities.  This often includes assessment of environmental conditions and the associated costs for addressing and managing environmental issues, ranging from individual facilities to large property portfolios.

CRA also assists clients in properly identifying and disclosing potential environmental liabilities and costs as required by legislation, such as the Sarbanes-Oxley Act in the US and the EU Environmental Liability Directive.

A key area, often overlooked, for adopting ECA techniques is in due diligence, where hidden environmental costs can significantly change the viability of an acquisition or the significance of a divestment. CRA uses accepted practices and standards for environmental due diligence to ensure that our clients make the right decisions at the right time.

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