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 covers both the monetary outflows and resource consumption required for economic activities. The concept falls into two categories that together give a 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) covers 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 view is important 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 allows more complete assessment of the true cost implications of production and consumption decisions throughout a product's life cycle.
As Chief Operating Officer, Iris leads our organisational development and oversees day-to-day operations. Before joining 2-0, she worked in the biotechnology sector. As an LCA consultant, Iris has devoted her expertise primarily to the domains of sustainable agriculture and food production. She is dedicated to teaching LCA and is responsible for our educational efforts. Iris holds an M.Sc. in Biology – Biotechnology from the University of Copenhagen.
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Glossary terms are clearer once you have seen them applied. Our guide to what LCA is and how it works walks through the complete methodology: goal and scope, inventory modelling, impact assessment, and interpretation.
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