Why LCA Matters to the Planet
Life Cycle Assessment (LCA) is quickly emerging as the best “litmus-test” of a company's environmental claims and the most rigorous way to assess and validate the impact a corporation has on the planet, whether it is in the form of GHG emissions, toxicity to plants or animals, water used, or waste produced. LCA is environmental impact analysis that has a scientific and internationally standardized methodology behind it, and is used by the most sophisticated investors and most motivated companies. In short, LCA is the best defense against greenwashing out there.
LCA was invented in the late 60s when Coca-Cola commissioned research on their packaging process, inadvertently building the foundation for today's methodology. Eventually, the Environmental Protection Agency (EPA) and the Society of Environmental Toxicologists and Chemists (SETAC) developed and formalized methods for conducting LCAs in 1990. Using extensive data gathering and analysis, LCA provides a holistic “cradle-to-grave” picture of a company’s product(s), supply chain and operations. It also validates data through several methods (including independent expert review) – leading to its long-standing reputation as the most thorough and trusted assessment available.
LCA is a systems-level analysis that assesses the environmental impacts associated with all stages of a product’s life, including raw material extraction through materials processing, manufacturing, distribution, use, repair, maintenance, and disposal or recycling. It compiles and examines the inputs and outputs of materials and energy, water and waste, and sometimes other key factors like land footprint, depending on which industry you are analyzing. In addition to individual products, LCA can be applied to services or whole companies across nearly all industries. It’s founded on ISO 14044, and based on peer-accepted and/or regulation-defined methodologies. The databases LCA practitioners use are standardized as well, making it far easier than other impact measurement frameworks for investors to measure “apples-to-apples” when evaluating how a product or company compares to others in its same industry.
Figure 1: Life Cycle Assessment
Furthermore, LCAs are critical because they ensure that companies report data accurately and within industry-standard contexts, something that many simpler reporting tools unfortunately overlook or cannot provide.
Typical GHG reports, for example, often examine only the energy use of a product’s main operations, not its full life cycle. And most ESG ratings or reports focus only on financial risks. Therefore both types of reports can too easily miss a product’s or company’s wider impact on land, water, air, health and the environment. Beyond greenhouse gas (GHG) emissions, LCA practitioners also account for key environmental factors such as sustainability of land use, water consumption, toxicity and air pollution.
LCA complements and adds value to traditional market and financial analysis. Together these techniques offer a more complete understanding of the vertical, supply chain dynamics and the horizontal, competitive landscape for a product or company. As a result, they help investors make far better informed decisions about climate risks and opportunities within a company’s ecosystem - and their impact on the bottom line. These LCA results also provide avenues for mitigation frameworks and associated decarbonization strategies by uncovering potential hotspots within a product’s environmental impact.
The largest ESG ratings and data providers recognize the commercial demand for this information - numerous groups specializing in scenario analysis and physical risk assessment have been acquired by larger players seeking to broaden their expertise. In making these deals, ESG data providers implicitly acknowledge that their offerings must evolve to meet the level of analysis desired by investors. A KPMG survey found that 63% of managers consider quality and consistency to be the biggest challenge with implementing ESG data into their investment strategies.
Figure 2: Elements of Rapid Product Life Cycle Assessment
A key flaw in most environmental assessments on the market is that they use only self-reported data, which inevitably is framed with a positive spin rather than within a framework of objective, verifiable and comparable facts. That approach is increasingly being questioned by investors, regulators and insurers. And LCAs that are done by third parties ensure that the perils of self-reporting are avoided.
As with any form of environmental analysis, LCAs can have challenges. Because the methodology involves extensive data gathering and analysis, full-scale ISO-compliant LCAs can be expensive and take several months to complete. And because the data can vary significantly depending on scope, data sources, assumptions, or other indicators, ISO-compliant LCAs can be challenging to implement. Disagreements can take place, or differences in approach can prevent LCAs from achieving standardized results.
We at Boundless Impact Research & Analytics have developed a “rapid LCA” to enable emerging and growth-stage cleantech and sustainability-focused companies and products to access the manifold benefits of LCA. Our ISO-guided LCA uses objective, consistent and verifiable data and analysis, and keeps to most of the ISO-compliant standards such as having an independent industry expert review the data a company provides as well as do a peer review of our assessment.
Figure 2 illustrates our rapid LCA, which estimates a product's impact across the five product life cycle stages, and has quicker turnaround than traditional LCAs, but still produces thorough, science-based and verifiable analysis.
By following a common methodology and using standardized industry databases, we are able to compare and contrast various products and services with an ‘apples-to-apples’ approach. This avoids missing problematic ‘hot spot’ issues that may occur a few tiers up the supply chain or after a product’s assumed useful life is over.
Using our proprietary rapid form of Life Cycle Assessment (LCA), we provide a true picture of the environmental performance of products, initiatives and companies so that executives and investors have the most relevant climate impact data to drive their investment decisions. It is worth noting that Scope 3 emissions are much easier to measure once a company has done an LCA of its key products.
We are also trying to help standardize LCA metrics, practices and data sets so that investors and companies can reap the benefits of comparison to existing industry benchmarks. We update those benchmarks regularly as many cleantech industries like EV batteries, alternative proteins, low carbon jet fuels and hydrogen are evolving quickly. Because our gathering and analysis of data is consistent within industries, rather than determined by each company’s own LCA, our assessments are actually more reliable across companies within each industry.
At Boundless, we believe that objective, verifiable, science-based methods that are consistent across industries, will become the standard for environmental impact reporting - and market and financial analysis. Consumers, investors and regulators are increasingly demanding it. We’re here to help.
