Lifecycle analysis (LCA) has become a best practice tool that many companies use to analyze and improve the environmental performance of their products. It enables them to work out what the biggest impacts of a product are and where they occur in the process of creating and consuming it. A company can then focus on reducing those impacts and measure progress towards its goal.
But sustainability metrics are evolving. A recent poll of more than 100 environmental managers, product designers and LCA practitioners conducted by Trucost reveals the limitations of LCA. Measuring impacts in physical terms such as tonnes of greenhouse gases or cubic meters of water used is becoming a first step towards creating more insightful and user-friendly metrics. Converting physical data to monetary values using natural capital valuation takes LCA to a whole new level. The implications for product design were discussed at a recent Trucost webinar.
Natural capital refers to the goods and services provided by nature, such as forests which give us timber and which also clean the air and regulate water flows. In the past, business and society has taken these resources for granted – and to a great extent still does. But increasingly, companies are having to pay for these costs as a result of environmental regulation. Applying natural capital valuation to products can help companies design lower impact, more sustainable products and avoid these costs.
The poll showed that one limitation with LCA is that the results are very technical, and only really understandable by LCA specialists and experts in the sustainability team. Just 13% of respondents said that the results make sense to a mainstream business audience (see figure 1). Converting LCA data into monetary values overcomes this issue by presenting the data in a way that is accessible to everyone.
Figure 1: Who is able to understand LCA results?
Around 70% of respondents said being able to compare different environmental impacts was important, but this was not possible with LCA results or other exiting methods because they use different physical metrics (see figure 2). Using a single monetary metric enables a range of impacts to be compared on a like-for-like basis.
Figure 2: Is it important to compare impacts and is it possible with existing methods?
Over 75% of respondents thought it was important to be able to consider regional resource availability, but were unable to do this with LCA data (see figure 3). As a result, for example, a company does not know whether the amount of water used to make a product is actually a problem. Monetary valuation provides that all important context because the availability of water in a specific locality is reflected in the value it is given.
Figure 3: Is being able to compare regional resource availability data important and is it possible with LCA?
The importance of being able to relate resource use to availability was recently emphasized with the publication of WWF’s latestLiving Planet report which shows how we are living well beyond the means of the Earth to support us.
One company that has been exploring how natural capital valuation could enhance LCA is US carpet tile manufacturer Interface. The company was one of the first to start applying LCAs on its products as a matter of course in 2000 as part of its Mission Zero sustainability program.
Interface looked at two carpet tile products, one manufactured in North America and the other in Europe. Trucost applied its valuation techniques to the LCA data reported for each product. The analysis showed the total environmental cost of one square meter of Interface’s North American carpet tile was $1.20 in 2012. The production phase was responsible for three quarters of the cost. Carbon was by far the biggest impact at 80% of the costs, followed by water use at 20%.
For the European tile, the cost per square meter was $1.55 in 2012. The production phase was responsible for 60% of the cost, followed by the end-of-life phase at 35%. Carbon accounted for more than 90% of the costs.
The finding that carbon was by far the most significant impact validated Interface’s long-running efforts to reduce emissions. “Understanding the significance of carbon emissions relative to other environmental impacts has sharpened our focus on projects that drive down our carbon footprint,” says Connie Hensler, Interface’s director of corporate LCA programs. “It has simplified the internal discussions and helped us to prioritize our efforts,” she adds.
Process energy only contributes 10% or less to the carbon footprint. In contrast, as much as two thirds comes from the supply chain. This insight has reinforced Interface’s focus on eliminating virgin raw materials and pursuing low-carbon recycled materials. Hensler says when you use a recycled raw material, you don’t carry across the upstream impacts that were caused by its original extraction because it displaces the need for virgin raw material. Using recycled materials has a great benefit in reducing natural capital cost, she adds.
Working with Trucost has helped Interface simplify its internal communications and drive continuous improvements by creating an annual global product weighted evaluation of its products’ carbon footprint. The production stage global warming potential of its average product has been cut by a quarter since 2008. Having just one metric to focus on rather than up to ten speeds up the sustainable design process, says Hensler.
The project also gave Interface valuable insight into regional impacts like water resources and smog creation. For instance, the cost of smog in the UK is almost four times the cost of smog in North America. Hensler says this information could influence Interface’s decisions on where to source raw materials and locate its production plants.
“We understand the impacts in our supply chain more than we ever have before just using LCA,” Hensler told webinar attendees. “Instead of just the LCA specialist understanding it, I’m able to share this information with people who can really make decisions and move our product design and production processes in a more sustainable direction.”
Interface is interested in using natural capital valuation again to further understand and enhance the sustainability of its products: “Our products are rapidly changing as we strive towards our sustainability goals, and as we change raw materials and processes the effect on natural capital will change too,” says Hensler. “As our environment changes, the valuation of natural capital will also evolve,” she adds, “so what is less important today may become critical in the future.”
Interface is one of only a handful firms to add value to its LCA data using natural capital valuation, but Hensler is confident that many other companies will follow suit. This is the same situation as when Interface started using LCA but no one else was, Hensler said. Now it’s become mainstream. The same could happen with natural capital valuation. “When you’re taking a leadership position you just have to jump out there and take a chance,” she said.
So Interface has thrown down the gauntlet. Which companies will respond? LCA has helped companies make great progress in sustainable product design, but for the journey to continue, LCA needs to develop. Natural capital valuation is the way ahead.
James Richens joined Trucost as Research Editor in December 2013. He is responsible for editing Trucost’s public and client research reports, as well as promoting the importance of natural capital valuation in the marketplace. James has over 13 years of experience writing about corporate sustainability as a journalist for ENDS Report, the UK environment business magazine. Before that he worked as an environmental policy adviser for the Confederation of British Industry. James graduated from the University of Strathclyde with a degree in politics. This article was republished with permission from Trucost.
