Question

Environmental costing is an attempt to take the explicit and implicit environmental cost associated with a product into account during the production process. Required: Based on your own research on Environmental Costing, discuss what you have learned about it. You may share examples, provide definitions, or anything else relevant to the topic.

Answer 1

Environmental Costing

1. In order to continue the growth of Trade and commerce the economy needs be steady and it is required to have sustainable growth.

2. Sustainability comes only with efficiency and the economy being eco-friendly.

3. Environmental costs are one of the many different types of costs, businesses incur as they provide goods and services to their customers

4. Having clear knowledge about the environmental costs and performance of processes and products can promote more accurate costing and pricing of products and can aid companies in the design of more environmentally preferable processes, products, and services for the future.

5. The companies may gain competitive advantages over others by making their products eco-friendly allowing the customers to select such products.

6. With the increased demand for environmental sustainability, there have been increased rules and regulations by the international communities and national regulatory bodies. As a result, many organizations have to incur huge expenditure in order to comply with the same.

Examples of Environmental costs

1. Effluent Treatment plants - where the organizations are required to treat hazardous waste before dumping it in landfills or water bodies

2. In INDIA the Automotive industries have to comply with pollution control board rules and regulations. where the set up newer norms for emissions by vehicle engines. and in order to comply with the same, the companies have to incur huge R&D costs for engine designs which meet the requirements. and the older generations become obsolete.

3. Mine refilling costs- Where a mining company undertakes certain mining operations at a particular area the company is required to refill the land and take afforestation activities after the completion of mining.

4. The companies have to create more energy-efficient products as a result of increasing compliance norms.

5. All the research and development are undertaken to make a product eco-friendly forms part of environmental costs.