Life-Cycle Assessments (LCA) and Life-Cycle Costing (LCC) are important aspects of Activity-Based Cost and Environmental Management because environmental management issues both relate to costs and environmental impact. Also, they always go beyond the four walls of the organization.
In my first book LCA and LCC are integrated into a single, coherent and effective framework using the well known Activity-Based Costing (ABC) principles, among others. This gives Activity-Based Cost and Environmental Management models unprecedented capability in directing attention towards the critical success factors (both economic and environmental) that can be ranked, produce comparable results, treat overhead correctly and so on. Basically, ABC is extended into the environmental domain with all the benefits of ABC, and more, see ABC.
To do this, the following elements of Activity-Based Cost and Environmental Management are crucial;
|The overall framework is based on ABC, as already stated.|
|Traditional ABC works for the cost world, so two environmental dimensions were added giving three dimensions in total;
|The entire value chain/life-cycle of the processes/products (assessment objects in general) are incorporated into the models if the goal is to make LCA/LCC models.|
|Uncertainty is handled using Monte Carlo simulations. To handle uncertainty is crucial due to the inherent uncertainty in the life-cycle, data quality and so on, but using Monte Carlo simulations also greatly enhances the identification of critical success factors beyond standard ABC models and allows, for example, building ABC simulation models for budgeting purposes.|
Click here if you want to read a paper to get an idea of what this actually implies.