This chapter includes an overview of a cost-of-quality (COQ) reporting system. Such a system has, in fact, been applied in practice by a number of companies. This exercise pertains to the application of a COQ reporting framework to environmental management.
1. What motivation is there to implement an environmental accounting and control system?
2. Construct a sample environmental cost-of-quality report using the four categories that comprise a traditional COQ report (i.e., prevention costs, appraisal/detection costs, internal failure costs, and external failure costs).
3. Do you think firms would be motivated to provide to shareholders information contained in the environmental COQ report you propose above in (2)? Why or why not?