Enhancing Supply Chain Performance with Environmental Cost Information: Examples from Commonwealth Edison, Andersen Corporation, and Ashland Chemical

Each of three case study companies volunteered generous amounts of information to this report as well as considerable hours for in-depth reviews. At Commonwealth Edison, Tom Tramm led the effort to provide detailed insights into the company's life cycle costing practices. At Andersen Corporation, Dale Olson provided technical contributions and coordinated the Andersen in-house reviews. Thanks also go These case studies are descriptions of initiatives, business practices, and decision-making approaches at Commonwealth Edison (ComEd), Andersen Corporation (Andersen), and Ashland Specialty Chemical Company (Ashland). Therefore, the concepts, terms, and approaches presented in this document represent those used by participating companies, and do not necessarily reflect the position or the views of the U.S. Environmental Protection Agency nor those of individual reviewers. Executive Summary Companies' information systems typically hide from decision-makers the costs and benefits related to their environmental, health, and safety (EH&S) performance. Such costs may include not only those costs historically associated with EH&S, but also costs associated with material usage, labor, and capital resources. Heightened recognition of these costs through environmental managerial accounting approaches these costs often reveals cost-effective opportunities to prevent pollution and eliminate wastes, and encourages business decisions that are both financially superior and beneficial to the environment. Supply chain management is a particularly promising area for the application of environmental managerial accounting techniques. Many firms already pursue strategies that emphasize eco-efficiency, i.e., improving material utilization per unit of production. By expanding those efforts to include purchasing, inventory management, materials handling, disposition and logistics, companies can further improve environmental and cost performance. Environmental managerial accounting methods enable them to identify and quantify the most viable opportunities. This collection of case studies illustrates how supply chain management practices can be improved by determining the financial impact of business activities that have an impact on a company's environmental performance. Moreover, this report shows how environmental managerial accounting approaches can be integrated into ongoing business processes. The report includes case studies of multidisciplinary processes at three companies: Commonwealth Edison, Andersen Corporation, and Ashland Chemical Company. While the approaches vary among these companies, each one provides valuable lessons for other companies. Brief summaries of each case study are provided below. The experience of Commonwealth Edison (ComEd), a large Chicago-based electric utility company with annual revenues of approximately $7 billion, demonstrates that electric utilities and other companies can successfully and substantially reduce their costs and environmental burdens with innovative accounting practices. In …