A general theory for the flow and the generation of potential environmental impact through a chemical process has been developed. The theory defines six potential environmental impact indexes that characterize the generation of potential impact within a process, and the output of potential impact from a process. The indexes are used to quantify pollution reduction and to develop pollution reducing changes to process flow sheets using process simulators. The potential environmental impacts are calculated from stream mass flow rates, stream composition, and a relative potential environmental impact score for each chemical present. The chemical impact scores include a comprehensive set of nine effects ranging from ozone depletion potential to human toxicity and ecotoxicity. The resulting waste reduction methodology or WAR algorithm is illustrated with two case studies using the chemical process simulator Chemcad III (Use does not imply USEPA endorsement or approval of Chemcad III).