EcoAct Senior Consultant, Lau Tambjerg explains how Life Cycle Assessment (LCA) can work at an organisational level to add business value and aid the transition to net-zero.
So far, more than of 70 countries have committed to the ambition of net-zero carbon emissions. In addition, at the time of writing 2940 companies have committed to science-based targets (SBTs). Reaching these targets will be no easy feat. Most companies are getting their operational emissions (Scope 1 & 2) under control but face difficulty in doing the same for their supply chain and product use (Scope 3).
Companies are looking for ways to reduce their Scope 3 emissions while maintaining other strategic commitments such as increased profitability and growth. In its 2016 report investigating Scope 3, CDP found that “purchased goods and services” and “use of sold products” accounted for most of the Scope 3 emissions. Helping to understand these two categories would therefore go a long way in supporting a net-zero ambition.
One way of measuring and identifying emissions reduction opportunities is through Life Cycle Assessment (LCA). This assessment systematically looks at a product or service’s life cycle from raw material extraction over processing and manufacturing to distribution, use and recycling or disposal. The methodology has existed for over 50 years. It is set out in internationally recognised standards ISO 14040:2006 and 14044:2006 and, for greenhouse gas emissions specifically, in ISO 14067:2018 and PAS 2050.
LCA is widely accepted as a key decision-making tool for companies. LCA is applied by many of the leading companies in sustainability, ranging from Mars to Siemens to BMW. Because LCA specifically analyses both upstream (e.g. purchased goods and services) and downstream (e.g. use of products) impacts, it is an ideal tool to effectively measure Scope 3 emissions and account for the full impact of a business’s products and services.
Life Cycle Assessment in corporate footprints
Many, however, view LCA as a stand-alone assessment, which looks only at an isolated and very specific issue, with limited transferability to the wider company and other corporate sustainability activities. However, LCA can do much more for companies than answer individual isolated questions. In fact, there is a branch of LCA that looks at a company as a whole.
Most companies today produce much more than a single type of product. Consumer goods companies like Nestlé, P&G and Unilever have large collections of brands and products. Nestlé alone has over 2000 different brands across countries and product ranges. Even within companies with a single or a few brands like Nike, there is a large variation in the types of products produced. Nike’s product range for example extends to shoes, apparel, sports equipment and accessories with each of these categories spanning many different individual items.
For such companies, conducting a single-standing product LCA will only analyse a small part of the overall company. This is where the Organisational Life Cycle Assessment (OLCA) comes in. This methodology is set out in ISO/TS 14072 and is designed to assess the entire collection of goods and services of an organisation.
How does OLCA work?
While assessing all the products a company makes sounds like an arduous task, the methodology of OLCA is designed to make this process more manageable.
For example, Unilever adopted OLCA to find a more streamlined approach to calculating their Scope 3 emissions and accounting for their vast array of products. The OLCA approach used involved the selection of 14 countries to be assessed based significance in terms of sales volumes and consumer habits. Similar products were clustered, and a representative product for each cluster subject to a full LCA. The LCA results of these representative products are used to extrapolate footprints of other products within the same cluster. This method enables Unilever to assess and calculate emissions for over 2000 products annually.
The OLCA approach is not limited to large multinational companies. A road testing of the method by the UN hosted Life Cycle Initiative showed the usefulness for organisations of many different sizes, types, sectors and locations. The participating organisations found that OLCA helped them with among other things: (1) identification of environmental hotspots; (2) tracking of environmental performance over time; and (3) improving organisational decision-making.
It is evident that an OLCA will provide many valuable insights for the sustainability team in understanding Scope 3 emissions, but the value of the assessment extends well beyond just the sustainability team.
Getting value from an organisational footprint
Naturally for larger organisations, carrying out an OLCA means more time and effort. The Life Cycle Initiative road test found that project duration was between 2 and 18 months. Often the assessment requires inputs from across the business: sales, research & development, and procurement.
If engagement from these functions is obtained, the information gained justifies the effort because it will enable different business functions to individually contribute to reducing the organisational footprint and in so doing gain additional commercial value.
Sales & Marketing
Consumers are increasingly demanding sustainable products. Products marketed as sustainable are growing 5.6 times faster than those that are not. With an OLCA approach, the Sales & Marketing teams are in an ideal position to demonstrate proactivity and transparency on climate change and sustainability. If an OLCA then leads to emissions reductions and new products, then they have a great story and brand credentials to bring to market.
For B2B companies the increased focus on supply chain emissions is a virtuous circle. With leading companies demanding more insight into their supply chain, this will drive more of their suppliers to seek better understanding of their own operations and supply chain. Similarly, if you can provide your customers with all the information their procurement teams are asking for in terms of emissions, you will not only be supporting your own transition to net-zero, but that of your customers, which can only be good for business!
With purchased goods and services being one of the two main emission sources, procurement has a key role to play in reducing Scope 3 emissions. The results of the OLCA can be effectively used in understanding your key ingredients & materials and where the highest emissions lie. Your Procurement team has a great opportunity to get engagement from suppliers in refining and understanding their ingredients. In addition, getting the detail that an OLCA provides means a far better understanding of current impacts as well as future climate related supply chain risks.
Investor Relations (IR)
Since the launch of the Task Force on Climate-related Financial Disclosures (TCFD) in June 2017 there has been increasing attention on the oversight, risk management and emissions disclosure. Subsequently, investors are increasingly enquiring not just about operational emissions, but also the emissions and risks associated with the supply chain. With an organisational assessment a business is equipped with robust data to answer these kinds of questions
Research & Development
R&D for many companies has a key role to play in optimising and improving existing products. OLCA will inform the R&D team which parts of your products or services bear the most emissions.
With this information, R&D will also be able to innovate and develop the products and services that meet the demands of a low carbon world. Ecodesign tools based on OLCA are powerful in enabling product designers to develop less impactful solutions. For Philips, Ecodesign is a way of driving sustainability in all aspects of product creation. This creates a key opportunity for your business to answer the demands of the market and even gain a competitive advantage.
With an urgent need to limit global warming to 1.5oC degrees and a closing window to act, it is inevitable that businesses are going to find themselves under increasing pressure to be transparent about their full climate impact, to take action and to find innovative solutions. A tailored organisational footprint enables companies to do just that and to be better prepared for the net-zero challenge. An OLCA specifically, goes beyond individual product assessments and top-level corporate footprints, and provides the granularity and detail required to not only set a net-zero target, but actually meet that ambition.