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A computer system for calculating a score for a separately accountable business unit, the score being indicative of a level of unaccounted for external environmental cost of economic activities of the separately accountable business unit, the system includes accessing means for accessing accounts data indicative of recognized costs for the separately accountable business unit, accounts processing means for processing the accounts data by adding external environmental costs to the recognized costs and for calculating the score for the separately accountable business unit using the processed accounts data.
The present invention generally relates to method and system for calculating an environmental score. More specifically, the present invention relates to a method and system for calculating a score for a separately accountable business unit, where the score is indicative of external costs for the business unit.
Environmental issues are becoming increasingly important to companies, partly due to the fact that consumers and shareholders are demanding greater transparency and accountability, and partly in response to government regulation.
Investor demand is evidenced by the launch of several indices that focus specifically on companies that are deemed sustainable. Further, UK pension legislation as of 3 Jul. This has led to the need for companies to consider their environmental impact.
This technique is based on an assumption that the economic activity of a business unit, such as a company, can be environmentally sustainable and thus a score can be given to the company to rate the company between two extremes of unsustainable and sustainable.
In order to determine the ecological score, the quantity of the inputs and outputs to the business are considered and these are assessed against three ecologically sustainable conditions.
These are derived from the Natural Step principles.
The inputs and outputs are multiplied by a factor that is either 0 or 1 dependent upon whether the inputs and outputs are assessed as meeting the Natural Step principles.
This technique is based on the premise that the economic activity of a business is sustainable. Sustainability has to be judged based on the qualification of these Natural Step principles.
It is an object of one aspect of the present invention to provide a method and system for calculating an environmental score for a separately accountable business unit that does not make any assumptions about environmental sustainability and uses an accounting method to generate a score taking into consideration the full costs of the economic activity for the business unit.
A first aspect of the present invention provides a method and system for calculating a score for a unit of economic activity for which accounts can be separably determined. The accounts for the unit indicate recognized or internal costs. The score for the unit is calculated by taking into consideration the full cost of the economic activity for the unit by adding external environmental costs to the internal costs.
In one embodiment of the present invention the score is calculated by talking the ratio of the internal recognised costs to the total costs that comprise the internal recognised costs plus the external environmental costs. This embodiment of the present invention provides an incentive for a business to fully internalize all costs in order to increase the score for the business unit.
If the economic activity of the business unit incurs a large external environmental cost compared to their internal or recognized costs, the business unit will attain a low score of near 0.
The size of a companies score thus gives and indication of a companies economic environmental effect. It is of great benefit to cause businesses to internalize costs to provide a greater transparency of the economic costs of their commercial activity. The present invention can be used as a universally applicable business tool to be used by any type and size of economic organization for which separate financial data is available.
For example, the business unit can comprise a company, partnership, person or charity. Within a business entity, the business unit can comprise a department or division of a business, a service or product, or a group of services or products.
Thus the business unit can comprise any unit for which there is economic activity and for which separate accounts can be provided. Thus the present invention provides a means by which a score can be provided for a business unit to recognise the overall environmental degradation caused by economic activity.
This is reflected in the incorporation of external environmental costs into the determination of the score. The external environmental costs can represent the costs that people would be willing to pay for the product in order to preserve the environment.
The external costs are costs that do not show up on the balance sheet for a company and they are termed external because although they are real costs to some members of society, firms do not normally take them into account in the running of their businesses.
The score determined in accordance with the present invention is determined using a technique that is independent of the business unit and can thus be used as a standard for the comparison of the environmental impact of the economic activity of business units.
The score can also be used for information purposes, e. Further, the score can be used by companies as a tool by which their environmental performance over time can be compared. The present invention evaluates financial reports for business units and takes into consideration unaccounted for external environmental costs to provide a score that is an indicator of the impact of the business unit on the environment.
In one embodiment of the present invention the recognised costs internal costs include costs and profit or loss for the separately accountable business unit.
Thus in this embodiment of the present invention, the profitability of the business unit is taken into consideration in the determination of the score. The present invention can be used for any type of economic activity because common price units can be allocated to all inputs and outputs from the economic activities of the business unit.
In this way the effect of different types of products and services economic activity is effectively weighted by the allocation of price to the activity.
Thus the effect of different types of products and services economic activity is translated to a common factor, price in the determination of the economic score for the business unit.Business Basics Starting A Business and business plan basics.
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