Significance and Use
5.1 This guide provides a method for evaluating investments in terms of their financial merits and environmental merits. This guide can be used to answer whether an investment is both economical and environmentally sustainable or if there is a tradeoff between the environmental aspects of manufacturing and profitability. In the event that there are tradeoffs, this guide provides methods for evaluating those tradeoffs.
5.2 The financial merits for this guide are typically from the individual stakeholder perspective (for example, owners or investors, or both) or from the perspective of a selection of stakeholders. It is up to the users to decide what financial changes are relevant to them. For instance, if there is a financial cost borne by a third party, the users may opt to exclude it from their analysis, as it is not relevant for them. The environmental merits are from a multi-stakeholder perspective (for example, societal level) and should follow established standards for evaluating environmental aspects of manufacturing. That is, environmental aspects of manufacturing should not be excluded simply because they do not affect the user.
1.1 This guide covers techniques for evaluating manufacturing investments from the perspective of environmentally sustainable manufacturing by pairing economic methods of investment analysis with environmental aspect of manufacturing, including manufacturing processes.
1.2 The economic techniques discussed include net present value, internal rate of return, payback period, and hurdle rate. These four techniques are deterministic, meaning that they deal with known values that are certain. Probabilistic considerations play no role in determining how these four techniques are deployed. The guide will also move beyond standard deterministic techniques to look at probabilistic methods like the concept of sensitivity analyses with a focus on Monte Carlo analyses.
1.3 The techniques can be used by manufacturers, regardless of size or complexity, to make environmentally sustainable decisions, including but not limited to whether to embark on an investment, discontinue a manufacturing line, invest or re-invest in a new project or factory. To outline all possible decision types would constitute a guide in itself.
1.4 This guide does not assume specific knowledge of financial techniques on the part of the user, besides some knowledge of discounting. The interested reader is encouraged to follow up and consult outside readings to cover financial techniques beyond the scope of this guide.
1.5 This guide uses U.S. dollars, percent change in environmental aspects of manufacturing, and unit change in environmental aspects of manufacturing as its primary units.
1.6 This standard does not purport to address all of the safety concerns, if any, associated with its use. It is the responsibility of the user of this standard to establish appropriate safety, health, and environmental practices and determine the applicability of regulatory limitations prior to use.
1.7 This international standard was developed in accordance with internationally recognized principles on standardization established in the Decision on Principles for the Development of International Standards, Guides and Recommendations issued by the World Trade Organization Technical Barriers to Trade (TBT) Committee.