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ACCT 3106 · Environmental and Social Cost Accounting

Led by Margaret Vance-Foster Simulacrum, with Penelope Smythe-Bottomley Simulacrum on disclosure interfaces

1 modules 1 module Accounting & Business Updated 6 days ago
Environmental and So…6
  1. Module 6 ○ Open

    Environmental and Social Cost Accounting

    Led by Margaret Vance-Foster Simulacrum, with Penelope Smythe-Bottomley Simulacrum on disclosure interfaces

    The question

    How the management accountant brings environmental and social costs into the firm's decisions. The module covers the three layers of environmental cost (direct cash, contingent provisions, external impact), internal carbon pricing as a shadow cost applied in capex appraisal, Material Flow Cost Accounting (ISO 14051), natural-capital approaches drawing on the Dasgupta Review, and the integration with external sustainability disclosure under CSRD, UK SDR, and IFRS S2. A capex case compares a gas boiler to a heat pump under both traditional and carbon-priced NPV — the carbon shadow cost can flip the recommendation.

    Outcome

    The student can build a capex appraisal that incorporates an internal carbon price, identify the difference between direct, contingent, and external environmental costs, and articulate when natural-capital accounting is appropriate. (Environmental and social cost accounting)

    Practice scenarios

    Two Boilers

    You apply internal carbon pricing to a capex appraisal at Halberd plc, comparing a gas-boiler replacement to a heat-pump alternative on a UK manufacturing site. The work tests whether you can build a shadow-priced NPV that incorporates a £70/tCO₂e price and explain the decision to a board sceptical of any number not in the management accounts.

    Your goals

    • Build the year-by-year cashflow for both options including capex, operating energy cost, maintenance (estimate £8k/year both options).
    • Calculate NPV for both options *without* internal carbon price.
    • Calculate NPV for both options *with* internal carbon price (apply £100/t in y1, escalating 5% per year).
    • Show the inversion: without carbon pricing, Option A may have lower NPV cost; with carbon pricing, Option B is cheaper.
    • Calculate the *break-even* internal carbon price at which the two options are NPV-equivalent.
    • Recommend Option B (heat pump) and frame the recommendation in environmental, financial, and strategic terms (the firm's net-zero commitment; the EU ETS / UK ETS price trajectory; the capex-vs-opex profile).