The Renaissance of Lifecycle Thinking
<p>For years, LCA languished in the back rooms of companies, a geeky system of accounting that was of interest to few outside of a small number of engineers and environmental managers; but in recent months LCA has moved to the forefront of corporate environmental efforts.</p>
It wasn't that long ago that LCA seemed pretty much DOA.
LCA, for lifecycle analysis (or, sometimes, "lifecycle assessment"), is a decades-old methodology to holistically evaluate the environmental impacts associated with the cradle-to-grave life cycle of a product or process. For years, LCA languished in the back rooms of companies, a geeky system of accounting that was of interest to few outside of a small number of engineers and environmental managers. Conducting an LCA was a lengthy, complex, and expensive proposition that few companies could justify. It certainly lacked mass adoption.
That's changing quickly. In the past few months, LCA has moved to the forefront of corporate environmental efforts, propelled by enabling technology, the prospects of climate change legislation, and the growing demands for radical transparency by consumers, business customers, government regulators, and retailers, notably Walmart. And it's not just about modeling individual products and processes. LCA is moving from the shadows and into the limelight, a strategic tool for environmental leadership companies.
Suddenly, LCA is a hot topic. In just the past few weeks, dozens of LCA-related stories have come across my desktop, highlighting its use in the automotive industry, lighting industry, energy sector, and the beverage companies, among others. There is a new crop of introductory courses being given to consultants and other environmental professionals on LCAs as well as deeper-drive, more advanced courses for professionals.
Traditional lifecycle analyses are much closer to the activities in a company's accounting department than its environmental department. "There are a lot of similarities between the basic world of accounting and lifecycle analysis," explains Jon Johnson, of the Applied Sustainability Center at the University of Arkansas, one of the co-chairs of the Sustainability Consortium recently formed by Walmart to advance LCA for thousands of products. "Most companies have used lifecycle modeling in a way that is similar to managerial accounting, for internal decision-making purposes -- you need good numbers on all your processes to make good decisions." But that's changing, says Johnson, who sees "a transition from LCA just as a managerial accounting tool to LCA as also a financial reporting tool, or the equivalent, where it's going to be used as a tool to report to external audiences impacts on products throughout their whole lifecycle."
Chris Park agrees. Lifecycle analysis "is being introduced to a whole new audience in a new set of applications that probably have a lot more strategic importance and potential impact than the traditional audiences and purchasers and consumers of LCA services and LCA information," Park, leader of Deloitte's Enterprise Sustainability Group, told me last week. Deloitte recently published a free and very readable report, "Lifecycle Assessment: Where is it on your sustainability agenda?" (download - PDF) that summarizes the business drivers, applications, and bottom-line benefits of lifecycle assessments, from regulatory preparedness to growth and innovation.
Park says Deloitte, one of what's referred to as the Big Four accounting firms (along with PricewaterhouseCoopers, Ernst & Young, and KMPG), has seen growing interest in LCA among two groups of clients. One group are firms that have been conducting such analyses for a while. "Those companies are saying, as we step back and reevaluate this push toward transparency in the supply chain, as we're moving in the U.S. to a regulated market around carbon emissions, as we're seeing consumer pressure toward evaluating embedded carbon content -- it all of a sudden has more strategic import than it did as a more traditional technical evaluation tool."
The other group, says Park, are newcomers who "are beginning to understand LCA as important in evaluating such things as the environmental impact and the carbon footprint -- and are asking the question, 'What's the method? How do I apply it? What does this have to do with how I run finance or operations or other parts of the company?'"
For newbies and veterans alike, new technology is changing the game. For starters, as with so many other thing, it's making full-blown analyses cheaper, faster, and easier. It's also opening up the range of things that are dubbed "LCA." In Park's parlance, in addition to traditional LCA, there's "LCA Light" (in which one looks at only a portion of a product's life-cycle, or uses only rough estimations rather than razor-sharp data, to get results that are pretty good, albeit not perfect) and "LCA Heavy" (in which a traditional LCA is expanded to include more financial, operational, and strategic considerations).
A range of LCA software programs have become required tools of LCA engineers, including GaBi, SimaPro, and Umberto. Each demands its own level of experience and expertise. And then there's the software you likely already have, says Park: "As basic as this sounds, the software we've seen used most successfully is Microsoft Excel -- just home-built spreadsheets that take operational and financial data, take some degree of technical data, measures environmental or carbon impacts in a fairly straightforward way, and allows a manager to look at that information and move in a particular direction."
Beyond that, there's something called "input-output modeling," a more blunt-instrument approach to LCA that "estimates the materials and energy resources required for, and the environmental emissions resulting from, activities in our economy," in the words of the Green Design Institute at Carnegie Mellon University, where the methodology for "Economic Input-Output Life Cycle Assessment" was perfected. Its estimates of lifecycle inputs aren't as good as conducting a full LCA, but it's a lot cheaper and faster, and relatively accurate.
There's more to come, including Earthster, an open-source consortium that is inviting professionals to upload LCA data and methodologies in order to simplify and "democratize" LCA, while improving the quality by pooling nonproprietary information about products and processes. Earthster is garnering buzz within the LCA crowd as a potential game-changing technology.
What will be interesting to watch will be how much all this newfound understanding about products and processes will transform how companies design products, source materials, manufacture things, and sell them. Will leadership companies view LCA as a means of competitive advantage, as their increased understanding allows them to continually reduce waste, emissions, and costs? Will a regulatory price on carbon demand that companies use LCA to minimize their products' energy inputs? Will activists seize on LCA as yet another activity in which companies must engage, naming and shaming firms that haven't yet divulged their data?
And will LCA better inform green marketing? Says Jon Johnson: "I expect that companies that are actively involved in doing lifecycle analyses on their own products right now will be in a position to promote those products as credible alternatives even before an industrywide system is fully up and running." If so, LCA could do far more than the FTC to minimize greenwashing.
But all this is not for the faint of heart. Danger lurks for those who use LCA casually or carelessly. In my 1993 book, The E-Factor, where I described the state of the art of LCA at the time, I interviewed Tim Mohin, then with the U.S. EPA and one of the pioneers of LCA methodology. (Mohin subsequently went on to environmental positions at Intel and Apple.) What he told me at the time is truer now than ever: "If you use LCA data, you must be prepared to show your methodology and open it up to peer review. If you can't stomach that possibility, you're not ready."