In search for ground rules for product-oriented full cost accounting methods: Ensuring construct validity

Abstract

Product value chains cause environmental and social impacts, of which many are currently unaccounted for in the price of products. Several methods exist to calculate the pressures of such impacts, as well as their monetization. In the context of life cycle assessment (LCA), expressing environmental and social impacts in monetary terms allows for aggregation and easier communication. Many methods for monetization exist, with fundamental differences in their underlying monetization approach, accuracy, availability and application. Scientific and private sector initiatives have introduced full cost accounting methods that also use different monetization approaches. We reflect on the differences between such existing methods. First, we review the foundations of monetization and introduce a new categorization to align terminologies. We summarize the connections between monetization and life-cycle assessment methods, since both categories of methods can be seen as the building blocks of existing full cost accounting methods. We then sketch the monetization landscape and its challenges. Next, we inventory current product-oriented full cost accounting methods and, through interviews with their developers, provide insights into their underlying monetization philosophy, data sources and quality, scoping, aggregation, and transparency. From this review, we propose four provisional ground rules for product-oriented full cost accounting methods in the discussion section, addressing theoretical framing, the time dimension, the integration of positive impacts and the methods’ transparency.