A recent article on building an actionable framework for Green Purchasing did a great job of outlining the the true total cost of ownership calculation for any purchase when sustainability is taken into account. Simply put:
TCO = Purchase Cost + Overhead + Environmental Costs + Social Consequences where
- Overhead Costs and operating costs include:
- labor requirements
- utility costs
- maintenance costs
- rent
- depreciation
- production/utilization costs
- Environmental Costs include:
- regulatory reporting costs
- remediation
- pollution control costs
- waste management costs
- unused inventory disposal costs
- labeling
- environmental insurance
- accident cleanup costs
- future compliance costs
- Social Consequence Costs include:
- customer relationship costs
- regulator relationship costs
- lender relationship costs
- worker health and safety costs
- corporate image and brand costs
- litigation costs
In other words, the best price is not the best price if:
- the product costs more to use, maintain, and own
- the product costs more to insure, dispose of, and clean-up after
- the product could damage your reputation with customers, lenders, and regulators.