1. 1 Total Cost Assessment Method and Applications Gregory A. Norris Sylvatica / Harvard School of Public Health

2. 2 TCA Project Collaborators n AIChE Center for Waste Reduction Technologies n Arthur D. Little n Bristol Myers Squibb n Dow n Eastman Chemical n Eastman Kodak n Georgia Pacific n Monsanto n Owens Corning n Rhom & Haas n Smith Kline Beecham n US Department of Energy

3. 3 Collaborator Motivation “The FULL monetary costs and benefits of EH&S issues historically have NOT been presented in an economic format to business leadership for decision making.” - Duane Koch, Dow Chemical

4. 4 TCA Approach to Non-Conventional Costs: Match Company Conventional Approach n Follow & Adapt to General and Company- Specific Accounting Conventions n Investment costs n Depreciation, salvage values n Impacts before- or after-tax n Discounting n Time Horizon

5. 5 Total Cost Assessment Method Corporate Cost Analysis System Results: per year or per unit of production LCA Results: per functional unit Scenario Builder for Accidents/Liabilities, Possibilities, “Intangible” Outcomes, etc. Integrate Functional Unit & Annual / Production Perspectives Modeling, M/C Analysis Results Reporting & Cause/Factor Exploration

6. 6 At the Heart: Scenario Analysis Option A Option B Probability Years Scenario A1 Cost A1a Probability Cost in Year of Occurrence Cost 1yr later Cost 2yr later

7. 7 Approach to Uncertainty n Take blinders off; acknowledge n Ask subject experts what they know n Brainstorm n Model systematically n Test for possible importance n Refine if necessary

8. 8 Monte Carlo Analysis Pr(A) A Pr(B) B Pr(A*B) A*B Structured sampling for A and B; compute A*B each iteration; create distribution for A*B

9. 9 Optional Spreadsheet Tracking/Recording of Input

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13. 13 Mechanics: “Workshop” Approach n Workshops configured for 1-2 days - Key business and project people needed for data/analysis have only limited time (current paradigm) n Highly disciplined process with total focus on TBCA - due to limited time n Scenarios used to clearly document key issues, data, judgements and decisions

14. 14 Dow Application Examples n Report that use of method has lead to decisions “estimated to save/earn hundreds of millions of dollars” n > Dozen business examples n Evaluate 2005 EH&S Objectives established in 1995 n “TBCA” = Total Business Cost Analysis

15. 15 Completed Eight TBCA Workshops for Dow EH&S 2005 Goals n Emissions - Priority and Chemical n Waste - TTU’s and Kilns n Waste - Landfills n Wastewater ( BOD and Hydraulic) n Energy n Loss of Primary Containment + Process Safety n Personal Injury - Illness/Motor Vehicle n Transportation

16. 16 Business Application Examples n EDC/Vinyl Expansion Alternatives n Chlor-Alkali Cell Technology Evaluation n Polycarbonate Technology Route n New Sustainable Product (Agrifiber) n Water Systems Optimization n Compliance Issues n Integrated Health

17. 17 Summary n Total Cost Assessment Method: n Multi-national companies incorporating intangibles and externalities into financial evaluations of: n Environmental, Health & Safety decisions n Capital Investments n Corporate Strategy n Dow applications: Impacting Decisions with benefits estimated ~ $100M’s