Chapter 4: A Cost-Benefit Analysis of CVG's Solid Waste Reduction
Program
In the previous chapter, the evolution of CVG’s solid waste reduction program
(SWRP) and its economic benefits were demonstrated. The focus of this Chapter is to
compare the costs of CVG’s solid waste reduction program to its economic benefits.
Thereby ascertaining the net economic benefit of CVG’s solid waste reduction program.
Costs
For a solid waste reduction program to be effective, it requires leadership from an
employee or employees, or the outside hiring of an environmental consultant to implement
the program. In the case of CVG, that responsibility is primarily in the hands of the
Environmental Manager.
According to the Environmental Manager, one employee spends 8 hours per day on
recycling duties. This employee is paid an average of $5.50 per hour. The Environmental
Manager spends an estimated 5% of his time ($100,000/per year compensation) directing the
solid waste reduction program. Utilizing this cost data, the calculations in Figure 4.1
demonstrate that CVG spent an estimated $16,440 in 1997 on its solid waste reduction
program.
Figure 4.1: Calculations for CVG Solid Waste Reduction Program Costs
(1 Employee) X ($5.50/hr.) X (8 hrs./day) X (260 work
days/year)
= $11,440 per year + 5%(100,000)
= $16,440 per year |
Benefit (Cost Savings)
The two areas that need to be examined associated with cost savings from CVG’s
solid waste reduction program are 1) reduced production costs from packaging reductions,
and 2) reduced disposal costs.
Reduced Production Costs from Packaging Reductions
As demonstrated in the previous chapter, CVG has been able to save a considerable
amount of money with its packaging reductions program. According to CVG’s 1994
records, the production cost savings associated with packaging reductions were estimated
to be $1,240,000 from the 1989 baseline year. Since 1994, CVG has further enhanced its
packaging reduction programs. However, no data is available for these years. Therefore,
the 1994 figure will be used as the average annual cost savings associated with packaging
reductions.
Reduced Disposal Costs
Through source reduction, recycling and composting programs, CVG has been able to
reduce its disposal costs considerably. In 1989, disposal costs were determined to be
$99,190. 1995 and 1996 disposal costs were reduced to $26,800 and $33,850 respectively. In
order to calculate an average annual disposal cost reduction, these two years will be
averaged. As the calculations in Figure 4.2 indicate, the average annual disposal cost
reduction from CVG’s solid waste reduction programs is $68,865.
Figure 4.3 demonstrates that the total cost savings benefit from *CVG’s solid
waste reduction program amounts to $1,308,865.
Figure 4.2: Calculations For CVG Disposal Cost Reductions
| 1995 Disposal cost reductions = 1989 Baseline disposal costs
– 1995 disposal costs = $99,190 - $26,800
= $72,390
1996 Disposal cost reductions = 1989 Baseline disposal costs – 1996
disposal costs
= $99,190 - $33,850
= $65,340
Average Annual Disposal Cost Reduction (DCR) = (1995 DCR + 1996 DCR)/ 2
= ($72,390 + $65,340)/2
= $68,865 |
Figure 4.3: Total Annual Cost Savings Benefit From CVG’s SWRP
| Annual Total Cost Savings = Packaging Reduction Savings + Disposal
Cost Savings = $1,240,000 + $68,865
= $1,308,865 |
Average Annual Cost-Benefit
From these data, it is clear that CVG has benefited economically from its solid waste
reduction programs. Figure 4.4 demonstrates CVG’s average annual cost-benefit from
its solid waste reduction program. Average annual costs amounted to $16,440 per year,
while benefits equaled $1,308,865 per year. Therefore, net savings from CVG’s solid
waste reduction program amounted to $1,292,425 per year.
Thus, the popular misconception that environmental programs are costly
to business has been proven untrue in the case of CVG’s solid waste
reduction program. On the contrary, CVG’s solid waste reduction program
saves them well over $1.25 million per year. Having proved its economic
benefits in this chapter, the next chapter focuses on the
ecological benefits of CVG’s solid waste reduction program.
|
