- 6 Marks
Question
Sustainability assessment and test for Full-Cost Accounting (FCA) of HVSC is to measure the impact over the full product life cycle. The Management team is concerned about the great deal of judgment that would be exercised. Conceptually, FCA appears straightforward, but it is also not an easy technique to develop and use in practice if adopted by SavvyTech plc.
The Sustainability Assessment Model (SAM) measures the impacts on sustainability of a product such as HVSC over its full life cycle from raw material extraction through the production process to final usage and disposal.
Required:
Explain the SAM four-step approach to measuring product HVSC over its entire life cycle.
Answer
- Establish SAM Exercise: Identify what will be subjected to evaluation, such as HVSC product, process, or operations system, and define the boundaries for evaluation.
- Define Boundaries: Include all costs and benefits over the full life cycle of the product. This includes environmental and social costs or benefits, such as extraction of raw materials and disposal.
- Measure Impact: Evaluate HVSC’s impact under four headings—Economic (profits, costs), Resource Use (materials needed for production), Environmental (impact on nature), and Social (benefits to excluded groups like the elderly). Both monetary and non-monetary impacts are measured.
- Convert to Monetary Terms: Convert all non-monetary measures into a common money measurement. This total measurement will provide a full cost analysis of the product, process, or operation.
- Tags: Full-Cost Accounting, Product lifecycle, Risk Management, Sustainability
- Level: Level 3
- Topic: Controlling Risk
- Series: JULY 2023
- Uploader: Theophilus