Incorporating Life-Cycle Economic and Environmental Factors in Managerial Decision-Making

Recent environmental trends, including (1) an expansion of existing command and control directives, (2) the introduction of market-based policy instruments, and (3) the adoption of extended producer responsibility, have created a need for new tools to help managerial decision-making. To address this need, we develop a nonlinear mathematical programming model from a profit-maximizing firm’s perspective, which can be tailored as a decision-support tool for firms facing environmental goals and constraints. We typify our approach using the specific context of diesel engine manufacturing and remanufacturing. The approach allows the incorporation of traditional operations planning considerations—in particular, capacity, production, and inventory—together with environmental considerations that range from product design through production to product end of life. A current hurdle to implementing such a model is the availability of input data. We therefore highlight the need to involve all departments within businesses and for industrial ecologists Industrial ecology and business managers to work together to implement meaningful decision models that are based on accurate and timely data and can have positive economic and environmental impact.