Costing

One of the biggest obstacles to the implementation of green design and cleaner technologies is bad math, or more specifically, inadequate cost analysis and faulty capital budgeting methods.  Experience worldwide shows that managers often turn down good cleantech solutions because they think the solutions are more expensive than they really are.

Getting the right data is the field of Environmental Management Accounting(EMA).  The US EPA has published An Introduction to Environmental Accounting as a Business Management Tool: Key Concepts and Terms, that is the best introduction.   The UN has published one“definitive” guide to EMA, and another is published by the International Federation of Accountants.  The Guide to Corporate Environmental Cost Management from the German government is good practical guide.

The Energy & Materials Flow & Cost Tracker (EMFACT™)is a free software tool designed to be used within companies for systematically tracking materials and energy use; releases, discharges, and wastes; and associated costs in ways that can create value for their business. The tool can provide a comprehensive picture of resource use and its relation to production and planning that can help improve both business and environmental performance.   The same publisher also provides

Once good data is obtained the next step is capital investment analysis of alternatives.  The best guide I know is the Training Manual on Strategic and Financial Assessment of Pollution Prevention Investments.  Once you understand the principles of cleantech alternatives analysis from this manual, you are ready to use this great free software:

P2 Finance is a Microsoft Excel spreadsheet designed to compare the financial performance of three alternatives you select.  It supports an increased cost inventory, includes factors such as depreciation and inflation, and calculates, ROI, NPV, etc.  A more sophisticated version is E2 (Energy and Environment) Finance.  This is a stand-alone program with an expanded energy costs inventory.   This are amazing great free programs which can be used to evaluate any alternatives to the base case or current operations.  It’s just better software!

Getting the cost accounting right is critical for any organization seeking sustainability and a cleantech future.  I have trained many accountants in these methods, and helped the Philippines Institute of CPAs develop a national continuing-education program to teach the country’s accountants how they can be powerful supporters of their companies’ sustainability.  I taught environmental accounting as a professor at the Asian Institute of Management in Manila, and at the Universidad del Pacifico in Lima, Peru.

Please share good cleantech cost analysis tools below!

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