For years I've been calling it the Economic Calculus of manufacturing. The biggest problem in getting manufacturing companies to put money toward, oh, environmental, safety, education, training issues is that these are accounted unsupported costs-- directly off the bottom line. There is no place in a corporate accounting system for "costs saved because the plant didn't blow up because we did good safety and training"-- or the obvious others.
That's why corporations often wait until a disaster happens before they can commit the dollars necessary to affect the problem. Now they can quantify the savings.
But as with environmental regulations, the economic calculus changed and no corporation would be caught dead (at least in North America and Western Europe) dumping raw pollutants into the air or water or ground. Costs for remediation are simply cranked into capital and operating costs for the plant as a matter of course.
Safety and security are entering the same process, but we're not there yet.
Now, the economic calculus is widening again...to include sustainability issues. One of the good things about sustainable operations is that there appear to be revenues easily obtainable from sustainability.
Why is the economic calculus widening? Because of regulatory and public pressure. Ernst and Young, the accounting and consulting giant has released a report on shareholder demands for sustainable operations.
Our sister website, www.sustainableplant.com produced an article about the report, and references it. Here's the opening paragraph of SustainablePlant's article:
"Investor attention to the triple bottom line of environmental, social and economic performance is growing and raising support levels for shareholder resolutions on environmental and social issues. A new Ernst & Young LLP study, “Leading Corporate Sustainability Issues in the 2012 Proxy Season: Is Your Board Prepared?” indicates that investors are challenging boards to further improve oversight and disclosure around hot-button topics."
Recommended reading, as is the Ernst and Young study. As the economic calculus is widening, we might start thinking about what other hot button issues could be folded into operational excellence.
