Abstract
This chapter discusses how to integrate sustainability and environmental impacts into capital budgeting decision-making by including: life-cycle-assessment (LCA), life-cycle costing (LCC), eco-efficiency (EE) and full-cost accounting (FCA) appraisal techniques. This comprehensive investment analysis – from “cradle to grave”- provides a template by which hidden environmental costs and benefits can be identified, analyzed and priced thus resulting in a better prediction of cash flows. The model also integrates environmental risks into the risk-rate component of the cost of capital by developing a sustainability risk-rate and sustainability-cost NPV that captures the sustainability exposure of each capital project alternative.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Bunke D, Graulish R (2002) MEG equivalents as an indicator of hazardous substance use in products and processes. Gate Environ Health Sci Life Cycle Manage 1–9
Bunke D, Gensch CO, Moller M, Rudenaur I, Ebinger F, Graulish K (2003) Assessment of toxicologist risks due to hazardous substances: ranking of risk phrases. Int J Life Cycle Assess 8(1):6–7
Epstein MJ, Recj Buhovc A (2005) Identifying, measuring and managing organizational risks for improved performance, Management accounting guideline. The Society of Management Accountants of Canada and AICPA, Hamilton
Graham JR, Harvey CR (2001) The theory and practice of corporate finance: evidence from the field. J Finance Econ 60:187–243
Hopwood A (2009) Exploring the interface between accounting and finance. Account Organ Soc 34(5):549–550
IFAC’s International Guidance at https://www.ifac.org/publications-resources/project-appraisal-using-discounted-cash-flow
Kim SH, Farragher EI (1981) Current capital budgeting practices. Manage Account 6:26–30
Kwak W, Yong S, Heesbok L, Lee CF (1996) Capital budgeting with multiple criteria and multiple decision makers. Rev Qual Finance Account 7(1996):97–112
Lin TW (1993) Multiple-criteria capital budgeting under risk. Adv Math Program Finance Plan 3:231–239
Moore JS, Reichert AK (1983) An analysis of the financial management techniques currently employed by large U.S, corporations. J Bus Finance Account, Winter
Pike R (1988) An empirical study of the adoption sophisticated capital budgeting practices in decision-making effectiveness. Account Bus Res 18(72):341–351
The Economics of Ecosystems and Biodiversity (TEEB) Interim Report (2008) European Communities. Cambridge, UK
Vesty G (2011) The influence and impact of sustainability issues on capital investment decisions. CPA Australia
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2013 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Kimbro, M.B. (2013). Integrating Sustainability in Capital Budgeting Decisions. In: Taticchi, P., Carbone, P., Albino, V. (eds) Corporate Sustainability. CSR, Sustainability, Ethics & Governance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-37018-2_5
Download citation
DOI: https://doi.org/10.1007/978-3-642-37018-2_5
Published:
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-37017-5
Online ISBN: 978-3-642-37018-2
eBook Packages: Business and EconomicsBusiness and Management (R0)