How Organizations Can Benefit From Water Costing

Full cost accounting is considered a breakthrough

, and might sound like a new concept for most. Accounting would require high levels of precision and accuracy, and balance is an ultimate goal, which would demand the need to avoid double entry at all instances.

Full cost accounting requires us to take a look at how our actions impact everything all around us. We need to understand the environmental and social cost implications of what we do. This is also, essentially, what the "triple bottom line" or the "three P" approach to financial reporting is all about. Full cost accounting should be used by companies as they come up with a water costing profile, to be sure that they are taking into account ALL the implications associated with the use of this precious resource.

Have you ever heard of the term full cost accounting? In short, it represents what we could consider a quantum leap away from the traditional definition of cost analysis. Accounting, as we know and love it, requires us to be very particular and very strict when it comes to interpreting data. There is no margin for error and everything must balance. Everyone might remember double entry very well?

Comprehensive and accurate water costing is a very important adherence for each organization. This is our most precious resource after all and we can be sure that over use and a lack of sustainability will be heavily penalized, whenever scarcity rears its head. Go further than the absolute calculation associated with water costing, or "direct" costs. These are only base level costs of course and do not reflect the true cost of using and eliminating water.

The true picture will only be revealed when water costing takes into account all the indirect costs associated. This is where we start to enter a gray area in accounting and corporate disclosure terms, as there is no absolute method in favor. Many of the smarter companies are finding ways to adopt a comprehensive water costing approach, by looking at every inch of their actions from all perspectives.

Consider direct water costing. Such includes the relevant costs needed for the treatment, transportation or modification of water to suit any specific usage. It will include the cost of the technology and methods required to "manipulate" the water. It will include regulatory costs, as well as the cost of actually procuring and discharging the resource. Don't forget, that there are management costs and other resource costs associated with time, materials, equipment and technology.

Direct water costing only reveals part of the total liability. Such revelation will require a thorough brainstorming session. Consider, for example, how a company's use of water and discharge may affect the local ecology. What implications will it have for the delicate ecosystem? What is the potential cost of service disruption? How does the company's particular use of water affect its important relationships with stakeholders? It is likely that, in one way or the other, significant add on costs can be revealed through a thorough analysis.

Full cost water costing calculations must be applied to any strategic initiatives being considered by the company. Any expansion plans that involve an increase in the amount of water consumed and/or discharged must be analyzed to take into account potential effects on people, planet as well as profits.

There would be implications related to resource use. Companies will be required to justify every kilowatt used, every drop of water, and every gram of carbon, which would require a sophisticated perspective,.

by: Daniel Stouffer

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