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Disclaimer
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
accounting.2
1 AT&T Environmental Accounting Glossary (1995).
2 Copies can be obtained from the EPA's Pollution Prevention Information Clearinghouse at
202/260-1023.
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Acknowledgements
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).
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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.
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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
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8.
TABLE OF CONTENTS (continued)
Page
7.3 The Activities/Resources Matrix 29
7.4 Protocol for Using the Tool 32
7.5 Design Reviews 33
Looking Ahead 35
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Introducing
"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
programs.
How Did AT&T Initiate Its Green Accounting Project? This section
describes AT&T's use of a multi-functional team to develop Green
Accounting.
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.
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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
programs
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
follows:
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
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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.
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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).
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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
1993
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
Accounting
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
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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
programs.
8 Barry F. Dambach and Braden R. Allenby, "Implementing Design for Environment at AT&T," Total
Quality Environmental Management (Spring 1995).
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"We base our environmental goals on Total
Quality Management principles."
, - AT&T
-7-
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. -
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"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
services."
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
services."
- 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).
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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.
3.2
Customer Demands
"When we address social concerns and reduce the need for
environmental remediation, we significantly increase value for our
customers."
- AT&T
10
Ibid.
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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
contracts.
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
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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
TQEM.
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
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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:
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Finance/Policies
Manufacturing/Production
Information Systems
Manufacturing Strategies
Supply Line Management
Design
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
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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
costs)
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
dissemination.
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.
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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."
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"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.
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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
costs.
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
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-18-
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
points:
AT&T should define its Green Accounting terms and establish a common
language;
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
AT&T;
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
(RAD));
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.
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-19-
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.
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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
Benchmarking
Cost driver
Cost object
Cost of quality
Design for environment
Direct cost
Environmental cost
accounting
-21 -
Environmental
management system
Externalities/external costs
Full cost accounting
Full cost environmental
accounting
Full cost assessment
Full cost pricing
Green Accounting
Indirect costs
Investment management
Life cycle analysis
Life cycle costing
Logistics
Performance management
Performance measure
Pollution prevention
Private costs
Reduce, reuse, recycle
Resource driver
Supply chain cost
Sustainable resource
development
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
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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
models."
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.
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- 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
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-24-
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
Improvements
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.
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7.
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
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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
Q
At what stage in the business case process is the environmental manager normally
included in decisions on equipment and facilities acquisitions or divestitures?
Early.
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.)
Yes
No
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?
Yes
No
Has life cycle analysis and related life cycle cost impact analysis been performed on any
produces)?
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?
Yes
No
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-27-
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:
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-28-
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
processes.
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
material.
Developing (environmental) plans/strategies: time and expense involved in
choosing, documenting, communicating, and deploying environmental strategic
plans.
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.
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-29-
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.
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-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:
Prevention
DfE
Advanced Manufacturing
- Supply Line Management
Prevention training
- Better tools and systems
- Waste minimization
Appraisal
Environmental testing, audits, analysis
Tracking performance
- Risk analyses
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Failure
- 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
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-33 -
Review and understand the Key Definitions and Environmental Activities
Dictionary before attempting the assessment
Understand the current accounting system's capabilities, limitations, and
potentials
Come to a consensus on the answers to the survey's questions and the
activity/resource matrix to identify targeted performance measurements and
opportunities
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
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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
activities.
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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
management.
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
following:
Determining whether future liabilities should be spread over product life in
order to build reserves for environmental costs that are predictable;
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* 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
management;
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.
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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
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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.
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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
compliance.
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.
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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.
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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).
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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,
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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
takeback.
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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."
RecyclingOpen 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
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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.
ScrapOld (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
activities.
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
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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.
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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
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. 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
costing.
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.
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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
company.
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
concepts.
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
improvement.
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.
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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
products.
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.
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