What would likely lead a company to have higher operating costs regarding energy consumption?

Advance your understanding of sustainability accounting with the FSA Level 2 Exam. Practice with engaging quizzes and detailed explanations to enhance your learning experience. Prepare to excel!

A company that experiences increasing energy consumption would likely face higher operating costs related to energy. Energy costs often represent a significant portion of overall operational expenses for many businesses. As energy usage rises—whether due to higher production levels, inefficient processes, or the reliance on energy-intensive technologies—the associated costs will also escalate.

Additionally, higher energy consumption could result in elevated costs coming not only from the direct purchase of energy but also from potential demand charges, increased emissions-related fees, or penalties for exceeding certain consumption thresholds set by regulations. As energy prices fluctuate and often trend upward, consuming more energy can lead to challenges in maintaining profitability, particularly if the business model does not allow for passing those costs onto customers.

Other choices do not align with leading to higher energy costs in the same way. For instance, being an efficient consumer of energy would typically help reduce operating costs, while adopting renewable energy sources often contributes towards cost savings in the long run, despite the initial capital investments. Losing eco-friendly product sales, while potentially impacting revenue, does not have a direct correlation with increasing operational expenses related to energy consumption.

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