Expenditure is synonymous with Cost in Life Cycle Assessment terminology. It represents the value spent to produce or obtain a specified amount of product or production factor.
In LCA and cost-benefit assessment, expenditure encompasses both the monetary outflows and resource consumption required for economic activities. The concept is divided into two fundamental categories that together form the complete picture of economic burden. Private expenditure (internal cost) represents the direct financial outlay paid by an economic actor to produce or obtain products, covering items such as raw materials, labour, energy, and capital goods. External expenditure (external cost) comprises the costs arising from an activity that are experienced by other economic actors or society at large without being reflected in market prices.
The sum of private and external expenditure constitutes the social cost of an activity. This comprehensive view is essential for Life Cycle Sustainability Assessment, as it reveals the total economic burden of activities beyond what is captured in conventional financial accounting. Understanding both components of expenditure enables more complete assessment of the true cost implications of production and consumption decisions throughout a product's life cycle.
In Environmental Life Cycle Costing, expenditure analysis focuses primarily on the private costs directly covered by actors in the product life cycle, whilst complementary Life Cycle Impact Assessment addresses the external costs through environmental impact quantification and potential monetary valuation.
