Just published: Comparing Full Cost Accounting methods

Just published in the Q1 journal Environmental and Sustainability Indicators: a comparison of the current product-oriented full cost accounting methods.

Various challenges are identified for creating valid and comparable calculations of the full costs of products, expressing the level of sustainability of a product.

The article presents a new way of mapping the diversity of approaches and presents 4 ground rules and calls for a discourse on these rules.

Read the article for the details, downloadable for free here: https://doi.org/10.1016/j.indic.2023.100275

You can join the online discourse at: https://www.linkedin.com/groups/12862281/

Abstract:

Product value chains cause environmental and social impacts, of which many are currently unaccounted for in the price of products. Several methods exist to calculate the pressures of such impacts, as well as their monetization. In the context of life cycle assessment (LCA), expressing environmental and social impacts in monetary terms allows for aggregation and easier communication. Many methods for monetization exist, with fundamental differences in their underlying monetization approach, accuracy, availability and application. Scientific and private sector initiatives have introduced full cost accounting methods that also use different monetization approaches. We reflect on the differences between such existing methods. First, we review the foundations of monetization and introduce a new categorization to align terminologies. We summarize the connections between monetization and life-cycle assessment methods, since both categories of methods can be seen as the building blocks of existing full cost accounting methods. We then sketch the monetization landscape and its challenges. Next, we inventory current product-oriented full cost accounting methods and, through interviews with their developers, provide insights into their underlying monetization philosophy, data sources and quality, scoping, aggregation, and transparency. From this review, we propose four provisional ground rules for product-oriented full cost accounting methods in the discussion section, addressing theoretical framing, the time dimension, the integration of positive impacts and the methods’ transparency.