Author(s)

H. Krieg, S. Albrecht, M. Jäger

Abstract

Integrating environmental aspects in planning and controlling processes is an increasing challenge for companies and organisations, especially in times of growing environmental awareness of customers and increasing regulative pressure. Monetisation of environmental impacts can help here to include environmental impacts of products and processes in established planning and controlling structures and thereby contribute to organisational sustainability efforts. The method proposed here allows for a systematic integration of environmental impacts and economic factors. It does so by using the simplex algorithm, a heuristic approach that is used in classic business theory for, for example, planning of production processes within companies. The approach presented is based on the outcomes of a Life Cycle Assessment of products and processes. Furthermore, all environmental aspects to be included in the planning have to be limited. Such limitation can come, for example, from an organisation’s environmental policy. Resources with unlimited availability are considered to be free of charge in business theory and can therefore not be monetised. Through the limitation towards a target value, scarcity is created. Through the iterative application of the simplex algorithm, an optimal allocation of the scarce resources, in this case environmental impacts, can be reached. The approach thereby allows for systematically planning programs with the constraint of limited environmental impact. This results in a portfolio that fulfils the goal of reduced environmental impact with minimal costs, while also giving information on the internal value of scarce parameters, such as emissions, through shadow prices.

Keywords

monetisation, LCA, portfolio planning, reducing impacts, environmental policy, carbon tax, carbon trading, linear optimisation