[The following is an excerpt from "The Green to Gold Business Playbook: How to Implement Sustainability Practices for Bottom-Line Results in Every Business Function," by Daniel C. Esty and P.J. Simmons, published by Wiley. You can read an interview with Esty and Simmons here.]
Assessing environmental impacts of individual products or services (we’ll call them “products” for short) is one of the most important things you can do in creating the diagnostic foundation that your company needs to pursue Eco-Advantage. Product-level impact analyses can help fine-tune your understanding of eco-related risks and opportunities, pinpoint specific areas for you to target for improvement, and help you evaluate complex options and trade-offs in product and process design. But conducting product impact assessments is tricky. There are many competing methodologies and tools available for product “life cycle analysis/assessment” (LCA) -- from “LCA Light” rapid assessment tools to costly software tools that can intimidate PhDs. It’s an inherently messy affair because of the extraordinarily complex nature of the challenge. You are trying to account for and quantify every possible environmental impact of every input and output at every stage of a product’s life cycle -- from raw material extraction to use to end of life. With such exercises, it’s easy not only to lose sight of the forest for the trees, but also to get lost deep in the forest and spend a huge amount of time and money trying to find your way out.
Fortunately, most companies don’t need to -- and shouldn’t -- aim for perfection or full-fledged LCA studies when it comes to analyzing product impacts. What usually matters most is getting a good enough sense of what a product’s main impacts are (and which elements are the chief culprits) to steer you on the right path to reducing them. In those cases, simple tools that produce rough estimates will likely suffice. If, however, a business wants to share results with external audiences -- especially to make marketing claims about how “green” a product is -- they will need to plan to invest in rigorous analytical efforts and be ready to share the methodologies behind them.
Below are the top seven things we believe every business should know in order to undertake product life-cycle analysis:
1. LCA is a generic term used to cover many different types of studies.
The basic idea behind the LCA method is to assess various environmental impacts across different stages of a product’s life -- from extracting and processing raw materials to manufacturing, use/reuse/maintenance, and disposal/recycling. Coca-Cola conducted the first LCA in 1969 to assess the relative impacts of glass versus plastic bottles.1 Today, LCAs are used for a wide variety of purposes and, as such, can differ sharply in breadth and depth. The biggest differences stem from choices about the life cycle stage and types of impact:
• Life cycle stage: Most LCAs set out to assess, even if only roughly, the environmental impacts of products from “cradle to grave”-- that is, from resource extraction to final disposal. But LCAs sometimes use different boundaries, including: “cradle-to-gate” (resource extraction to factory gate just before transport to the customer -- often used for “environmental product declarations” to support marketing claims); “gate-to-gate” (from the gate through which materials enter the production process to the gate through which they leave -- used to study the impacts of a specific process in the value chain); and “cradle-to-cradle” (resource extraction to recycling as opposed to disposal). Industry-specific LCA jargon exists for all of these, too: the automobile industry, for instance, has conducted studies in terms of “well-to-wheel,” “well-to-station,” “well-to-tank,” “tank-to-wheel,” and so on.2
• Type(s) of impact: To make things more manageable, some LCA studies limit their scope to assess impacts on just one environmental issue, such as climate change; in fact, a “product carbon footprint analysis” is actually a type of LCA -- and is a monumental undertaking in and of itself, given the complexity of assessing energy use and emissions from cradle-to-grave. Other LCAs strive to assess impacts more comprehensively, including threats to human health or ecosystems from toxic chemicals, depletion of natural resources, freshwater use, degradation of critical ecosystems, destruction of habitat, and more. Other LCAs focus on social impacts of particular products and processes or workers and communities.
2. It’s critical to know why you want to do a product LCA so you can choose the right tool.
Before embarking on a potentially time-consuming and expensive LCA, get clear on the following: What question(s) are you trying to answer? What problem(s) are you trying to solve? What decision(s) do you need help with? In other words, what’s your company’s goal for the analysis? Being explicit about this up front is a crucial prerequisite to choosing the right tools for the task. You don’t want to use a sledgehammer for a nail: In some cases, getting what you need can simply be a matter of organizing a good discussion with the right people in the room.
3. Most studies build off an international standard approach for LCAs.
A set of international standards have been painstakingly built over decades to establish a unifying framework on which most LCAs build: ISO 14040 and ISO 14044.
4. An LCA is only as good as the data and assumptions behind it -- and no LCA is perfect.
Xerox Vice President of Environment, Health and Safety Patty Calkins summed up the LCA challenge by telling us a joke circulating in sustainability circles: “How many people does it take to do an LCA? One to do it, and one to change it when you get more data.” With so many potential variables at play, the reality is that even the most meticulously crafted LCAs can produce findings that are uncertain, incomplete, or controversial. The challenge with LCAs is only partially described by the age-old problem of “garbage in, garbage out.” To understand why, consider the following hypothetical example of two competitors conducting separate LCAs on their nearly identical products:
Company A spends tens of thousands of dollars to generate its own primary data, while Company B uses publicly available data based on sector averages. Company A inadvertently omits a few seemingly insignificant manufacturing-related inputs from the study, but Company B meticulously includes every single one. Company A assumes that consumers will use the product about 8 hours a week for 32 weeks, while Company B assumes 7 hours a day for 40 weeks. Company A weights impacts on local watersheds 33 percent more than Company B. Now imagine the difficulty in deciding whose final numbers are “better” when they end up being different—yet this type of scenario happens all the time in real life.
Similarly, when it comes to numbers in LCAs, keep in mind the old adage that “it’s all relative.” Unless two companies’ products are verified by the same third-party certification agency, there is little meaning in comparing environmental impacts across competitors. As Deloitte has pointed out in a white paper on the subject: “Small differences in assumptions related to system boundaries or valuation techniques can lead to radically disparate results.”3 The natural tendency with LCAs is to try to distill complexity down into single numbers or “scores” -- but doing so when nature is involved inevitably requires subjective judgments, which means numbers can only be trusted to a point. In this way, LCA is as much an art as it is a science.
5. When it comes to LCA tools, it’s the Wild West.
As Locus Research’s Managing Director Timothy Allan puts it, “LCA is a method, not a tool.”4 There are more tools than you can imagine out there -- from simple Excel spreadsheets and free “rapid LCA” calculators to complex, customizable software packages. And as you read this, you can be sure that countless PhDs, consultants, and developers are hard at work picking apart existing tools and creating new ones.
The good news is that LCA methodologies are rapidly advancing, building on years of accumulated sweat equity. Three of the leading (albeit costly) LCA software packages are PRe’s SimaPro, PE International’s GaBi, and Ecobilan’s TEAM. There are also countless specialized LCA tools and consultancies focused on carbon footprinting, joining some of the more established firms including Carbon Impact at SAP, Planet Metrics, and Clear Carbon. One of the more promising developments in 2010 was the launch of a new open-source initiative called Earthster, which is working to make the LCA process simpler and more affordable to businesses of all shapes and sizes.
6. The search is on to standardize approaches.
Recognizing the high costs and challenges of going it alone, many companies are pooling resources to develop cheaper, better, and faster ways of doing LCAs. Most notably, the Sustainability Consortium -- backed by Walmart and about 50 other major companies -- is working to develop “transparent methodologies, tools, and strategies” for assessing the life cycle sustainability attributes of a wide array of consumer products -- including a database of product LCA information. The hope is that companies one day will be able to use a common methodology to evaluate suppliers’ products and convey green product attributes to consumers in stores. Green business expert Joel Makower describes the effort as a “man-on-the-moon-caliber undertaking,” while skeptics insist it’s essentially a wild goose chase. Without placing any bets on any specific outcomes, we believe the effort will advance the state of the field -- in useful ways.
7. It’s never too early for companies to start building their assessment capacity.
While LCAs may be difficult, they aren’t going away -- and the pressure on companies to understand and disclose their products’ environmental impacts will only grow in the years ahead. By performing even a simple LCA, a company will not just get to know its products better; it will also build internal capacity to think and innovate along life cycle lines and ask the right questions when the time comes to consider hiring a consultant, investing in a software package, or building your own tools. One of the best initial investments we recommend is to spend $10 to download Rita Schenck’s quick guide, “LCA for Mere Mortals” -- an outstanding primer that can be skimmed in an hour. We list other resources and “LCA Light” tools to get your feet wet at the end of this chapter.