Sustainability accounting
Full Cost Accounting
Definition
Full cost accounting is a systematic approach to identifying, summing, and reporting the actual costs of a product or activity, including operating, capital, future, overhead, and hidden costs that conventional accounting overlooks. Popularised in the US EPA's 1997 handbook for municipal solid waste, it is used more broadly to bring environmental and social costs into financial decision-making.
References
definition and cost categories
Overview
What it means
Conventional accounts show what an organisation pays; full cost accounting asks what an activity actually costs, including costs shifted to future budgets, other departments, or society. In waste management it revealed the true per-tonne cost of disposal versus recycling; in sustainability it underpins the case for internalising externalities.
How it is used
Municipalities use FCA for service pricing and pay-as-you-throw systems; companies apply it in environmental management accounting; and the concept connects to true-cost accounting and natural-capital valuation.
Why it matters
Decisions made on partial costs systematically favour polluting options; full cost accounting is a practical bridge between financial accounting and sustainability economics.