This case study reports AT&T's developing position on "Green Accounting," as defined by

AT&T as of July, 1995.  AT&T defines Green Accounting to mean "identifying ^and measuring

AT&T's costs of environmental materials and activities, and using this information for

environmental management decisions."1 The case study intentionally uses AT&T's language and

definitions in explaining environmental accounting efforts underway there. The concepts, terms,

and approach represent AT&T's view and not necessarily the position or views of the U.S.

Environmental Protection Agency (EPA). The EPA is offering this case study as one of many

possible approaches to environmental accounting. Readers may also want to consult An

Introduction to Environmental Accounting as a Business Management Tool: Key Concepts and

Terms, EPA 742-R-95-001 (June 1995) for more general information about environmental

   1 AT&T Environmental Accounting Glossary (1995).
   2 Copies can be obtained from the EPA's Pollution Prevention Information Clearinghouse at



       The United States Environmental Protection Agency (EPA) wishes to acknowledge the

cooperation and input of AT&T which generously allowed access to its people and materials for

preparation of this case study. In particular, Jeannie Wood, Co-Chair of AT&T's Green

Accounting Team repeatedly made time in her busy schedule  to answer questions and share

information. In addition, Barry Dambach  (Co-Chair) and other members of the Green

Accounting Team graciously agreed to review drafts of this document and  provided helpful

comments to EPA.  EPA also appreciates the comments provided by Daryl Ditz of the World

Resources Institute. EPA hopes the documentation of AT&T's experiences will help other

companies begin to use environmental accounting and appreciates the cooperation of AT&T in

telling its story.

       This case study was prepared for the EPA's Environmental Accounting Project, which has

been working with stakeholders for the past three years to encourage and  motivate business to

understand the full  spectrum of environmental costs and incorporate these costs into decision-

making.3 As a product of this effort, EPA has commissioned  case studies documenting
   3 In December 1993, a national workshop of experts drawn from business, professional groups,
government, nonprofits, and academia produced an Action Agenda which identifies four overarching issue
areas that require attention to advance environmental accounting:  (1) better understanding of terms and
concepts, (2) creation of internal and external management incentives, (3) education, guidance, and
outreach, and (4) development and dissemination of analytical tools, methods, and systems. The purpose
of this document is to help address the third recommendation, which includes the preparation and
dissemination of case studies. The U.S. Chamber of Commerce, the Business Roundtable, the American
Institute of Certified Public Accountants, the Institute of Management Accountants, AACE International
(the Society of Total Cost Management), and the U.S. EPA co-sponsored the Workshop. For more
information on the workshop, see Stakeholders' Action Agenda: A Report of the  Workshop on Accounting
and Capital Budgeting for Environmental Costs, December 5-7, 1993; EPA 742-R-94-003 (May 1994).

                           Acknowledgements (continued)

companies' efforts to address environmental accounting. For more information on EPA's

activities in this area or for additional copies of the case studies, please contact the EPA's

Pollution Prevention Information Clearinghouse at (202) 260-1023.  Holly Elwood, Coordinator of

EPA's Environmental Accounting Project, would like to hear about companies beginning to

implement environmental accounting. She can be  reached at 202/260-4362.
       This case study was prepared by ICF Incorporated under EPA Contract No. 68-W2-0008,

Work Assignments 82 and 109. The EPA Work Assignment Managers were Holly Elwood and

Marly Spitzer.  Carlos Lago served as the EPA Project Officer. The ICF principal author was

Paul Bailey.

                               TABLE OF CONTENTS
1.     Organization of Case Study	   1

2.     Background	   2

3.     Why Did AT&T Decide to Address Green Accounting?  	   5

      3.1    Management Commitment		   5

      3.2    Support to Related AT&T Initiatives	   6

      3.2    Customer Demands	   9

4.     How Did AT&T Initiate Its Green Accounting Project?	  10

      4.1    AT&T Chose a Team Approach	  10

      4.2    Team Clearly Defined Its Vision and Charter	, .,	  11

      4.3    Multi-Functional, Company-Wide Team	  12

5.     How Did AT&T's Green Accounting Team Gather Information?	  13

      5.1    Literature Review Process	  13

      5.2    Information Collection Through Team Meetings	  14

      5.3    Addressing Related DfE Issues	  16

6.     What Has AT&T Learned? 	  17

      6.1    Defining Green Accounting and Developing A Common Language  	  19

      6.2    Applying the ABC/ABM Approach to Green Accounting	  21

      6.3    Developing Green Accounting Tools to Assess Baseline Performance and
             Foster  Improvements 	  24

7.     The AT&T Self Assessment Tool	  25

      7.1    The Status Survey	  25

      7.2    Environmental Activities Dictionary (ABC/M)  .	  27

                    TABLE OF CONTENTS (continued)


7.3     The Activities/Resources Matrix	  29

7.4     Protocol for Using the Tool  		  32

7.5     Design Reviews  	  33

Looking Ahead	  35

                            "GREEN ACCOUNTING"
                                      in AT&T
1.      Organization of Case Study

       This case study describes the actions AT&T has taken and the issues it has encountered in

applying environmental accounting, which AT&T refers to as "Green Accounting."  The

presentation is not chronological, but is organized as follows:
             Background.  This section introduces AT&T, highlights its definition of
             Green Accounting, and presents a chronology of key events in its
             development of its Green Accounting approach.

             Why Did AT&T Decide to Address Green Accounting?  This section
             discusses AT&T's management commitment to Green  Accounting and its
             relationship to AT&T Design for the Environment (DfE) and quality

             How Did AT&T Initiate Its Green Accounting Project?  This section
             describes AT&T's use of a multi-functional team to develop Green

             How Did AT&T's Green Accounting Team Gather Information? This
             section summarizes AT&T's fact-finding visits and literature review process.

             What Has AT&T Learned? This section presents the key findings of the
             Team's activities through June 1995.

             AT&T's Self Assessment Tool. This section describes the elements
             comprising AT&T's first environmental accounting tool.

             Looking ahead.  This section addresses AT&T's evolving agenda for future
             Green Accounting activities.
       Exhibit 1 on the following page lists some of AT&T's key accomplishments in Green

Accounting, all of which are covered in this case study.

                 Exhibit 1: AT&T's Key Accomplishments in "Green Accounting"
      Senior management commitment to Green Accounting

      Established internal multi-functional team with global representation to develop Green Accounting
      concepts and tools

      Clearly defined "Green Accounting"

      Developed a literature review process and appointed subject matter "experts"

      Prepared a Green Accounting Glossary

      Developed a Green Accounting "self assessment" tool  for AT&T facilities including a protocol,
      status survey, environmental activities dictionary, and data matrix

      Completed design reviews of Green Accounting "self assessment" tool at three facilities and revised
      tool accordingly

      Explored and articulated linkages between Green Accounting and other AT&T initiatives including
      Total Quality Management (TQM),  Design for Environment (DfE),  Pollution  Prevention (P2),
      Activity-Based Costing and Management (ABC/M), supply line management, and product take-back
2.      Background

        This case study illustrates how AT&T, a major multinational high-technology company has

begun to implement what it terms "Green Accounting."  AT&T defines "Green Accounting" as

              Environmental cost accounting (aka Green Accounting):   Identifying
              and measuring the costs of environmental materials and activities
              and using this information for environmental management decisions.
              The purpose is to recognize and seek to mitigate the negative
              environmental effects of activities and systems.
       AT&T recognized that some definitions of environmental accounting include both "private

costs," which are the costs that impact a firm's bottom line, and "societal costs" (also termed

"externalities") which is a term for impacts on society and the environment that currently are not

reflected in a firm's bottom line.  AT&T has focused to date solely on private costs, particularly


conventionai and potentially hidden environmental costs.  Eventually AT&T expects to address

contingent posts .and externalities.4  Few companies outside of the utility .sector, in North America

have moved to incorporate externalities into their accounting systems; however, AT&T does

intend to go further and look at externalities in the future.

       AT&T. Driven by its expressed desire to keep a healthy balance between business

interests and environmental protection, AT&T has stated that the two interests are not  necessarily

inconsistent.5  AT&T believes that investing in the environment has helped it decrease

operational costs and avoid future liabilities. As a result,  AT&T has set aggressive environmental

goals.  For example, in 1993 AT&T reached its goal of eliminating emissions  of

chlorofiuorocarbons (CFCs) and other ozone-depleting substances from its manufacturing

operations.  AT&T achieved this goal two and a half years ahead of a worldwide ban by creating

new manufacturing techniques that eliminated  the use of  the materials responsible for the

emissions.  AT&T has also achieved significant results by  reducing waste, increasing recycling, and

using recycled paper.

       AT&T was created in 1984 under a court-ordered division of the Bell System's

telecommunication business. The world's largest telecommunications company, AT&T employs

over 300,000 people around the world, and its revenues exceeded $75 billion  in 1994. AT&T's

revenues are derived from telecommunications services, products, and systems; rentals and other

services; and financial services and leasing.  With the Company's recent mergers and acquisition of
   4 For a discussion of these cost categories, see^ln Introduction to Environmental Accounting as a
Business Management Tool: Key Concepts and Terms, EPA 742-R-95-001 (May 1995), pp. 7-17.
   5 AT&T 1993 [latest available] Annual Report, p. 19.


cellular service, cable, and entertainment companies, AT&T has positioned itself to be a major

player in the nation's efforts to construct an "information superhighway" of communication links.

        AT&T manufactures and purchases components and products to support its global

information movement and management offerings, including microelectronics, switching;

transmission, wireless, and satellite operating systems; fiber optics; voice, data, and video

communications devices; and mainframes, videoconferencing systems, multimedia personal

computers, automated teller machines, and other integrated business systems. AT&T Bell

Laboratories and other AT&T research  and development (R&D) units investigate new

technologies and evaluate ways to make technology more useful to customers. AT&T recognizes

that environmental aspects  may be found in all of its business  operations, such as equipment

manufacturing and telecommunications services, its laboratories, and even its office buildings.

        AT&T's  manufacturing subsidiary,  Western Electric, first issued a corporate environmental

policy in 1973. Following divestiture and restructuring in 1984, AT&T issued a Policy for

Environmental Protection that recommitted the company to the concepts of the original policy.

AT&Ts policy goes beyond regulatory compliance by committing the company to develop and use

nonpolluting technologies, minimize wastes, increase recycling, design products and processes with

environmental impacts as a critical factor, and raise all employees' awareness of environmental

responsibilities.  AT&T's recently updated policy embraces a life cycle approach6 and the use of

Design for Environment practices throughout the organization.7
   6 AT&T defines life cycle analysis/assessment as "the review of the environmental impact of a product
or process over its entire life cycle, including resource extraction, manufacture, packaging and
transportation, use and recycling/disposal." AT&T Environmental Accounting Glossary.

   7 Barry F. Dambach and Braden R. Allenby, "Implementing Design for Environment at AT&T," Total
Quality Environmental Management (Spring 1995).


       This case study begins in February 1994 and documents the birth of the Green Accounting

project at AT&T, the avenue through which environmental accounting is being introduced into

the company.  As of July 1995, the project has left its infancy, but is still in the growing, formative

stage. See Exhibit 2.

                    Exhibit 2: Chronology of Green Accounting at AT&T

  February 1994    •

  December 1994  •

  February 1995    •

  April 1995

  September 1995  •

  October 1995    •
AT&T creates new senior management position for Technology and
Environment and organizes Design for Environment (DfE) Program

Green Accounting Team assembled (as part of AT&T's DfE
Program) to develop AT&T approach and tools for Green

Design reviews of AT&T Green Accounting tools began

Design reviews of AT&T Green Accounting tools completed and
tools revised

Field tests of Green Accounting tools began

Field tests of Green Accounting tools to be completed

Green Accounting tools to be presented to AT&T DfE Team
3.     Why Did AT&T Decide to Address Green Accounting?

       This section describes the factors, which include management commitment, support to

related programs, and customer demands, that led AT&T to address Green Accounting.
3.1     Management Commitment

       AT&T's senior management commissioned the Design for the Environment (DfE)

program as part of AT&T's policy for environmental protection. The architects of AT&T's DfE

program see economic considerations as a key component and have established a Green


Accounting Team to help implement DfE.  The Green Accounting Team believes that Green

Accounting can support the achievement of AT&T's environmental policies by:
              Supplying relevant cost data to understand and improve environmentally
              impactive processes, and drive desired behavior towards designing
              environmentally preferable products and services;

              Providing information to support the most cost-effective solutions to
              preventing and/or meeting environmental compliance needs; and

              Providing evidence of compliance with environmental standards (both
              regulatory and voluntary).
       In this way, Green Accounting can help AT&T avoid potential environmental liabilities,

reduce costs, and minimize its impact on the environment.  Green Accounting has been described

as "essential not only to give the environmental projects an equal chance of receiving needed

resources, but also to get an accurate description of the true environmental costs associated with

the manufacture of each product."8 Providing management with environmental cost data

facilitates making better environmental and business decisions.

3.2    Support to Related AT&T Initiatives

       The prospects for adopting Green Accounting were enhanced by its relationship to several

important programs and activities at AT&T, including Total Quality Management (TQM), Design

for Environment (DfE), and Activity-Based Costing and Management (ABC/M).  This section

summarizes the relationships seen  at AT&T between Green Accounting and each of these

   8 Barry F. Dambach and Braden R. Allenby, "Implementing Design for Environment at AT&T," Total
Quality Environmental Management (Spring 1995).

                                             "We base our environmental goals on Total
                                             Quality Management principles."

                                                          ,        - AT&T

       Total Quality Management. Top management at AT&T has emphasized that its

environmental goals are based on Total Quality Management (TQM) principles.  AT&T employs

the Cost of Quality (COQ) model, focusing priorities on prevention through source reduction

first, followed by reuse, recycling, and

treatment — with disposal as the last

option.9 For example, AT&T views the

reduction of waste as a means to reduce

costs. Senior management has identified three major ways that improved environmental

management strategies support TQM,  noting that they enhance:
       (1)    Customer satisfaction through improved relationships, which come as a
             result of meeting or exceeding environmental expectations;

       (2)    Organizational effectiveness, by involving everyone in sharing the mission to
             improve environmental quality; and

       (3)    Company competitiveness, because when a company addresses social
             concerns such as its impact on the environment, it significantly increases
             value for its customers.
       AT&T views Green Accounting as a major component of Total Quality Environmental

Management (TQEM). AT&T believes that "quality is a given in competition  today" and that

"environmental quality will be a given very soon."

       Design for Environment. AT&T is a leading corporate proponent of Design for

Environment (DfE), which calls for environmental considerations to be incorporated into product

design from the outset. AT&T's commitment to DfE figures prominently in its vision statement:
   9 These priorities were established to support EPA's environmental management hierarchy, which was
codified by Congress in the Pollution Prevention Act of 1990.                      -

              "AT&T's vision is to be recognized by customers, employees,
              shareowners and communities worldwide as a responsible company
              which fully integrates lifecycle environmental consequences into
              each of our business decisions and activities. Designing for the
              environment is a key in distinguishing our processes, products, and
       This progressive vision is backed up by top level management commitment. In 1993,

AT&T created a new post to develop the rules and tools needed to achieve its vision.  Brad

Allenby, named Research Vice-President for Technology and Environment, moved quickly to

constitute a DfE Coordinating Team which identified a number of priority areas for subteams:
        •  green accounting

        •  product takeback
        •  supply line management

        •  life cycle analysis
«  international environmental standards

•  external relations
•  energy
       AT&T management developed a

charter, for each of these subteams. The DfE

Team commissioned the Green Accounting

subteam to address environmental attributes
        "Designing for the environment is a key in
        distinguishing our processes, products, and
                            -  AT&T Vision
in accounting in order to support AT&T's environmental programs, especially DfE. The charter -

that was given by management to the Green Accounting Team was to (1) develop methods and

tools, (2) identify environmental costs and related activities, and (3) implement this understanding

throughout AT&T.  AT&T views Green Accounting as an essential component of DfE programs

intended to make AT&T's operations more environmentally responsible:  "the full life-cycle

environmental cost for a product... will be used to drive the desired behaviors needed for DfE to

be successful."10
   10 Barry F. Dambach and Braden R. Allenby, "Implementing Design for Environment at AT&T," Total
Quality Environmental Management (Spring 1995).


       Activity-Based Costing and Management.  AT&T's DfE Team has made a commitment to

the use of Activity-Based Costing (ABC) and Activity-Based Management (ABM). Viewing them

as tools that support TQM, AT&T often refers to ABC/M or ABC/ABM.
                                               "[A]ctivity based costing... drives the costs to
                                               the cost drivers or root causes.  Most envi-
                                               ronmental costs are still included in overhead
                                               accounts for the  facility  and are allocated
                                               using methods that may have been appropri-
                                               ate for labor-intensive operations but that will
                                               not be so in today's high  tech  electronics
                                               industry where labor is continually becoming
                                               a smaller portion of the total product cost."
                                                             -  Dambach & Allenby10
       AT&T sees ABC and ABM

performing related but different functions.

AT&T views ABC as a method for assigning

relevant costs to products by identifying the

resources consumed by activities performed for

these products, which are termed "cost

objects."  (A telephone, computer, or ATM

could be a cost object.)  But AT&T believes that "tracking costs alone does not drive

improvement." That is where AT&T sees ABM coming into play.  From its process point of view,

ABM seeks to determine what are the "cause drivers" of activities and their costs.  AT&T believes

that ABM can put the management focus on such areas as product or process design, supplier

qualification, process performance (e.g., efficiency, waste), and product disposal alternatives,

among others. Through ABC/ABM, AT&T's goals are to reduce or eliminate costs by dealing

with their driving causes and to employ performance measures as indicators of AT&T's progress.
       Customer Demands
              "When we address social concerns and reduce the need for

              environmental remediation, we significantly increase value for our


                                                       - AT&T

                                         - 10-

       AT&T has recognized customer expectations as a driver for improving environmental
performance in the context of DfE.  For example,
              More and more customers are asking AT&T to identify and validate its
              reductions in use of targeted chemicals and materials (e.g., CFCs)
              Customers are asking AT&T to reduce packaging or recycle it
              Customers are asking AT&T to take back old products as part of sales
       AT&T's position is that environmental management can improve customer satisfaction and
relationships by meeting or exceeding environmental expectations.  The Green Accounting Team
has noted that the definition of "customer" in some cases may include not only the marketplace,
but also society, shareholders, employees, the government, or even the environment (as "an
abstract customer").

4.     How Did AT&T Initiate Its Green Accounting Project?
       This section describes AT&T's use of a multi-functional Team to foster Green
Accounting.  The section covers why AT&T chose a team approach, the Team's vision and
charter, and how the Team has operated.

4.1     AT&T Chose a Team Approach

              "The issue isn't limited to one discipline, one industry, or one
              nation.  The environment affects all of us, and it will take all of us
              to protect it."
                                 — AT&T Chairman and CEO Bob Allen
       AT&T frequently uses teams as a part of its TQM approach to managing and improving
its operations.  Recognizing that Green Accounting must involve several traditionally separate

                                          -11 -

perspectives and functions (e.g., environmental, accounting, finance) as must DfE (e.g.,

environmental, process/product design, research and development, marketing), AT&T

management saw a multi-functional team approach as the only viable option.  To achieve its goal

of integrating environmental concerns into business decisions, AT&T senior management has

alerted its associates to expect changes in their roles and company processes as AT&T implements

environmental initiatives such as Green Accounting and DfE.  In particular, AT&T expects that

associates who have roles in technical, purchasing, and financial processes must collaborate — by

understanding, communicating,  and working with each other — to consider the environmental and

financial consequences of decisions.  Similarly, AT&T believes that its cost accounting systems

must change to allow a much clearer view of the true costs of producing products and providing

services.  In anticipation of these coming changes, a team approach to implementing Green

Accounting would involve and ready its people for designing the corporation's future and

initiating the necessary multi-functional dialogues.
4.2    Team Clearly Defined Its Vision and Charter

       At its first meeting in February 1994, the

Team reviewed the charter developed for it  by

AT&T senior management. The Team

developed a vision statement relating Green

Accounting to TQEM and highlighting AT&T's

Pollution Prevention Policy, which is based on

achieving and sustaining a healthy balance

between business interests and environmental
    Green Accounting Charter
     Facilitate the integration of
    environmental considerations
into management accounting systems,
       models, and practices
      throughout AT&T through
   communication,  education and
     development of guidelines.

 Emphasis is placed on using Activity
  Based approaches, principles and
  costing methodologies to support
protection. The Team then decided to expand its charter to reflect its vision. Notably, the Team

agreed that its purpose was not to impose environmental cost accounting, but to facilitate Green

                                           - 12-

Accounting throughout AT&T by communication, education, and development of approaches and
tools that can be used to foster accountability and better management processes for achieving
environmental goals.

       Using brainstorming techniques, the Team discussed "why does it make sense for AT&T to
implement Green Accounting?" Conclusions included the following

       •      to control/improve process costs
       •      to trace costs to green activities
       •      for investment decisions/trade-offs
       •      to assess design impacts, now and in the future
       •      to prove compliance with environmental standards
       •      to respond to customers and other stakeholders
       •      to support sustained growth of profitability
       •      to make it easier to understand AT&T's impacts on the future.

       The Green Accounting Team had a project and product-focus from early on. For
example, the  second meeting of the Team included group brainstorming on key projects and
priorities. Continuously identifying specific products and tools crystallized for the Team a set of
near-term objectives for orienting Team activities and defining the Team's purpose.  The Team
agreed that tools to assess environmental costs could guide AT&T activities and decisions to make
a positive impact economically and environmentally.
43    Multi-Functional, Company-Wide Team
       From the start, recruiting and maintaining the Team has been a priority.  Initially, the
Team was intended to be a multi-functional management Team with an environmental focus. The
first meeting included nine members from various parts of the company representing functions
such as:

          Information Systems
          Manufacturing Strategies
Supply Line Management
Manufacturing Engineering
Technology and Environment
       As the work progressed, the Team decided to add members who could represent product
management (and the "voice of the customer"), logistics (e.g., transportation and packaging
concerns), and finance from a plant perspective.  New members were also added to facilitate
coordination with other relevant AT&T activities and as replacements for departing members. In
time, the multi-functional membership of the Green Accounting Team has expanded to include
members representing AT&T facilities nationwide and overseas as well, to encompass global
considerations.  The result has been a lively, motivated group that has made significant progress in
giving body to abstract concepts and translating those concepts into practical approaches.  Team
members have learned to work together and communicate in an evolving common language.  As
the focus of the Team changes over time, its members will likewise change.

5.     How Did AT&T's Green Accounting Team Gather Information?
       Much of the Team's first six months was spent in gathering and reviewing information.
This learning  program included literature reviews, fact-finding visits to diverse AT&T facilities,
and focused efforts to understand how Green Accounting relates  to other ongoing DfE efforts.
This section describes these activities.
5.1     Literature Review Process
       At the start, each Team member received a copy of Accounting for the Environment by
Rob Gray as well as the February 1994 issue of IMA's Management Accounting magazine. These
reference documents were soon joined by a flood of articles having some relevance to Green


Accounting. To deal with the volume of information systematically, Team members chose a team

approach to filter the information through designated "subject matter experts."  Each expert was

to filter information for the Team by preparing a synopsis of each article and then e-mailing it to

Team members with a recommendation on whether or not to read the article thoroughly.

Resource materials were grouped into the following categories for assignment to Team members:

       •      Environmental Management Systems and waste minimization (as related to

       •      Life Cycle Cost, business case,  and cost/benefit models

       •      Design (to  recycle/reuse/cost, including trade-off models)

       •      Recycling/takeback (European  regulations)

       •      SEC requirements, corporate policies, and other companies' annual reports

       *      Accounting systems with environmental attributes, and bridges between
              accounting systems and environmental management systems

       •      Asset management and investments/dispositions

       *      Qualifying and requalifying suppliers for environmental reasons

       As Team members ran across relevant  reading material,  they contacted the subject matter

expert or copied the entire Team, based on whether the information merited full distribution.

The objective was a more efficient, economical, and faster approach to information review and

5.2    Information Collection Through Team Meetings

       AT&T used Team meetings as opportunities to learn about different company operations,

capabilities, and needs. For example:
              A meeting at the AT&T Atlanta Works fiberoptic cable manufacturing
              facility was enriched by a tour and presentations that provided an
              opportunity to explore how environmental costs are handled at that facility.

              On the same trip, the Team met with Coca Cola, headquartered in Atlanta
              and perceived by the Team as a leader in life-cycle environmental
              assessment, which described its environmental program.

              A meeting in Colorado Springs allowed the Team to visit an AT&T
              microelectronics plant and be briefed on its environmental programs.  The
              Team .heard about some of the business benefits of pollution prevention.
              For example, past pollution prevention actions and community relations
              activities had created a favorable atmosphere for the community's
              acceptance of subsequent plans to expand wafer fabrication capacity in
              Fort Collins.

              A meeting in Scotland was the occasion to expand the global horizons of
              the Team, which heard about the environmental program at AT&T-
              Dundee (where ATMs are manufactured) as well as take-back programs in
              Europe. This meeting brought the Team together with two professors at
              University of Dundee who had co-authored the text Accounting for the
              Environment, used as a key reference by the Team.  In the course of the
              meeting, the professors responded to questions  about different aspects of
              green accounting.

              A meeting at AT&T-Paradyne (where network  cards for laptops are made)
              in Florida was scheduled to dovetail with AT&T's Activity-Based  Costing
              and Management (ABC/M) Conference. This allowed the Team  to learn
              about the connection between Green Accounting and ABC/M.

              A meeting at AT&T-Merrimack Valley Works in Massachusetts gave the
              Team an opportunity to observe a pilot system developed for tracking
              chemical usage and waste generation and linking associated costs  to
              products,  using an average purchased cost of chemicals drawn from
              Accounts  Payable.  The system provided  a model for allocating chemical
              costs  to a process or product.
       At the AT&T Merrimack Valley Works, the Green Accounting Team met with Merrimack

Valley Work's Pollution Prevention Team, which made the following comments that directly

spoke to the potential value of Green Accounting:
              "If we'd had Green Accounting and process cost information, we
              could have saved weeks [of effort]"

              "We'd like to know how much it costs to research the viability of
              alternative materials [to lead solder], the cost impact on materials
              purchases, and the time and cost spent on completing a toxics use
              reduction report."

                                          - 16-
              "More awareness and measurement of things like disposal costs ...
              would drive attention to where the costs are."
To support incorporating Green Accounting into AT&T's pollution prevention initiatives, the

Green Accounting Team envisioned developing an environmental accounting assessment tool (see

pp. 25-33) that site teams could use in determining the most helpful information and in setting

priorities to meet environmental objectives.

       Green Accounting Team meetings to date have facilitated active interchanges, helped the

Team develop an understanding of the status of environmental accounting at AT&T, and

demonstrated corporate commitment to DfE and Green Accounting.
53    Addressing Related DfE Issues

       One important activity of the AT&T Green Accounting Team has been to relate its

efforts to other relevant DfE initiatives underway at AT&T. The Green Accounting Team

started by reviewing the charters of the other DfE subteams to determine their respective  areas of

expertise and emphasis. Based on this review, the Green Accounting Team decided to coordinate

with other AT&T DfE teams, such as the Takeback Team, the Supply Line Management (SLM)

Team, and the Life Cycle Analysis Team. Such coordination was seen as allowing Green

Accounting Team members to learn what other relevant DfE groups were doing and to identify

potential areas of linkage and coordination  (e.g., where Green Accounting may figure into take-

back programs,  purchasing, and facilities and engineering functions).  As a result, Green

Accounting Team members with expertise in certain subject areas were selected to serve as

liaisons to other DfE sub-teams when common topics of interest were identified.


       Notable examples of such common topics include the Green Accounting Team's work with

the SLM Team and with product takeback issues.
              A joint meeting with the DfE SLM Team focused on a Total Cost of
              Ownership (TCO) model, which takes the perspective of AT&T as the
              customer.  The AT&T Green Accounting Team worked with the DfE SLM
              team on accounting aspects of activities such as qualifying and requalifying
              both suppliers and materials,  with the ultimate goal of reducing defects and

              The Green Accounting Team explored how its approach would apply to
              product takeback. The Team first sketched the takeback process in activity
              terms and then identified which activities (e.g., reverse distribution) would
              entail resource costs and which activities (e.g., reuse, resell) might entail
              financial benefits. The Team agreed that a trade-off analysis could assess
              whether benefits exceed costs in product takeback. The  Team noted that a
              separate trade-off analysis also should be performed comparing the costs
              and quality of recycled'or reused materials compared to new materials,
              including associated purchasing costs.
       The Green Accounting Team is continuing to explore and articulate the relationships

between Green Accounting and other DfE activities.

6.     What Has AT&T Learned?

       As Team members learned about Green Accounting and how it could be applied to

AT&T's operations, the Green Accounting Team generated a number of findings and identified

issues for later consideration.  This section describes the key findings and issues the Team

identified in its first nine months of activity.
       Over the course of its meetings, the Team realized that the use of different management

information systems at AT&T Business Units would pose an implementation quandary.  In order

to implement Green Accounting, a number of different information systems across AT&T could

be employed, but there is no single cost accounting or environmental support system in common


across the corporation at this time.  The Team also discovered that some business units had

already implemented ABC for reporting product costs (i.e., inventory valuation for financial

statements). The next logical step appeared to be using ABC/M for process costing to develop

environmental performance reports  and decision models for management purposes.
       In its meetings, the Team reached some additional conclusions and articulated a variety of

findings about applying Green Accounting at AT&T.  The Team identified the following key


       •      AT&T should define its Green Accounting terms and establish a common

                    A glossary or dictionary of terms should be developed;

       •      Green Accounting at AT&T should be based on ABC/ABM principles;

                    ABC/ABM can provide a common-sense platform to apply Green
                    Accounting; and

                    The essential ingredients are to identify desired behaviors and
                    establish rewards and recognition.

       •      Baseline information is not available concerning the degree to which
              environmental costs are allocated to specific products;

                    Attention is already being paid to some environmental costs at

                    Accounting treatments may vary when it comes to overhead costs
                    (i.e., some costs  may be allocated to products, general and
                    administrative overhead  (G&A), or research and development

                    AT&T must set  a baseline to help target opportunities.

       The following sections describe the actions taken by the AT&T Team to define Green

Accounting and establish a common language, base Green Accounting on ABC/ABM principles,

and develop tools for assessing baseline performance and improvements.


6.1    Defining Green Accounting and Developing A Common Language  ,

       Defining Green Accounting.  From the very first meeting on, the Team sought to define

Green Accounting. The Team discussed the many applications of environmental accounting,

including requirements for insurance and taxes, regulations, and external financial information.

The Team agreed  that Green Accounting should first focus on "true and relevant" costs11 that

appear in a facility's budget. At the kick-off meeting, members related Green Accounting to two

basic accounting activities:  (1)  planning, such as predictive analysis weighing environmental

impacts on the future (i.e., life cycle analysis, target costing), and (2) collecting and reporting data

(such as gathering information to support decision analysis and reporting to SEC, EPA, etc.).  For
                     • t
both activities, the Team believed that "excellent costing capabilities" were a prerequisite for

effectively accounting for the environment (i.e., identifying costs that mirror operations). Using

what Jeannie Wood, AT&T's Green Accounting Team Facilitator, terms "root cause thinking," the

Team concluded that the best business focus for Green Accounting  is the collection and use of

information for internal management, because making better decisions will result in improved

performance for external reporting.

       As noted on page 2,  the Team defined Green Accounting as follows:
              Environmental cost accounting (oka Green Accounting):  Identifying
              and measuring the costs of environmental materials and activities
              and using this information for environmental management decisions.
              The purpose is to recognize and seek to mitigate the negative
              environmental effects of activities and systems.
   11 AT&T also refers to these costs as "private costs" meaning those costs that affect the firm's bottom
line and that the firm actually pays out.  AT&T Environmental Accounting Glossary.


       A recurring issue in environmental accounting is how to define and identify

"environmental" costs.12 The Team acknowledged the difficulty of distinguishing in some cases

between environmental and health/safety materials and activities, but kept its focus on

environmental issues.  The Team recognized that environmental aspects would sometimes be

inseparable from health and safety concerns.  The Team also recognized that certain costs may be

hidden and not attributed directly to environmental activity, such as production shutdowns caused

by responding to emergency spills or retooling for environmental impact reduction. The Team

started to address this issue by developing definitions of environmental  activities, as described

starting on page 27.

       Establishing a Common Language; The Green Accounting Glossary. The Team took

several actions to foster a common language to communicate about Green Accounting both

within the Team as well as across AT&T. A key activity was the preparation of an Environmental

Accounting Glossary.

       The Environmental Accounting Glossary was an early project of the Team.  It was designed

to identify and clarify the definitions of key terms in an ABC/M context.  The AT&T

Environmental Accounting Glossary was based on the "Glossary of Activity-Based Management,"

which was published by Computer Aided Manufacturing-International (CAM-I) in 1991 and

edited by Norm Raffish and Peter B.B. Turney. Other terms were incorporated from "Common

Cents" written by Peter B.B. Turney.  AT&T appended Green Accounting examples to many of

these terms and added new terms specific to Green Accounting. The 12-page glossary covers

such terms as:
    12 Sc&An Introduction to Environmental Accounting as a Business Management Tool: Key Concepts and
Terms, EPA 742-R-95-001 (May 1995), pp. 7-12.

Absorption costing
Activity attribute
Activity-based cost system
Activity-based management
Activity cost pool
Activity driver
Cost driver
Cost object
Cost of quality
Design for environment
Direct cost
Environmental cost
                                          -21 -
 management system
Externalities/external costs
Full cost accounting
Full cost environmental
Full cost assessment
Full cost pricing
Green Accounting
Indirect costs
Investment management
Life cycle analysis
Life cycle costing
Performance management
Performance measure
Pollution prevention
Private costs
Reduce, reuse, recycle
Resource driver
Supply chain cost
Sustainable resource
Value-added activity
Value chain
       The Glossary is a "living document" that is expected to evolve as AT&T further

implements Green Accounting.  The July 1995 version of the Glossary constitutes Attachment A

of this case study.

       In another effort at spreading awareness of Green Accounting and developing a common

language throughout AT&T, the Team explored the possibility of adding a Green Accounting

newsgroup to AT&T's news network or leveraging off the existing environmental newsgroup. The

Team envisioned using this medium for communicating objectives, policies, vocabulary, model

adaptations, and researching current capabilities and practices.  To determine the level of interest

in this initiative, the Team put a few paragraphs about its activities in the environmental

newsgroup. The Team has been entering information into this newsgroup about conferences and

forums relating to Green Accounting and is still evaluating the effectiveness of this activity.
6.2    Applying the ABC/ABM Approach to Green Accounting

       The first meeting of the AT&T Green Accounting Team included viewing an AT&T

conference video on ABC/ABM that contained a few references to environmental considerations.

The Team agreed that good cost management is necessary for Green Accounting; thus, the


Team's orientation was on how ABC/ABM practices and principles could help AT&T achieve

better environmental habits.  For example, ABC/M could help measure the cost savings from

reduced materials costs due to recycling and reuse. Through the course of its meetings, the Team

reiterated the view that ABC/ABM provides an excellent vehicle to implement Green Accounting.

The Team believed that ABC/ABM would help AT&T identify environmentally preferable

activities and measure them against AT&T's objectives and strategies, thus "balancing the

scorecard with several perspectives."  In addition, the Team concluded that ABC/ABM provides

an approach to understand and target areas of opportunity in current processes and in design

considerations, including design to environmental cost.1'* Moreover, the Team came to believe

that Green Accounting can provide an impetus to move forward with ABC/ABM because it

demonstrates a practical and useful application of ABC/ABM.
       The Team decided to recommend use of ABC/ABM principles to stimulate improvement

of environmental results.  The Team viewed ABC/ABM as an ideal platform for Green

Accounting, concurring that AT&T can account for the environment effectively by incorporating

environmental elements into ABC/ABM cost tracking and planning models as follows:
              "Where Activity Based Costing (ABC) captures cost elements in
              processes — we need to add the environmental elements.

              Where Activity Based Management (ABM) uses data to make
              decisions — we need to add environmental criteria to the decision
       The Green Accounting Team took these principles to heart and used them as a

touchstone for its work.  The Team's vision is to see environmental elements added where ABC
   13 Design to environmental cost refers to a concept of product design oriented toward environmental
cost goals or constraints much like the terms design for disassembly and design for recyclability refer to
concepts of product design which emphasize ease of disassembly and recycling, respectively, at the end of a
product's useful life.

                                            - 23. -

links costs to processes, and environmental criteria added to the decision models used in ABM.

The Team sees ABC as a tool for identifying the true costs of products, and thereby providing an

impetus for process improvement or reengineering that does not necessarily arise from traditional

cost accounting systems, which do not highlight environmental costs.
              "When we look at total costs and their 'cause' drivers, two
              approaches can be considered: (1) attempt to reduce the cost or
              (2) reduce/eliminate the cause driver. The environmental
              preference is to eliminate the cause driver; doing this, we'll both
              avoid costs and avoid environmental waste/hazards."

                                    —     AT&T Green Accounting Team
       Activity-based management employs a set of specific concepts and terms such as "cost

drivers" (i.e., factors or causes that influence the costs of an activity such as the amount of waste

generated), "activity drivers" (e.g., regulatory compliance), activity "characteristics" or "attributes"

(e.g., value-added, non-value-added, environmentally-preferable), "inputs" and "outputs" of

activities (e.g., materials, products, wastes), and performance measures (e.g., percent of recycled

context).  The Team added some examples to the AT&T Environmental Accounting Glossary and

conducted its own exercises to clarify the terminology.
       In addition, at one point, the Team performed an exercise in defining inputs, outputs, and

drivers for environmental activities. The inspiration for this exercise came from reviewing the

format of an Activities Dictionary published by ICMS, Inc.  While the Green Accounting Team's

activity dictionary (described on pp. 27-29) listed activities, definitions, and general ideas of

resources used in the activities, the ICMS dictionary employed a more involved format that

included cost drivers, inputs, outputs, and other information.  The exercise of labelling

environmental activities with value-added or non-value-added characteristics proved to be difficult

for the Green Accounting Team to complete at that time. The Team concluded that (1) there is


a need for clarifying the value-added nature of certain environmental activities (e.g., training),

which may depend on who is viewed as the customer; (2) output measurements should be linked

to corporate strategic environmental objectives; and (3) any pre-existing dictionary should be used

with caution because of the need to tailor the language. Team members decided to try

individually, based on their own areas of expertise, to define inputs, outputs, and drivers for each

environmental activity, with the goal of pooling these efforts later into the Green Accounting

environmental activities dictionary (see pages 27-29).
6.3    Developing Green Accounting Tools to Assess Baseline Performance and Foster

       The Green Accounting Team found that although attention was being paid to some

environmental costs at AT&T, good data were not readily available to assess the degree to which

environmental costs were being identified and allocated to specific products. The Team found

that, viewed as overhead, environmental activities' costs might be allocated to products generically

or might be charged to research and development (R&D) or general and administrative (G&A)

overhead.  Among the major action items considered by the Team to develop baseline

information were the following options:
       (1)    Survey AT&T plants to learn how they currently trace environmental costs
              and cost recoveries to products,

       (2)    Pilot implementation of Green Accounting for a product or plant with
              relatively high "green costs,"

       (3)    Develop a self-assessment tool that AT&T plants could use as an aid in
              establishing baselines and goals for improvement
       After much discussion, the-Team decided to implement the third option as a first step.

The AT&T Self Assessment Tool
       A major product of the AT&T Green Accounting Team has been the development of a
self-assessment tool.  The tool is meant to be used by business unit or site Pollution Prevention
Teams as a springboard for discussion and improvement (both immediate and continuous).  It
provides  a platform or template that can be adapted for local considerations. In addition to the
Green Accounting Glossary described above, the tool includes the following components:

       •       Status Survey
       •       Environmental Activities Dictionary
       •       Activities/Resources Matrix
       •       Protocol

       Each of the tool's components is described in turn.

7.1    The Status Survey
       The purposes of the survey are to raise awareness of potential weaknesses in existing
decision processes and accounting systems and drive behavior in desirable directions.  The survey
was a product  of the entire Green Accounting Team; for example, all Team members were asked
to think up at  least 5 questions to put into the survey.  All members were responsible for
reviewing, editing, and enhancing the survey. Team members pooled their questions and edited
the results to generate a first draft of the survey.  At a subsequent meeting of the Green
Accounting Team, participants made considerable revisions to the survey. The Team crafted one
portion of the  survey to  help users identify both (1) what cost information is available for a list of
environmental activities and (2) how costs are classified (i.e., direct, product overhead, or G&A).
       The survey was designed to draw attention to how decisions are made and what
information is used, available, or needed; how costs are classified in accounting systems and


whether environmental elements and activities are reflected in product and process costing.  In

addition, the status survey includes a module of questions relating to post consumer product take-

back.  The following are some selected examples of questions from the survey:
                              AT&T Status Survey - Selected Questions
At what stage in the business case process is the environmental manager normally
included in decisions on equipment and facilities acquisitions or divestitures?
          Just before final decision
After final decision
          Not generally included
          At what stage should environmental considerations be introduced and weighed?
          Are the financial impacts of environmental considerations included in the business case?
                                                                  Yes        No
          When production and materials handling processes are designed/reengineered (including
          tooling/equipment acquisitions), are financial estimates of tangible and intangible
          environmental costs/benefits included? (Examples:  licenses, treatment, chemicals
          recovery, improved goodwill, reduced  risk of fines and penalties, etc.)
          If so, what was included and how was it derived?

          What was the confidence level of the estimate?
          Is product life cycle regularly considered during the design phase?

          Has life cycle analysis and related life cycle cost impact analysis been performed on any

          If so, which produces)?  	
          Did the scope of the analysis include end of life recycling or disposal costs?

                                                                  Yes        No
          Are depreciation expenses and assets related to equipment acquired for environmental
          management easily segregated from other depreciation expenses or capital assets?

        A major focus of the survey was whether decisions about

                      product design features
                      production and handling processes
                      sourcing and make vs. buy choices
                      capital investments, or
                      facility investments/divestments
 consider environmental impacts and cost trade-offs, and if so, which costs are considered and how

 are they handled. This included frequently overlooked costs such as future costs, potential

 liabilities or contingent costs, and so-called "intangible" costs (and benefits) such as brand image

 and customer relations costs.  The survey also posed questions about the process used to evaluate

 cost trade-offs for environmental impacts, including when environmental managers are consulted

 on decisions  about equipment and facility acquisitions.

       To assess the availability of cost data, the survey provided a listing of environmental

 activities and a table to note whether the costs of the activities were classified as direct product

 costs, product overhead, or G&A.  To promote consistency, the Green Accounting Team

 developed  definitions for the activities, which were collected in an "Environmental Activities

 Dictionary (ABC/M).1'
7.2    Environmental Activities Dictionary (ABC/M)

       The Green Accounting Team identified over two dozen environmental activities that could

serve as a starting point for Green Accounting.  Each activity was defined in a sentence or two,

sometimes with explicit examples. The dictionary covered all the activities included in the

activities/resources matrix (described on pages 29-31  below), presented in the same order, as well

as over a dozen activities related to product take-back.  Selected examples of environmental

activities on AT&T's list include the following:

       AT&T Environmental Activities Dictionary — Selected Entries

Obtaining permits:  time and  expenses  for all involved  in documenting and
applying for environmental permits.

Operating and maintaining environmental/pollution control equipment: time and
expense of operators and contractors to train, operate, and maintain equipment
or equipment parts for specific environmental  purposes; includes depreciation
costs of equipment and tooling (i.e., wastewater treatment plant and air pollution
control devices).

Environmental media  testing  (sampling and  analysis):   time and expense,
including contractor's fees, for scientific testing of air, soil or water. This includes
sample collection and analysis costs.

Training (environment-related): includes internal instructor time, materials, and
room costs as well as participants' time and expenses in courses that are related
to environmental and safety training; if external  instructors are used, this activity
cost includes fees.

Storing waste and hazardous materials: time and expense of personnel and space
requirements for specialized storing of hazardous materials and other solid wastes
pending  use for production or  disposal.   This  includes flammable liquids,
compressed gases, etc.

Evaluating equipment for environmental projects:  time and expense by environ-
mental managers in evaluating equipment for purchase which has either the
primary function of pollution  prevention or will  improve or  replace current
equipment which has an environmental impact.

Reengineering to meet environmental objectives:  time and expense involved in
redesigning  a product  or process or researching  alternative materials and/or

Qualifying/requalifying suppliers:   time and  expense by environmental and
sourcing staff and other technical personnel involved in evaluating, interviewing,
and monitoring  suppliers  as  a result of a specific environmental reason; this
includes  suppliers for materials, supplies, services, and  transportation.   An
example includes activities of requalifying suppliers  of CFC solvent substitute

Developing  (environmental)  plans/strategies:   time and  expense  involved  in
choosing,  documenting, communicating, and deploying environmental strategic

De-ionizing water for manufacturing:  time and expense, including equipment
costs, to de-ionize incoming water  for a production process.  While it may be a
normal production cost, using this information may lead to reducing use and costs
of processing this natural resource.


       AT&T's list of environmental activities included activities required to comply with

environmental regulations as well as activities not compelled by law (e.g., developing

environmental strategies). Some activities, such as training, might include both required training

and training provided voluntarily by AT&T to supplement legally required minimums.  Some

environmental activities overlap (or may constitute) production activities, such as evaluating

process equipment that will reduce or prevent pollution, and process/product reengineering.

Some activities (e.g., qualifying suppliers) may be performed by non-environmental staff. Notably,

AT&T included the use of certain resources  in the scope of its list of environmental activities;

energy and water consumed directly in production are to be assigned to "other environmental

activities."  As noted above in the description of "de-ionizing water," AT&T believed this focus

might lead to  reducing use and costs of natural resources.
       The Environmental Activities Dictionary included a short key definitions list covering the

terms activities, resources, liabilities, residues, and waste. Several categories of resources were

distinguished, consistent with the activities/resources matrix (described next).

7.3    The Activities/Resources Matrix

       From the start, the Green Accounting Team aligned its approach with ABC/ABM

principles.  Toward this goal, the Team designed an activities/resources matrix, which lists over

two dozen  environmental activities (as defined in the AT&T Environmental Activities Dictionary)

and provides several major resource categories, including labor, materials/supplies, services/

consulting fees, equipment depreciation, energy and other utilities, and other facilities.  A

separate companion matrix covers product take-back activities and resources. Exhibit 3 presents

an illustrative excerpt.





S3 it
a 2
« c
a .2
GJ 4^
a .2
•3 1
1 1 8
15 a ^
co o
'§ ^
•^ cu
C3 3
fities (as deflned in
yities Dictionary)
u o
< <:

ng (environmentally related)


toring/tracking regulatory
O 3


oping (environmental) plans/
A) 4-)
> CO
S is
"O t/3

jineering to meet
onmental objectives

ating & maintaining
onmental equipment
n. e
O 4>


ling materials

ling hazardous materials

ng wasteAlazardous materials

>sing of waste/hazardous
T3 S

                                            -31 -

       The user fills appropriate cells in the matrix with one of the following symbols:

              $      Yes, the data are readily available

              ?      No, the data are not available, but are needed or desirable

              X     No, the data, whether available or not, are not relevant

       Users of the matrix can employ these results to identify what information is important. In

this way, AT&T facilities can establish priorities for reconfiguring accounting systems to capture

the desired information.  AT&T noted that priorities would usually be determined by regulatory

compliance requirements, best practices, Cost of Quality categories, and total activity cost.
       The Team thought that once the cost data were developed, AT&T facilities could assess

their relative performance by assigning activity costs to Cost of Quality (COQ) categories (i.e.,

prevention, appraisal, failure). The conceptual model is a total COQ of 30% of sales revenues

(i.e., 5% for prevention, 10% for appraisal, and 15% for failure costs including non-compliance);

and AT&T believes that by making greater investments in preventive measures, AT&T can

reduce the overall COQ in half (i.e., to 15% of sales revenues).  Thus, the Team invested some

time in relating different, general environmental activities to the three segments  of the COQ

model as follows:
                     Advanced Manufacturing
              -      Supply Line Management
                     Prevention training
              -      Better tools and systems
              -      Waste minimization

                     Environmental testing, audits, analysis
                     Tracking performance
              -      Risk analyses

              -      Residues and wastes
              -      Remediation and litigation costs
              -      Devalued assets
              -      Lost sales and higher cost of capital due to
                     impaired corporate image
       Then, the Team conducted an exercise to apply its work directly to the COQ model. It

took some examples of specific environmental activities and tried to map them to the elements of

Cost of Quality. The Team reached the following conclusions:
              Some activities could easily be correlated to prevention (e.g., operations
              and maintenance (O&M) on environmental equipment) or failure costs

              Other activities (e.g., monitor and track regulations) were more ambiguous
              and usually ended up in the appraisal category

              Activities might need to be further subdivided; for example, some types of
              training might be more compliance than preventive in nature.
       The Green Accounting Team tabled this effort in order to develop and test the

assessment tool, with the intent of returning to this exercise. The Team learned from this

exercise that it should provide examples of COQ activities as part of the assessment tool package

to help AT&T facilities in determining priorities and assessing performance.
7.4    Protocol for Using the Tool

       The Green Accounting assessment tool was intended to help AT&T business units

optimize decisions and activities to meet a set of environmental objectives.  The assessment tool

reflects multiple perspectives, can be adapted to local situations, and incorporates Activity-Based

Costing principles. The suggested protocol included the following:
              Employ a team approach in applying the tool to capture a "diversity of
              perspectives" (e.g., engineering, accounting, plant management)

              Begin with  an awareness session to discuss the purposes of the exercise

                                           -33 -
        •      Review and understand the Key Definitions and Environmental Activities
              Dictionary before attempting the assessment

        •      Understand the current accounting system's capabilities, limitations, and

        •      Come to a consensus on the answers to the survey's questions and the
              activity/resource matrix to identify targeted performance measurements and

        •      Use the answers to establish the baseline for improvement

        •      Agree on what areas should be emphasized for improvement

        •      After an appropriate period of time, conduct the assessment again to
              evaluate progress and affirm the next steps for improvement.

        Because  actual data reporting mechanisms were beyond its Charter, the Green Accounting

Team did not require or request that the findings of the assessment be reported back. However,

comments that would improve the survey or enlighten the Team were welcomed.
       The Green Accounting Team suggested that after an AT&T facility completes the survey,

logical follow-up actions for improvement could include:  (1) establishing which environmental

activities, because of perceived importance and relevance, will need to be captured, (2) assigning

activities costs to Cost of Quality categories (prevention,  appraisal, failure) to assess relative

performance, (3) comparing activities costs to available benchmarks, (4) establishing policies and

practices to include environmental elements in decision making and business case analysis, and (5)

aligning desired objectives to compensation and rewards.
7.5    Design Reviews

       In early 1995, AT&T completed the process of having three sites review the assessment

tool. The purpose of the reviews was to evaluate the usefulness of the tool, not to assess the


resulting information.  Initial feedback was generally positive, emphasizing the tool's success in

highlighting key issues:
              "The approach goes to the 'heart of the matter' which is to
              understand environmental issues and impacts through raising
              awareness, getting people involved, and understanding what action
              needs to be taken."

                                  - Design Review Team #1
              "All questions increased awareness and indicated a need for change
              .... The review team seemed enthusiastic about the tool and the
              potential improvements it can achieve."

                                   - Design Review Team #2
              "Most questions increased awareness and indicated a need for
              change. Several improvements (e.g., consideration of costs of
              closure and contingencies, examples of intangible costs/benefits and
              liabilities) were suggested by the participants that are being
              incorporated into the tool."

                                   - Design Review Team #3
       Although initial feedback from the reviews indicated that some survey questions could

benefit from improvements in wording and sequencing, all the questions were viewed as relevant.

As a result of the review, AT&T also added some new questions. The answers to several

questions documented the need for (1) decision modeling tools and (2) improvements in decision

processes to include environmental considerations. The Green Accounting Team representatives

present at the reviews agreed that a site group applying the tool  could quickly grasp its role and

realize the importance of improving AT&T's capability to measure and improve environmental



8.     Looking Ahead

       Next Steps for the Assessment Tool.  Looking ahead past the design reviews of the

assessment tool and the resulting enhancements to it, the Green Accounting Team outlined next

steps for application of the assessment tool:
       (1)    Assist pilot locations to capture environmental activity cost data, select a
              trial product, and perform an evaluation of conventional costing for the
              product versus Green Accounting costing.  Identify the differences and
              what business decisions would have changed.

       (2)    Develop guidelines for critical environmental activities and methods for
              assigning costs.

       (3)    Distribute the assessment package to all AT&T BU's with
              recommendations for its use

       (4)    Contact the CFO's office for its support in establishing the process and
              templates as guidelines for reporting to corporate management
       In looking ahead, the Team also considered the issue of incentives:  "It is essential to

connect the activities with desired behaviors and rewards/recognition."  The Green Accounting

Team believed it had identified the activities.  The next step, linking output measurements to

behaviors and rewards, would require the involvement of the entire DfE Team and AT&T senior

       Future Issues and Objectives for Green Accounting at AT&T.  Given the limited amount

of time since the Team was formed, it has covered quite a bit of ground. In the course of its

work, the Team identified a number of other issues to address in the future, including the

              Determining whether future liabilities should be spread over product life in
              order to build reserves for environmental costs that are predictable;

        *      Developing a process for focusing (i.e., through interviews with process
              owners) on what is important in order to avoid being inundated with
              irrelevant data;

        •      Defining inputs, outputs, and drivers for environmental activities; and

        •      Relating environmental activities to Cost of Quality categories.

       The AT&T Green Accounting Team has identified many areas throughout AT&T where

Green Accounting can be successfully applied.  Working with other AT&T groups,  tying in with

other environmental programs within the company, and supporting the use of Green Accounting

in AT&T's management practices were cited as some of the Team's objectives. Specific objectives

for future applications of Green Accounting include the following:
       •      Bring environmental cost considerations into the business case for any
              future plant start-ups and divestitures;

       •      Inject environmental considerations into standard business case process
              models used by AT&T organizations for business planning and

       •      Move environmental information and cost impacts into the hands of
              designers and tie in with the Green Index, which is an AT&T software tool
              being developed to assist designers in scoring the environmental attributes
              of a product and identifying areas for improvement;

       •      Introduce life cycle cost  models that incorporate environmental
              considerations, eventually including "societal costs" or "externalities" and
              customer costs (e.g., product disposal).  This would support the TQM
              concept of Total Cost  of Ownership. These environmental attribute
              decision models will help AT&T define its business and environmental
              strategies; and

       •      Use Green  Accounting to develop lists of corporate environmental metrics
              that can be used to measure and reward performance.

       In light of this vision, as of July  1995,  the Team faces a rich agenda of future projects in

furthering AT&Ts adoption of Green Accounting.

For additional information on AT&T's implementation of Green Accounting, contact

                      Jeannie Wood, Team Facilitator
                       AT&T Green Accounting Team
                   Phone 513/445-2660, FAX 513/445-1441
             E-Mail SMTPIJeannie Wood@Dayton OH.NCR.COM


                                    Attachment A:
                          AT&T Green Accounting Glossary
                                        (July, 1995)

Absorption costing. Also known as full absorption costing. A method of costing that assigns all
       or a portion of the manufacturing costs to products or other cost objects.  The costs
       assigned include those that vary with the level of activity performed and also those that do
       not vary with the level of activity performed.

Activity. 1. The processes or procedures  that cause work to be performed within ah organization.
       2. The aggregations of actions performed within an organization that are useful for
       purposes of Activity Based Costing (ABC).

Activity analysis.  The identification  and  description  of activities in an organization.  Activity
       analysis involves determining what activities are done within a process, how many people
       perform the activities, how much time they spend performing the activities, what resources
       are required to perform the activities,  what operational data best reflect the performance
       of the activities, and what value the activity has for the organization.  Activity analysis is
       accomplished by means of interviews, questionnaires, observations, and reviews of physical
       records of work.

Activity attribute.  A characteristic of individual activities. Attributes include cost drivers, cycle
       time, capacity, and performance measures. For example, a measure of the elapsed time
       required to complete an activity is an attribute. In Green Accounting, the environmental
       impact of disposing of waste is an attribute of this activity.

Activity-based costing (ABC).  A methodology that measures the cost and performance of
       activities, resources, and cost  objects.  Resources are assigned to activities, then activities
       are assigned to cost objects based on their use. ABC recognizes the causal relationships
       of  cost drivers to activities.

Activity-based cost (ABC) system.  A system  that maintains and processes financial and operating
       data on  firm's resources, activities, cost objects, cost drivers, and activity performance
       measures.   It also assigns cost to activities and cost objects. In Green Accounting, this
       includes assignment of environmental attributes and categories, such as preventive,
       assessment and failure.

Activity-based management (ABM).  A discipline that focuses on the management of activities as
       the route to improving the value received by  the customer and the profit achieved by
       providing this value.  The discipline includes cost driver analysis, activity analysis, and
       performance measurement. Activity-based management draws on ABC as its major source
       of  information.  In Green Accounting,  this includes providing information to product
 Part of the glossary is based on the "Glossary of Activity-Based Management," which was published by Computer Aided
 Manufacturing-International (CAM-I) in 1991 edited by Norm Raffish and Peter B.B. Turney. Terms preceded by an
 asterisk have been added from "Common Cents" written by Peter B.B.Turney.
 Definitions added by the AT&T Green Accounting Team are in italics.

        designers, facility managers, environmental managers and process engineers in order to
        achieve desired performance metrics.

 Activity cost pool. A grouping of all cost elements associated with an activity.  In Green
        Accounting, this includes all resources consumed in activities like environmental training,
        treating and disposing waste, special handling of hazardous materials, etc.

 Activity driver. 1. A measure of the frequency and intensity of the demands placed on activities
        by cost objects. 2. A measure of the use of an activity by the cost objects.  An activity
        driver is used to assign costs to cost objects. It represents a line item on the bill of
        activities for a product or customer.  An example is the  number of part numbers, which is
        used to measure the consumption of material-related activities by each product, material
        type, or component. The  number of customer orders measures the consumption of order-
        entry activities by each customer. Sometimes an activity driver is  used as an indicator of
        the output of an activity, such as the number of purchase orders prepared by the
        purchasing activity. In Green Accounting,  this  includes an activity  driver such as regulatory

 Activity level.  A description of how an activity is used by a cost object or other activity. Some
        activity levels describe the cost object that uses the activity and the nature of this use.
        These levels include activities that are traceable to the product (i.e., unit-level, batch-level,
        and product-level costs), to the customer (customer-level costs), to a market (market-level
        costs), to a distribution channel (channel-level  costs), and to a project, such as an R&D
        project (project-level costs).

Air Pollution Control Devices. Equipment connected to  manufacturing process equipment to reduce,
        neutralize or minimize the toxicity or hazardous  constituents of an air emission.  These
        devices may generate additional waste streams that need to be handled in an environmentally
        sound manner.  Examples include combustion units, bathhouses, electrostatic precipitators,
       filters, etc.

 Benchmarking. The process of comparing an organization's performance and procedures in a
        given area to that of the best companies, with  the company's current practices compared
        with those of world-class operations.  In Green Accounting, this could include supplier
       packaging,  recycling or product packaging management.

Best practices. Also known as competitive benchmarking. A methodology that identifies an
        activity as the benchmark by which a  similar activity will be judged. This methodology is
        used to assist in identifying a process  or technique that can increase the effectiveness or
        efficiency of an activity.  The source may be internal  (e.g. taken from another part of the
        company) or external (e.g.  taken from a competitor).

Bill of Activities.  A listing of the activities required (and, optionally, the  associated costs of the
        resources consumed) by a product or other cost object.

Capacity. The output capability of a  company when it fully utilizes its bottleneck resources to
       create the maximum value for customers while  generating the minimum waste.

Code of Federal Regulations (CFR) United States Compendium of Federal Regulations.  These are
       broken into titles for different areas of regulations.  40CFR covers the majority of regulations
       covering the handling, storing and disposition of solid wastes.

*ConventionaI cost system. Any of the older, traditional cost systems that use direct material
       and/or labor consumed as the primary means of apportioning overhead.

Cost assignment.  The tracing or allocation of resources to activities (stage one) or cost objects
       (stage two).

Cost driver.  Any factor that causes a change in the cost of an activity.  For example, the quality
       of parts received by an activity (e.g.  the percent that are defective) is a determining factor
       in the work required by that activity, because the quality of parts received affects the
       resources required to perform the activity. An activity may have multiple cost drivers
       associated with it.  In Green Accounting, the design  of the product for disassembly or the
       packaging for disposal would be a cost driver.

Cost object.  Any customer, product,  service, contract, project, or other work unit for which a
       separate cost measurement  is  desired.  In Green Accounting, environmental measures would
       not be considered a cost object, but an attribute. However, output of an environmental
       report for regulatory and stakeholder purposes would be considered a cost object.

Cost of Capital (CoC).  The sum of the cost of debt and cost of equity expressed as a ratio to total
       debt and equity (total capital.)

Cost of Quality (COQ). All the resources expended for appraisal costs, prevention costs, and
       both  internal and external failure costs of activities and cost objects. In Green Accounting,
       the COQ model can be applied to environmental COQ for objective setting and measuring.
       For example, recycling activities can significantly reduce disposal costs.

Design for Environment (DfE). The driver of environmental concerns, constraints and objectives into
       the design of products and processes.  An engineering perspective in which the
       environmentally related characteristics of a product, process, or facility design are optimized.

Direct cost.  A cost that is traced directly to an activity or  a cost object.  For example, the
       material issued to a particular work  order or the engineering time devoted to a specific
       product are direct costs to the work orders or products.  In Green Accounting, an example
       would be the use of chemicals in production of a single product. However, it would be
       indirect in the production of several products.

Disposal.  The ultimate disposition of a product or process residual resulting in the material being
       placed in storage, a landfill or incinerator.

Effluent.  Liquid residue resulting from a manufacturing process.

Emissions.  Air or gaseous residue resulting from a manufacturing process.

Energy. The unit of power consumed by equipment or a product to perform an activity. Included is
       the transformation of gasoline, electricity, coal, natural gas, wind, solar,  water movement,
       etc., consumed by the performance of the product or equipment.

Environmental cost accounting (aka Green Accounting).  Tracking environmental materials and
       activities and using this information for environmental management decisions.  The purpose
       is to recognize and seek to mitigate the negative environmental effects of activities and
       systems.  Sometimes refers only to a firm's private costs while others include the full range of
       private and societal costs imposed throughout the life cycle of a product.

Environmental management system (EMS).  Organizational policies and procedures enacted to ensure
       that all environmental issues are handled in a quality fashion that works to minimize the
       operations impact on the environment and comply with regulations.

Externalities/External costs.  Social costs outside the scope of the producing entity, including costs
       from environmental activities from the moment of raw material extraction to receipt of parts
       and from loading for shipment to the customer to complete disposition of the product or
       parts of the product.  The former includes examples like energy, residues, emissions, and
       waste in intermediate production. The latter includes examples like energy involved in
       product use, maintenance materials, return, disassembly, treatment, and disposal.

Financial accounting. 1. The accounting for assets, liabilities, equities, revenues, and expenses as
       a basis for reports to external parties.  2. A methodology that focuses on reporting
       financial information primarily for use by owners, external organizations,  and financial
       institutions.  This methodology is constrained by rule-making bodies such as the Financial
       Accounting Standards Board (FASB), the Securities & Exchange Commission (SEC), and
       the American Institute of Certified Public  Accountants (AICPA).

Forcing.  The act of allocating the costs of a sustaining activity to a cost object even though that
       cost object may not clearly consume or causally relate to that activity. Allocating a plant-
       level activity (such as heating) to product units using ,an activity driver such as direct labor
       hours, for example,  forces the cost of this activity to the product.

Full cost accounting.  See Environmental Cost Accounting. In traditional cost accounting,  this may
       refer to allocating all direct and indirect historical costs to a product or product line.

Full cost environmental accounting. See Environmental Cost Accounting.  Sometimes called Total
       Cost Accounting by environmental professionals.

Full Cost Assessment aka Total Cost Assessment (TCA).  The process of integrating environmental
       costs into a capital budgeting analysis.  It has been defined as the long-term, comprehensive
       financial analysis of the full range of internal (private) costs and savings of an investment.

Full cost pricing.  Including environmental costs in the accounts of business, whose approximation
       will vary under different conditions in different times and places. For production, this
       includes the cost of production plus the cost of any environmental damage associated with it
       so that prices for raw materials and products properly reflect social costs. Without this
       quantification, resources will tend to be used inefficiently and environmental pollution will
       likely increase.

Generally Accepted Accounting Principles (GAAP). Refers to tenets, practices and principles that
       come from the Financial Accounting Standards  Board (FASB), Accounting Principles Board
       (APB) and the American Institute of Certified Public Accounts (AICPA).

Green Accounting.  See Environmental Cost Accounting.  Usually used to be distinctive from the
       word "environment" used to mean surroundings, influences or circumstances.

Hazardous Waste Management.  The handling, storing, treatment and disposition of hazardous waste
       which is defined by criteria regarding its potential impact on human health or the
       environment as established by local regulatory bodies.

Indirect cost.  The cost that is  allocated (as opposed to being traced) to  an activity or a cost
       object.  For example, the costs of supervision or heat may be allocated to an activity on
       the basis of direct labor hours. In Green Accounting, this includes allocating the cost of
       treating waste water to total units of output.

Internal Rate of Return (IRR).  The interest rate that equates the present value of the expected future
       cash flows, or receipts, to the initial cost outlay.

*Investment management. The use of ABC to manage capacity for maximum profitability and to
       direct capital spending to the most profitable improvement targets.   In Green Accounting,
       this includes pollution prevention  and other equipment that minimizes the environmental
       impact and risk exposure while reducing cost.

Life cycle.  The stages of a product, process, or package's life, beginning with  raw materials
       acquisition, continuing through processing,  materials manufacture, product fabrication, and
       use,  and concluding with any of a,variety of waste management options.

Life cycle analysis (LCA) oka Life cycle assessment.  The review of the environmental impact of a
       product or process over its entire life cycle including resource extraction, manufacture,
       packaging and transportation, use and recycling/disposal.

Life cycle costing  (LCC).  A costing concept that argues for including all the costs incurred for a
       product, from its inception to abandonment, as part of its product cost. In Green
       Accounting, this includes cost of extraction, intermediate manufacturing, manufacturing,
       transportation, product recycling in take-back, disassembling, reverse distribution, restocking
       used material, disposing of waste, etc.

Life cycle cost analysis I assessment (LCCA). The costing aspect of life cycle  assessment. It is a
       systematic process, for evaluating the life cycle costs of a system by identifying life cycle cost
       items, assigning measures of value to  those items, and evaluating options for reducing the
       total life cycle cost and optimizing the use of scarce resources.  It includes all private and
       social costs identified with a product,  process or activity throughout its lifetime.  Similar to
       the quality concept Total Cost of Ownership.

Logistics. The process of planning, implementing, and controlling the efficient,  cost-effective flow
       and storage of raw materials, in-process inventory, finished goods, and related goods from
       the point of origin to the point of consumption for the purpose of conforming to customer
       requirements. In, Green Accounting,  this can include packaging management, reverse
       distribution, recycling, etc.

*Managerial accounting.  Also known as Management accounting. An accounting methodology
       that emphasizes data for managerial decisions in contrast to cost  accounting which
       emphasizes determination of inventory costs.  It is the process of identifying, measuring,

       accumulating, analyzing, preparing, interpreting and communicating financial information
       used by management to plan, evaluate, and control to assure appropriate use of and
       accountability for its resources.

Net Present Value (NPV)  (discounted cash flow).  The present value of the expected net cash flows
       of an investment, discounted at the cost of capital, less the initial cost outlay of the project.

Non-valued-added activity.  See also Value-added activity. An activity that is considered not to
       contribute to customer value or to the organization's needs.  The designation non-value-
       added reflects a belief that the activity can be redesigned, reduced,  or eliminated without
       reducing the quantity, responsiveness, or quality of the output required by  the customer or
       the organization.

Notice of Deficiency (NOD). Formal document from a  regulatory inspection and enforcement agency
       identifying area(s) of non-conformance with regulatory requirement.

Packaging,  Outside container or covering for a product, or component used to separate and protect
       these items during handling, storing and transporting.  Includes items  such as boxes, drums,
       bags, pallets,  corrugated cardboard, shrink-wrap, bubble pack, polystyrene foam, etc.

*Performance management. The use of ABC to improve profitability. It includes searching for
       low-cost product designs,  identifying cost reduction opportunities, guiding efforts to
       improve quality, and measuring performance. In Green Accounting, this includes reducing
       environmental impacts as  well as improving profitability:

Performance measure. A financial or non financial  indicator of the work performed on and the
       results achieved from an activity, a process, or an organizational unit. An example of a
       performance measure of an activity is the number of defective parts per million. An
       example of a performance measure of an organizational unit is return on sales.  In Green
       Accounting, this includes reduction and elimination of certain chemicals and materials,
       increasing training and other preventive activities, and buying environmentally preferred
       materials and services.

Performance measurement.  A monitoring of absolute rate and trend rate at the operational,
       tactical, and strategic levels of business.

Pollution Prevention.  See 3 R's. The reduction in the toxicity or quantity of residues generated
       during the manufacture of products. This focuses on measures taken to prevent or minimize
       the generation of wastes and includes: material substitution, product/process redesign or
       refonnulation, reuse and recycling.

Post Consumer Product Takeback.  An alternative to disposal by the consumer, used products are
       sent to reclamation centers for disassembly to reuse the parts or send materials to be recycled
       or for product refurbishment for resale.  More  consumer awareness has increased the demand
       for takeback as part of the sales contract. Some countries, such as Germany and the
       Netherlands, are introducing legislation concerning packaging recycling and product

Potentially Responsible Party (PRP).  An individual or company identified as potentially having
       involvement and financial responsibility for the cleanup of an abandoned hazardous waste
       site under the US. Superfund program.

Private costs.  Those costs that affect the firm's bottom line and that the firm actually pays out.

Process.  A series of activities that are linked to perform a specific objective.  For example, the
       assembly of a television set or the paying of a bill or claim entails several linked activities.-

Product life cycle.  The period that starts with the initial product specification and ends with the
       withdrawal  of the product from the marketplace. A product life cycle is characterized by
       certain defined  stages, including research, development, introduction, maturity, decline,
       and abandonment.

Recoveries. Quantity, quality, and income of materials reclaimed for reuse or reprocessing during
       recycling activities.

Recycling-Closed loop. A recycling system in which a particular mass of material is remanufactured
       into the same product (e.g., glass bottles into glass bottles)..  Also known as "horizontal

Recycling—Open loop.  A recycling system in which a product from one type of material is recycled
       into a different type of product (e.g., plastic bottles into fence posts).  The product receiving
       recycled material itself may or may not be recycled.  Also known as "cascade recycling.

Reduce, Reuse, Recycle (3 R's). Hierarchy of preference for pollution prevention activities from most
       preferable to least.  Catch phrase for Pollution Prevention.

Remediation. Activities performed to clean-up  or minimize the hazard associated with a
       contaminated site.

Residues.  Any non-product item or material generated during the manufacturing process.

Resource cost assignment.  The process by which cost is attached to activities. This process
       requires the assignment of cost from general ledger accounts to  activities using resource
       drivers.  For example, the chart of accounts may list information services at a plant level.
       It then becomes necessary to trace (assuming that  tracing is practical) or to allocate (when
       tracing is not practical) the cost of information services to the activities that benefit from
       the information services by means of appropriate resource drivers. It may be necessary to
       set up intermediate activity cost pools to accumulate related costs from various resources
       before the assignment can be made.

Resource driver. 1. A factor used to assign cost to activities.  2. A measure of the quantity of
       resources consumed by an activity. An example of a resource driver is the percentage of
       total square feet of space occupied by an activity.  This factor is used to allocate a portion
       of the cost of operating the facilities to the activity.  In Green Accounting, the measure of
       time consumed by all personnel in researching past years of data for compliance reporting
       drives  the cost to this activity.

Return on Assets (ROA).  The ratio of net profit to total assets. See ROL

Return on Investment (ROI).  The ratio of net profit (after taxes) associated with total investment in
       the firm or project.

Scrap-Home.  The waste produced within a fabricating plant, such as rejected material, trimmings,
       and shearings.  Home scrap is recirculated within the fabricating plant and does not become
       external waste.

Scrap-New (oka Prompt).  Waste produced by users of semifinished products (turnings, trimmings,
       etc.)  This scrap must generally be returned to the materials processor if it is to be recycled.

Scrap—Old (aka Postconsumer solid waste).  A material that has served its intended use and has
       become a part of the  waste stream.

Solid Waste Management.  The handling, storage treatment, and disposition of solid waste, solid
       waste includes solids,  liquids and containerized gasses.  Hazardous wastes are a subset of
       solid wastes.

Storage.  Refers to the regulated activity of storing hazardous wastes prior to transporting, treatment,
       or disposal.  There are specific requirements regarding storage areas,  containers, and length of
       storage time.

Supply chain cost. A cost associated with an activity involved in operations as a component of order
       fulfillment. This includes receiving the order, purchasing materials, making the product,
       distributing the order  and planning and adjusting capacity. In Green Accounting, any activity
       that contributes to an environmental impact in the supply chain would be an environmental
       cost within the supply chain.

Supply chain management  1. A management technique focusing on operations effectiveness. 2.
       A strategic management approach  to organizing, integrating, and operating business

Support cost A cost of activities not directly associated with production. Examples are the costs
       of process engineering and purchasing.

Surrogate activity driver . An activity driver that is not descriptive of an  activity, but that is
       closely correlated to  the performance of the activity.  The use of a surrogate activity driver
       should reduce measurement costs without significantly increasing the costing bias.  The
       number of production runs, for example, is not descriptive of the material disbursing
       activity, but the number of production runs may be used as an activity driver if material
       disbursements coincide with  production  runs.

Sustainability. "Treating the world as if we  intended to stay."  Used as a desirable yardstick by which
       to assess human actions, yet is difficult to apply a precise meaning and  operationalize.

Sustainable development.  "Development that meets the needs of the present without compromising
       the abilities of future  generations to meet their own needs" (World Committee on
       Environment and Development, 1987.)

Sustainable resource development. To make sustainable the use of renewable natural resources
       (water, soils and forests) and conserve non-renewable natural resources through efficient  use

       and careful planning.  Application of the concept ranges from very broad to very strict and
       has been difficult to apply to establish goals.

Sustaining activity.  An activity that benefits different parts of the organization (e,g., the
       company as a whole or a division, plant, or department), but not any specific cost object.
       Examples of such activities are preparation of financial statements, plant management, and
       the support of community programs.

Take-back.  Refers to regulated or voluntary programs being implemented worldwide where
       manufacturers are responsible to take-back products andlor product packaging from
       customers and handle it in an environmentally sound manner.

Target cost.  A cost calculated by subtracting a desired profit margin from an estimated (or a
       market-based) price to arrive at a desired production, engineering, or marketing cost.  The
       target cost may not be the initial production cost, but instead the cost that is expected to
       be achieved during the mature production stage.

Target costing. A method used in the analysis of product and process design that involves
       estimating a target cost and designing the product to meet that cost (should be done
       throughout the life cycle).

Technology cost.  A category of cost associated with the development, acquisition,
       implementation, and maintenance of technology assets. It can include costs such as the
       depreciation of research equipment, tooling amortization, maintenance, and software
       development.                  .

Total Cost Assessment. See Full Cost Assessment.

Total quality management (TQM). A set of activities whose purpose is continuous process
       improvement, whose objective is total customer satisfaction, and whose core concepts
       include standardization, the efficient use of materials,  the critical role of management,
       design specifications control, reduction of defect rates, SQG, and effective use of human
       resources.                                                               .

Total quality environmental management (TQEM).  Total Quality Management applied to
       environmental management, having the same objectives with an environmental perspective.
       This includes Design for Environment, Hazardous Waste Management, Environmental
       Management, compliance programs, etc.

Total Stakeholder Analysis (TSA). A systematic, cost/benefit analysis of the present and potential
       impact of a company's processes, products, services, and facilities on all of its stakeholders.

Transporter. Carrier of materials, of products by road, air,  rail, or water.  There are specific
       regulations applicable when  transporting hazardous materials or waste.

Treatment.  Procedures performed on a waste to change its physical and/or chemical characteristics
       to reduce the hazard associated with the waste.

TSD Facility. Treatment, Storage or Disposal Facility. Regulated facility for the treatment, storage,
       recycling, or disposal of hazardous wastes.

Underground storage tank (UST).  Tank buried under the ground and used for storing hazardous
       materials or wastes. They are typically steel or fiberglass and require monitoring or secondary
       containment to prevent leaks from contaminating the environment.

Unit cost.  The cost associated with a single unit of the product, including direct costs, indirect
       costs, traced costs, and allocated costs.

Value-added activity.  An activity that is judged to contribute to customer value or satisfy an
       organizational need. The attribute "value added" reflects a belief that the activity cannot
       be eliminated without reducing the quantity, responsiveness, or quality of output required
       by a customer or organization. In Green Accounting, an example of a  valued-added activity
       would be minimizing waste.

Value chain. 1. A cost-reduction and process improvement tool that utilizes information collected
       about business processes and to identify candidates for improvement efforts.  2. Any
       linked set of value-creating activities,  from basic raw materials through the ultimate end-
       use product or service delivered to the final consumers. 3. The set of activities required to
       design, procure, produce, market, distribute, and service a product or service. In Green
       Accounting, the value chain is redefined to include take-back, disassembly and reuse and
       disposal of materials.

Volatile organic compounds (VOC's).  Usually solvents.  VOC emissions are linked to two of the
       world's major air pollution problems-photochemical smog and global warming.

Waste Analysis Plan. Regulatory requirements  in US to have a quality process in place to ensure that
       all wastes are sampled and analyzed to verify their regulatory status (hazardous or non-
       hazardous). TSD facilities are also required to have a waste analysis plan  to ensure that
       they are properly managing wastes that they receive.

Waste Minimization. The reduction in toxicity or quantity of waste generated from a facility.
Special Terms

British Standards 7750 (BS7750). Standards proposed by the British Standards Institute to establish
       a quality based environmental management system within a facility.  The quality principles
       and elements are similar to these of ISO 9000.

Certified Internal Auditor (CIA).  A professional who has achieved certification demonstrating
       knowledge and competency in independent appraisal activity within an organization for the
       review of operations as a service to management. It is a managerial control which functions
       by measuring and evaluating the effectiveness of other controls.

Certified Management Accountant (CMA).  An accounting professional who has achieved certification
       demonstrating knowledge and competency in managerial accounting which emphasizes data
       (financial and non-financial) for managerial decisions. Sometimes combined with the term
       cost accounting which emphasizes determination of inventory costs.  The term cost

     .  management tends to be used for inventory costing.  With the introduction of process costing
       through Activity-based Costing, cost management encompasses both product and process

Certified Public Accountant (CPA). An accounting professional who has achieved certification
       demonstrating knowledge and competency in regulatory external financial reporting
       information, Le. public trading, venture capitalists and tax reporting.

Chemical Manufacturers' Association (CMA).  A consortium of chemical producers in North
       America, many of which are multinational companies, that began a cooperative program
       known as "Responsible Care" to improve the industry's health, safety, environmental quality
       performance, and communications with the public.
Coalition for Environmentally Responsible Economies (CERES). An organization established after the
       Exxon Valdez Oil Spill in Alaska, that put together the Valdez Principles for adoption  by
       companies to demonstrate environmental responsibility.

Eco-Management and Audit Scheme (EMAS).  A voluntary certification in the European Community
       to set, up an environmental management system that covers all key areas of environmental
       impacts subject to independent verification. Upon completion of the audit, companies are
       allowed to use the EMAS logo, which signals they are an environmentally concerned

Global Environmental Management Initiative (GEMI).  An industry supported organization founded
       in 1990 by the Business Roundtable (composed of 200 chief executives from many
       industries).  GEMI promotes leadership in environmental management and applies  TQM

Green Index.  Software tool developed by the AT&T Engineering Research Center to assist designers
       in scoring the environmental attributes of a product and to identify and recommend areas for

Green Seal. A U.S.-based environmental organization that is developing environmental standards for
       products.  Meeting the standards allows display of the "green seal" logo on the product
       package to promote the environmental "friendliness"  of the product.

International Organization for Standardization (ISO) 9000.  Internationally accepted standards for
       implementation of an auditable and certifiable Quality System for a facility's operations.
       The intent is to ensure a recognizable level of quality programs for suppliers.

International Organization for Standardization (ISO) 14000.  Standards presently being developed for
       international use for implementation of a quality environmental management system for a
       facility based on. the quality principles and elements of ISO 9000.

Public Environmental Reporting Initiative (PERI).  Voluntary, non prescriptive guidelines developed
       for a systematic framework to organize environmental information to"improve, expand, and
       encourage environmental reporting to the public."

Society of Environmental Toxicology and Chemistry (SETAC). International organization that has
       been working to establish standards for implementing life cycle analysis.

Society for the Promotion ofLCA Development (SPOLD).  Consortium of industry, government,
       academia and environmental communities to achieve consensus on Life Cycle Analysis tools.

Strategic Advisory Group on the Environment (SAGE). Established by the U.N. Business Council for
       Sustainable Development to establish standards for eco-labeling, auditing, environmental
       management systems, environmental performance evaluation, life cycle analysis, and

Valdez Principles. Principles established by CERES that they want companies to adopt to increase
       their environmental performance.  These include public reporting of environmental activities
       and including an environmental activist on Boards of Directors.