As the opening scenario illustrates, environmental performance can have a significant effect on a firm's financial position. It also reveals a need for sound environmental cost information. In reality, for many organizations, management of environmental costs is becoming a matter of high priority and intense interest. Several reasons can be offered for this increased interest, but two in particular stand out. First, in many countries environmental regulations have increased significantly, and even more stringent regulations are expected. Often, the regulatory laws carry enormous fines or penalties, creating strong incentives for compliance. Furthermore, the costs for compliance can be significant. Thus, selecting the least costly method of compli ance becomes a major objective. To satisfy this objective, compli be measured and their fundamental causes identified. Second, successful costs must treatment of environmental concerns is becoming a significant competitive issue. Corpora tions are discovering that meeting sound busines objectives and resolving environ mental concerns are not mutually exclusive. To understand this critical observation it is important to examine a concept known as ecoefficiency.