Typically most large scale commercial developments require an environmental impact assessment to be undertaken as part of the planning process. While more a regulatory requirement, such an assessment often focuses the minds of companies and developers on qualitative aspects of the investments they want to undertake. Some projects have a greater potential environmental impact than others, e.g. building a nuclear power plant versus a commercial shopping mall.

In the UK, The Department of Communities and Local Government produce guidelines on the requirements of an environmental impact assessment (EIA). The kinds of development that requires an EIA in every case are oil refineries, power stations, chemical installations, airports, rail lines and waste disposal to name but a few. The EIA requires a business at the planning stages of an investment project to consider the impacts on a variety of factors.

Some of the areas which need to be assessed include land use, air emissions, noise, vibration, heat, light, population proximity and effects on water courses.Effects of the development/project need to be assessed under such headings and any mitigating measures described which will reduce or avoid the impacts. Normally, an EIA would be the work of engineers or consultants. It may not be possible to quantitatively assess all impacts, however if management accountants are consulted with/involved in an EIA, they obtain a much broader appreciation of some of the qualitative factors in large investment projects.

Questions 

1 Do you think management accountants can estimate costs of some of the environmental impacts of large capital investment projects? Can you think of any examples?

2 If the cost or cash-flow of the impacts or benefits of a capital investment cannot be quantified accurately, should they be omitted?