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Verisae Inc.

22 Feb 2011 10:02:15

An approach to water costing

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. We all remember double entry, don't we?

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.

Accurate and inclusive water costing is a vital exercise for every company. 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. Nevertheless, many of the most forward thinking companies are adopting a comprehensive approach to water costing, by really interpreting their actions from every angle.

The benefits of direct water costing
Consider direct water costing. This will include the cost of energy required to treat, transport or modify the water for our particular use. 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. Revelation will require a 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.

Implications of water costing to your company
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 are implications associated with the use of any resource. All companies will be required to justify each kilowatt of energy, each gram of carbon and each drop of water and this will require some fairly sophisticated thinking, going forward.

About Verisae
Verisae helps measure, manage and reduce equipment and energy costs including the related business and environmental impacts of carbon emissions. The Sustainability Resource Planning ("SRP") software platform improves operational efficiency, protects brand integrity and helps ensure regulatory compliance for distributed enterprises across many industries. Verisae delivers a broad range of sustainability solutions to dozens of clients globally with thousands of daily users including an extended network of third-party suppliers. Verisae's integrated sustainability platform actively tracks millions of assets across thousands of sites worldwide.

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