Life cycle costing (LCC) is an assessment of all Costs associated with the life cycle of a product. This methodology provides a comprehensive economic evaluation by tracking costs across all stages of a Product's existence, from raw material extraction through production, use, and end-of-life disposal.
Whilst the ISO 14040 series standards that govern Life Cycle Assessment do not explicitly define life cycle costing, the approach aligns with the life cycle thinking principle that underpins LCA. By applying the same system boundaries and life cycle perspective to economic analysis, LCC complements environmental LCA to provide a more complete picture of product sustainability.
In practice, life cycle costing can be applied with different scopes depending on the decision context. In some applications, LCC is restricted to the cost perspective of the end user of the product, focusing on purchase price, operating costs, maintenance expenses, and disposal costs that the user directly experiences. This narrower approach is particularly useful for consumer purchasing decisions or product design optimisation from a user's economic standpoint.
However, a more comprehensive approach considers costs borne by all actors throughout the product life cycle, not just the end user. This broader perspective captures the full economic implications of production decisions and reveals where costs are distributed across the value chain.
The distinction between traditional life cycle costing and Environmental Life Cycle Costing is important. Traditional LCC typically focuses on internal or private costs that are directly paid by economic actors in the life cycle. Environmental Life Cycle Costing extends this by also including externalities that are anticipated to be internalised in the decision-relevant future, ensuring that the economic analysis is performed with system boundaries consistent with the environmental analysis as prescribed by the ISO 14040 series. This integration enables more robust sustainability assessments that account for both market and anticipated future costs.
