Discuss eco-efficiency, full cost pricing and PPP.
The term eco-efficiency was coined by the World Business Council for Sustainable Development (WBCSD) in its 1992 publication 'Changing Course'. It is based on the concept of creating more goods and services while using fewer resources and creating less waste and pollution. Eco-efficiency is achieved through the delivery of competitively priced goods and services that satisfy human needs and bring quality of life while progressively reducing environmental impacts of goods and resource intensity throughout the entire life-cycle to a level at least in line with the Earth's estimated carrying capacity. In other words eco-efficiency means producing more with less.
Critical aspects of eco-efficiency are:*
A reduction in the material and energy intensity of goods or services; *
Reduced dispersion of toxic materials; *
Improved recyclability; *
Maximum use of renewable resources; *
Greater durability of products;
Purchasing power parity (PPP) is a theory which states that exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries. This means that the exchange rate between two countries should equal the ratio of the two countries' price level of a fixed basket of goods and services. When a country's domestic price level is increasing (i.e., a country experiences inflation), that country's exchange rate must depreciated in order to return to PPP. Economists use two versions of Purchasing Power Parity: absolute and relative. Absolute PPP refers to the equalization of price levels across countries. Relative PPP refers to rates of changes of price levels, that is, inflation rates. This proposition states that the rate of appreciation of a currency is equal to the difference in inflation rates between the foreign and the home country.
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. The overhead costs are generally calculated assuming less than full capacity operation of a plant in order to allow for fluctuating levels of production and costs.
Full cost accounting (FCA) generally refers to the process of collecting and presenting information (costs as well as advantages) for each proposed alternative when a decision is necessary. Costs and advantages may be considered in terms of environmental, economical and social impacts. Full cost accounting information may be used by decision-makers.
Full cost accounting embodies several key concepts that distinguish it from standard accounting techniques. The following list highlights the basic tenets of FCA.
1. Accounting for costs rather than outlays
2. Accounting for hidden costs and externalities
3. Accounting for overhead and indirect costs
4. Accounting for past and future outlays
5. Accounting for costs according to lifecycle of the product
So, to make a conclusion of these terms for understanding one should remember few simple things: eco-efficiency combines economic contribution and environmental burden by industry. The economic contribution is represented by the percent each industry contributes to GDP or employment. The environmental burden is represented by the percent each industry contributes to the emission of various residuals, or the use of materials and energy. Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Purchasing power parity (PPP) is a theory which states that exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries.