Activity-Based Life-Cycle Accounting (AB-LC-ACC) Methodology: Calculating Finished Good’s Material Cost and Material Carbon Footprint within a Hierarchical Bill-Of-Material (BOM)

Abstract

The Corporate Sustainability Reporting Directive (CSRD) requires from enterprises to report their actual Greenhous Gas (GHG) emissions and their future GHG reduction targets and associated reduction strategies. ISO’s Life Cycle Assessment (ISO-LCA) methodology offers a well-established approach to measure GHG emissions that is known for many years. But instead of being integrated with existing ERP systems, this methodology establishes an isolated system. The Activity-Based Life Cycle Accounting (AB-LC-ACC) methodology solves this integration problem by using the language spoken in the ERP-Control domain firstly, for the calculation of standard costs as well as standard GHG emissions with the same computational logic and secondly, for the alignment of the business domain with the IT domain. Left open is the problem of modeling the hierarchical Bill-Of-Material (BOM) within the AB-LC-ACC methodology for allowing consistent calculations of the finished good’s material cost and material carbon footprint. In this article the BOM modeling problem is solved by applying a comprehensive domain engineering approach where BOM related problems are identified and addressed at the conceptual, the operational and the implementation level.