MAF651 : SEMINAR 2

Group 1
Environmental Costs & Benefits
PREPARED BY

MIMI SHAMIRA BINTI MASEK 2017638872

MAZNI FIFI IMANI BINTI YAHANI 2017638868
NUR’IZZATUL FADZLINA BINTI ZALUDDIN 2017639036
NURUL HAMIZAH BINTI MOHAMAD IZANI 2017639102
NADIA ARDILLA BINTI MOHAMAD NAZARI 2017639092

AC220 8H
 
PREPARED FOR
PM DR NORZIATON ISMAIL KHAN
 Definitions
Concern on the environment, costs and time required
and management is the process of managing.
Environment Cost
Therefore, environmental cost management is about
Management how the management manage environmental impact
cost which arise during company business operation.

The costs that an organisation incurs to prevent,

Environmental monitor and report environmental impacts and the
Cost cost of failing to comply with environmental
regulations.

Environmental Benefits enjoy by the organisation from action taken

Benefits to reduce the impact on environment.
 Purposes
To allow the economic
entities, local and To comply with regulation
governmental collective, to imposed by authorities
have a corrective assessment

To assess the feasibility of a

To encourage companies to
project whether benefit
conserve the environment
outweigh the costs
 Techniques to allocate environmental cost
LIFE CYCLE COSTING
Within the context of environmental accounting, lifecycle costing is a technique which requires the full environmental
consequences, and, therefore, costs, arising from production of a product to be taken account across its whole lifecycle, literally
‘from cradle to grave’.

ACTIVITY BASED COSTING

ABC allocates internal costs to cost centres and cost drivers on the basis of the activities that give rise to the costs. In an
environmental accounting context, it distinguishes between environment-related costs, which can be attributed to joint
cost centres, and environment-driven costs, which tend to be hidden on general overheads.

FLOW COST ACCOUNTING

This technique uses not only material flows but also the organisational structure. It makes material flows transparent by looking at
the physical quantities involved, their costs and their value. It divides the material flows into three categories: material, system and
delivery and disposal. The values and costs of each of these three flows are then calculated. The aim of flow cost accounting is to
reduce the quantity of materials which, as well as having a positive effect on the environment, should have a positive effect on a
business’ total costs in the long run.

INPUT/OUTPUT ANALYSIS
This technique records material inflows and balances this with outflows on the basis that, what comes in, must go out. So, if 100kg of
materials have been bought and only 80kg of materials have been produced, for example, then the 20kg difference must be accounted
for in some way. It may be, for example, that 10% of it has been sold as scrap and 90% of it is waste. By accounting for outputs in this
way, both in terms of physical quantities and, at the end of the process, in monetary terms too, businesses are forced to focus on
environmental costs.
 FIVE TIER
• Direct costs associated with capital expenditures,
TIER-1 raw materials and other operating and maintenance
CONVENTIONAL costs.
• Example : electricity, fuel and gas that impact on
COSTS environment

• Costs from activities such as monitoring and

TIER-2 reporting of environmental activities and emission,
cost of searching supplier who responsible for
HIDDEN COSTS environmental impact and ongoing cost of cleaning
up contaminated land.

• Contingent liabilities arising from failure to clean up

TIER-3 contaminated sites, and fines and penalties for non-
CONTINGENT compliance with regulations.
• Example : penalties/fines, property damage, legal
COSTS expenses, future compliance cost, etc.
 FIVE TIER

TIER-4 • Less tangible costs and benefits that relate to

consumer perceptions, and employee and community
RELATIONSHIP relations.
AND IMAGE • Example : cost of producing environmental reports.
COSTS

• Costs that organizations impose on others which the

TIER 5 environment and society
• The society and environment cannot be composited
SOCIETAL COSTS for the societal costs as they may not legally
responsible according to the legal system
 Environmental cost impact
 Waste has environmental costs in terms of lost land
resources and the generation of greenhouse gases in
the form of methane.
 Organisation can identify the quantity of wasted in
waste production.
 The potential cost savings will be identified.

 Businesses usually use a lot of water and savings

must be made by reducing the water bills.
 The organisation need to identify where the water
used and plan how to reduced the consumption of
water water.
  Can be reduced at very little cost.
 EMA can assist to identify inefficiencies and wasteful
practices.
energy

 EMA will helps to identify savings benefit of travel and

transport for goods and materials.
 Organisation must plan how business operation will not
harmful the environment.
Transport

 The organisation can identify how to savings the raw

material.
 Increasing the production can be done without using
new resources.
Raw material
 Classification of Environmental Cost

 The costs of activities undertaken to prevent the production of

PREVENTION waste.
COST  Eg of activities : -Evaluating and selecting suppliers
-Designing products

 Costs incurred to ensure that the organization complies with

DETECTION regulations and voluntary standards.
COST  Eg of activities : -Auditing environmental activities
-Inspecting products and processes
 Classification of Environmental Cost

• Costs incurred from performing activities that have produced

INTERNAL contaminants and waste that have not been discharged into the
FAILURES environment.
• Eg of activities : -Treating and disposing toxic waste
COSTS -Recycle scrap

EXTERNAL  Costs incurred on activities performed after discharging waste

into the environment.
FAILURES  Eg of activities : -Cleaning up a polluted lake
COSTS -Cleaning up oil spills
 Advantages & Disadvantages of
Environmental Cost & Benefits

Advantages Disadvantages

Competitive advantages Burdensome

Marketing &
Cost
stakeholder relations

Time and
Build of good images
resources
 Applications

Product :STARBUCKS
• Problem:High production of plastics lead to pollution.
• Implementation:By 2015 Starbucks plan to have
recycling available in all stores that serve 5% of
beverages in reusable cups.
• Environmental Costs:Costs to produce the
packaging that can be reusable and recycle.
• Environmental benefits:
 Give the good image of the company
 Allow the company to save money
 Attract the investors to invest