Environmental costs and benefits in life cycle costing

Abstract

Purpose

From a methodological point of view, life cycle costing (LCC) is well developed with respect to conventional costs. However, when it comes to costs related to environmental issues, neither the items nor their estimation have been well developed. This paper aims at investigating the possibilities of using life cycle assessment (LCA) results to identify and estimate environmental costs or benefits in an LCC.

Design/methodology/approach

The paper begins by looking at the driving forces for introducing environmental costs in companies, continues by identifying external and internal environmental cost issues, and concludes with an attempt to estimate the internal costs.

Findings

Some of the items of an LCC have to do with increased/decreased sales, others with good will. Both are difficult to estimate, but LCA or LCA‐like investigations may be helpful in identifying relevant issues. Future costs to the product system may also be estimated, for example, with a distance‐to‐target type of weighting. LCA may be helpful in roughly estimating risks, especially together with those LCA impact assessment methods that model damage. Such an item in LCC can be dealt with as an insurance fee or, if the risk is too high, as a way of including necessary preventive actions.

Research limitations/implications

The literature on the subject is limited and not sufficient to aid in estimation of environmental costs and benefits for a company. It seems reasonable to begin an improvement of the methodology by looking at future costs and benefits.

Practical implications

This paper may help in structuring the task of using LCA information for estimating environmental costs in LCC.

Originality/value

There has been increased interest recently in the integration of LCA and LCC, such as in the SETAC (Society for Ecotoxicology and Chemistry) working group on LCC. This paper contributes with new outlooks and structures for that work.

Citation

Steen, B. (2005), "Environmental costs and benefits in life cycle costing", Management of Environmental Quality, Vol. 16 No. 2, pp. 107-118. https://doi.org/10.1108/14777830510583128