LCC-based Environmental Cost Management

The production of the companies plays an important part in the global environment. As the development of economy, the pollution has become a serious problem that catches human's attention. Therefore it is important for the companies to think about how to deal with the industrial pollution. With the issuance and improvement of environment-related laws, companies have to take an extended responsibility to protect environment and pay for everything they get from the nature. As a result, an all-round cost management model is strongly needed. To cater for this need, a LCC-based environmental cost management framework is provided in this article for controlling environmental cost.There are four parts in this paper. Chapter 1 firstly analyses the necessity and imperativeness of setting up a LCC-based environmental cost management framework. Chapter 2 explains different definitions and classifications of environmental cost, outlines the objective of environmental cost management and identifies problems in current environmental cost management practice in China. Chapter 3 is the core of this paper. With the theoretical foundation of life-cycle cost management and target costing, a LCC-based environmental cost management framework is established and further analysis in detail is followed. Chapter 4 points out that some concerns are needed when using the LCC-based environmental cost management method and some problems will block the use of the LCC-based environmental cost management method, and lists a few measures to solve these problems.There are two innovations in this papers. The first, the life-cycle cost theory agrees with enterprise environmental cost management as they both belong to strategic cost management. The second, with the theoretical foundation of life-cycle cost management and target costing, a LCC-based environmental cost management framework is established and further analysis in detail is followed.A main conclusion is obtained after the research: Resource consumptions and environmental pollution happen during the whole life of production, thus, companies must prevent pollution and control environmental cost effectively. A LCC-based environmental cost management system is highly recommended for it focuses on preventing the environmental cost in designing phase, can overcome most of the shortcomings of the previous environmental cost management methods.However, due to my limited knowledge, the theoretical analysis of a LCC-based environmental cost management framework is somewhat superficial and the framework itself is not perfect, maybe with some mistakes. Moreover, the lack of data confines this paper in just theoretical explanation, further study is needed to confirm its usefulness and effectiveness.