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 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 and to guide pollution reduction with 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 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 a case study using the chemical process simulator Chemcad III (Does not imply USEPA endorsement of Chemcad III).