Companies are constantly working on creating more value, typically by growing top-line revenue, managing labour costs and optimizing their business processes. They could create more value to look at the product life cycle across their value chain.
Understanding a product’s environmental impact across the value chain, from product development, sourcing materials, manufacturing, distribution, use, and disposal/recycling can help to reduce the environmental impact and in many situations create additional value, including cost reduction and improved brand positioning.
Using the worldwide accepted method Lify Cycle Assessment (LCA), all stakeholders in the supply chain, both upstream and downstream, can work together to identify and improve areas to reduce their environmental impact by looking at energy consumption, use of water, land and raw materials, waste, etc.
This article will look at several value-creating business possibilities and how LCA can help companies to achieve their sustainability goals.
Definition of Life Cycle Assessment:
LCA is a methodology that is designed to help businesses measure and quantify the end-to-end environmental and economic impacts of a product, process, or service. By examining each step in the product life cycle, LCA takes into account how raw materials were extracted; tmaterials and energy used during manufacturing, packaging, and distribution; impacts from using the product; and waste and pollution created throughout the process and at end-of-life.
LCA differs slightly from “footprinting.” Although the two terms are sometimes used interchangeably, footprinting is a subset of LCA that only takes into account a single metric (for example, the carbon or water impact of a product), whereas LCA involves analyzing a host of complex environmental metrics such as ozone depletion potential and eutrophication to understand the relative tradeoffs involved in a particular activity.
The LCA method is standardized throug ISO 14040 and 14044. LCA studies involve four steps: establishing the goal and scope of the study; taking a life cycle inventory; conducting a life cycle impact assessment; and interpreting the results to make a business decision.
Completing an LCA helps businesses make strategic and tactical sustainability decisions. LCA studies can be quite complex, time-consuming and therefore costly. This has deterred many businesses. However, with more and more business oriented and easy to use LCA Software available on the marketing this becomes a less expensive and rigorous endeavor.
Seven common LCA objectives
LCA supports making strategic and tactical business decisions. There are seven common objectives where a Life Cycle Assessment can help out.
1. Identify cost savings
2. Improve company brand value
3. Improve product design decisions
4. Better procurement decisions
5. Meet communication needs
6. Achieve compliance
7. Create better policies
1. Identify cost savings
A common goal of many sustainability projects is to reduce costs. You may do this by reducing your consumption of costly resources, or by recycling/reusing materials that would previously have been considered waste when manufacturing your product.
LCA provides a data-driven approach to identifying potential operational efficiencies through reducing energy use, material use, water consumption, waste generation,and emissions. By quantifying environmental impacts, companies can see where those impacts are greatest. Environmental impacts have associated financial costs — whether it’s a higher energy or water bill, or increasing business risk because of future expected regulation or price volatility. By reducing the impacts, you can also reap cost savings.
For example, a global media and entertainment company assessed the carbon footprint of DVD manufacturing and compared 9 different packaging options. They found opportunities to reduce the amount of plastic in the DVD case and save millions in operating costs annually. Changes in packaging and transport resulted in a 13% reduction in raw material consumption, a 20% drop in transportation emissions, and a $40M cost avoidance opportunity.
2. Improve company brand value
In more and more markets it is important that your brand is perceived as environmentally friendly. Many businesses are embracing sustainability so they have a better story to tell. For example, a food manufacturer that produces plant-based milks performed an LCA to compare the environmental impact of its products to those made from conventional dairy milk.
It then used the results to boost an existing marketing platform that had been proclaiming the benefits of a plant- over animal-based diet. Today, the company’s brand revolves around the fact that its products are competitive from both an individual health and overall environmental sustainability perspective.
In many cases, a business is able to leverage sustainability decisions made primarily for other reasons — cost or regulatory compliance, for example — into positive publicity. For example, some leading beverage companies have begun using recycled PET rather than crude oil to manufacture plastic bottles, primarily because the high price of crude oil has driven up packaging costs. Although making this substitution primarily saves money, it also makes for great public relations.
3. Improve product design decisions
LCA is also useful when making design decisions that affect sustainability. By evaluating various possible materials and processes for manufacturing and delivering a new product at the design stage, companies can use environmental, social, and economic criteria to reduce the life cycle impact. This helps answer eternal dilemmas such as “which is better — paper or plastic?”
A household manufacture carried out an LCA of their plastic water bottles and compared the environmental impacts to steel and aluminum bottles. The main environmental impacts were caused by the washing of the bottles throughout the life cycle. Steel and aluminum bottles are hand washed and the plastic bottle can be washed in the dishwasher. A dishwasher is much more energy-efficient (in terms of heating the water) and uses much less water than hand-washing, so the plastic water bottle showed significant environmental benefits when compared to the metal bottles.
4. Better procurement decisions
By engaging multiple suppliers on joint cost and impact reduction efforts, and by encouraging innovation among suppliers, businesses can make procurement decisions that significantly boost their sustainability efforts. LCA can lead the way here.
A large big-box retailer, for example, asks suppliers to assess the environmental footprints of their products and challenges them to continuously
improve those footprints. Not incidentally, improving these footprints usually results in lower costs. Although touted as a sustainability initiative, procuring products from supply chain partners that are proactively and continuously reducing their water or carbon impacts can translate into lower costs for the retailer—who can pass them on to consumers and retain its reputation as a low-price leader.
LCA can also be applied to a related procurement goal: Evaluating which supplier out of a large pool of potential partners might be best positioned to contribute to your sustainability objectives. Likewise, you can use LCA to choose the most appropriate product from a supplier’s portfolio. For example, your paper bag supplier might offer a range of options based on the percentage of recycled material you prefer.
5. Meet communication needs
Your shareholders may be asking questions about the environmental impacts of your products, such as how they contribute to climate change. Or you may decide to produce reports for local communities in which you operate manufacturing plants. You can use LCA to create a platform for communicating
positive environmental attributes about products to buyers and consumers.
Many businesses have started making sustainability commitments to stakeholders. For example, you may have a goal to reduce energy consumption by 50% by 2035. An LCA can help you meet that goal by calculating the initial baseline, identifying “hotspots” where energy consumption is greatest, and developing specific actions that are designed to contribute towards achievement of the goal.
LCA can also be used to create product labeling that communicates your sustainability achievements to retailers and consumers. An environmental product declaration(EPD), based on ISO 14025, illustrates the life cycle environmental performance of a product or service. EPDs have to meet and comply with specific and required methodological prerequisites. The results can be used to add up LCA-based information in the supply chain and to compare different EPDs.
6. Achieve compliance
Companies can expect to come under increasing pressure from regulatory mandates at local, national, and international levels. Europe, in particular, is pressing ahead with product labeling requirements. Businesses that do not meet those labeling mandates cannot sell their products in Germany already, and France and Japan are moving toward similar initiatives.
Such requirements represent a barrier to entry for businesses that have not performed detailed analyses of their environmental impacts. An LCA can directly address this, especially compliance related to directives such as the EU’s 2005/32/EC directive on eco-design for energy-using products, which establishes principles, conditions, and criteria for setting environmental requirements for energy-using appliances before they can be put on the market.
7. Create better policies
Organizations — government agencies as well as businesses — frequently want to consider the impacts of the policies they set. The European Union, for example, has a significant body of evidence-based environmental and sustainability policies, most of which are based on LCA. Likewise, v=-b businesses can use LCA to decide where to locate new storefronts or factories to reduce impact.
The Environmental Protection Agency is using LCA to better understand the impact of different biofuels to set policies in the United States.1 And the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) Model uses LCA to help researchers and analysts evaluate various vehicle and fuel combinations to determine the environmental impact of various modes of transportation.
Leadership in Energy and Environmental Design (LEED) building standards also encourage the use of LCA. LCA can also be used to make internal policy decisions. Many businesses want to establish footprint reduction goals. LCA can help them set realistic objectives within specific timeframes that they can then communicate to internal and external stakeholders.