Key words: true cost reporting, true cost accounting, health, sustainability, ecological, environmental, social, agriculture, forestry, water, energy, solar, fisheries, food, buildings, health, design, consumption, life cycle cost, material flow analysis, completing the market
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April 2023
What is True Cost Accounting?
The failure of the current U.S. economic system is in a large part a failure of accounting. An accurate understanding of businesses, governments, and resources must include consideration of all financial, environmental, and social costs. Many of these costs are not currently counted and are described as “external” costs. That does not, however, make them any less real. They are typically passed on to taxpayers and future generations.
Improving the understanding of true costs should be one of the major goals of U.S. society and of the world community. By counting costs accurately we can apply the tremendous power of the market to move us toward more sustainable ways of living.
TRUE COSTS
True cost accounting is the full accounting of all financial impacts, resource depletion, and environmental and social costs and benefits. This more complete accounting reveals that many “profitable” companies and enterprises are actually operating at a loss.
True cost accounting can: reduce risk and liability, improve employee morale and health, lead to better decision making, highlight opportunities for cost savings, identify opportunities for new processes, and uncover new business opportunities.
STAKEHOLDERS vs SHAREHOLDERS
Traditional economic analysis has been all about the company managers and stockholders. True cost accounting is about stakeholders. Stakeholders include all of an organization’s economic, social and ecological environment. They include the companies, employees, organizations, communities and fellow travelers who: work for or with you, care about your company, make your market or your work possible, are affected by your operations, or actively dislike your work or products.
The stakeholder perspective makes it possible to include, examine, and utilize stakeholder expertise. Stakeholder engagement is critical in developing true cost accounting reports and analyses. Stakeholder input can help a business or farm remain competitive, gain a competitive edge, and identify new product opportunities.