Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen

Exercise 18

Ecoefficiency
For years, companies dealt with pollution problems through compliance management (ensuring that a company follows environmental laws and regulations as cheaply as possible). No effort was made to improve environmental performance beyond the minimal performance that satisfied environmental regulations (improving environmental performance and increasing economic efficiency were viewed as incompatible objectives). Recently, two alternative views of managing environmental cost have been proposed: (1) ecoefficiency and (2) guided ecoefficiency.
Required:
1. Explain why ecoefficiency may be a better view of the world than that espoused by compliance management. Discuss factors that may support this view.
2. Some believe that even if the ecoefficient view is true, regulatory intervention still may be needed. The type of intervention, however, must be carefully designed. Explain what is meant by properly designed regulation, and identify the key assumptions that must hold for the guided ecoefficiency view to be valid.