Environmental costing
Environmental costing identifies and measures costs arising from a firm's environmental impact — compliance, waste disposal, clean-up and penalties. It makes these costs visible so they inform management decisions and pricing.
See it move
Environmental costs move through four categories of rising cost and lost control. Prevention costs fund cleaner technology before any damage occurs, and detection costs pay for monitoring and audits. When these are not enough, internal failure costs cover waste treatment and disposal, and external failure costs bring fines, clean-up obligations and reputational damage once harm reaches outside the firm.
Check yourself
Two product lines share a facility. Product Gamma generates 90% of the plant's hazardous waste; Product Delta generates 10%. Environmental compliance costs total €200,000 per year, currently pooled in general overhead and allocated equally by production volume (Gamma and Delta are produced in equal quantities). A manager proposes tracing these costs to the products that generate them. What would this change reveal?