Note by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida
Deming's Management Theory | Environmental Cost |
Social Accounting
This is an interesting discussion of human-induced climate change and how companies can deal with this issue. According to McKeon and Ranney, "climate change is the consequence of a lack of appreciation for the interdependence between the global economic system and the earth's biosphere." One approach to climate change is referred to as "business as usual". However, the recommended approach is based on Deming's theory of profound knowledge. A summary of two approaches is provided in a table at the end of the paper. An adaptation of the table appears below.
| Business as Usual | Using Profound Knowledge |
| Focus on competition | Alert to opportunities for "coopetition" |
| Management through division and compartmentalization |
Management informed by an understanding of interrelationships and interdependencies |
| Management sees disparate economic, social and environmental security needs |
Management realizes the interdependence of economic, social and environmental security |
| Management sees the future of business like the past, e.g., ever increasing in energy intensity | Management examines potentialities for a transition from
energy intensity to information intensity |
| Addressing climate change is seen as a burden, putting American business at a disadvantage, killing U.S. jobs | Addressing climate change is seen as a transformational
opportunity to build a sustainable U.S. economy and boost global competitiveness |
| A quick solution to climate change would be to geo-engineer the climate to align with human needs |
The long term solution to climate change is to align the human economy with the workings of the biosphere |
| Appoint a Chief Sustainability Officer | Executives learn about climate change and sustainability and accept responsibility to lead the organization's efforts |
| Business is highly quantifiable and the task is to manage what you measure |
The greatest gains and losses cannot be measured, but they must be managed |
| Profit is the aim of a well-managed business | Profit is a consequence of managing well |
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For a Note about the Thinking Roadmap see Higgins Thinking Roadmap
Related summaries:
Bayou, M. E. and J. B. Nachtman. 1992. Costing for manufacturing wastes. Journal of Cost Management (Summer): 53-62. (Summary).
Boer, G., M. Curtin and L. Hoyt. 1998. Environmental cost management. Management Accounting (September): 28-30, 32, 34, 36 and 38. (Summary).
Epstein, M. J. and S. D. Young. 1999. Greening with EVA. Management Accounting (January): 45-49. (Summary).
Hughes, S. B. and D. M. Willis. 1995. How quality control concepts can reduce environmental expenditures. Journal of Cost Management (Summer): 15-19. (Summary).
Johnson, H. T. 2006. Sustainability and "Lean Operations". Cost Management (March/April): 40-45. (Summary).
Johnson, H. T. 2012. A global system growing itself to death - and what we can do about it. The Systems Thinker (May): 2-6. (Summary).
Kite, D. 1995. Capital budgeting: Integrating environmental impact. Journal of Cost Management (Summer): 11-14. (Summary).
Lanen, W. N. 1999. Waste minimization at 3M Company: A field study of nonfinancial performance measurement. Journal of Management Accounting Research (11): 29-43. (Summary).
Lawrence, J. E. and D. Cerf. 1995. Management and reporting of environmental liabilities. Management Accounting (August): 48-54. (Summary).
Martin, J. R. Not dated. Russell Ackoff quotes and f-laws. Management And Accounting Web. Russell Ackoff
Martin, J. R. Not dated. Russell Ackoff: What is a system? Videos. (Note).
Reinhardt, F. L. 1999. Bringing the environment down to earth. Harvard Business Review (July-August): 149-157. (Summary).