Life Cycle Assessment Plays Key Role In “The State of Green Business”
On February 12, GreenBiz published its sixth annual “State of Green Business” Report.
There is much about the report that is interesting and prescient to the sustainability community. Perhaps unsurprisingly, one key finding is that companies increasingly rely on natural resources to do business:
“Although companies are developing ways to deliver goods and services more efficiently, their overall reliance on natural capital grew, with environmental costs rising by 8 percent to almost $352 million between 2007 and 2011. Companies have yet to decouple growth from environmental damage. This is mainly because of our global economy’s continued reliance on carbon-intensive fossil fuels, which meant that 42 percent of costs came from greenhouse gas emissions.”
But companies are also starting to realize the business benefits – cost savings, innovation, and other upside opportunities – of undertaking environmental activities:
“The number of S&P 500 companies reporting on profits from environmental activities rocketed by 61 percent over five years. Their environmental R&D more than doubled, despite economic gloom. The best is yet to come.”
The report, which you can download here was written and compiled in partnership with Trucost. It is both exhaustive in its approach and broad in its reach, with ten top trends:
• Companies Take Stock of Natural Capital
• Sustainability Becomes a Matter of Risk and Resilience
• Corporate Reporting Gets Integrated
• The Sharing Economy Makes Its Mark
• Commerce Gets Re-localized
• M2M Enables the Rise of Greener Machines
• Sustainability Goes App Crazy
• Materiality Becomes Material For Investors
• Companies Look Past Their Goals
• Peak Sustainability Threatens Corporate Progress
For EarthShift and the sustainability community, the first three trends offer a strong indication that the need for LCA is not only alive and well, but growing.
Companies Take Stock of Natural Capital
How else can a company value the natural capital – defined in the report as “the limited stock of Earth’s natural resources that humans depend on for our prosperity, security, and well-being” – if they can’t quantify natural capital requirements of their products, services and processes (see “Valuing Natural Capital at McDonald’s, Unilever, and Coca-Cola: GreenBiz Conference”)?
Another thing about natural capital – Sustainability ROI (S-ROI), our multi-criteria, multi-stakeholder decision analysis methodology and 3Pillars Software Tool, offers the companies the ability to understand potential business impacts to the environment, particularly when used in conjunction with LCA. Potential risks and benefits to the firm are balanced with those of other stakeholder groups – political, environmental and social.
Sustainability Becomes a Matter of Risk and Resilience
On risk and resilience, LCA affords companies the opportunity to proactively measure and analyze their environmental impacts. Nearly all business activities use resources in one way or another. Understanding resource consumption and its current and future implications helps companies avoid long-term risks associated with rising costs and increasing resource scarcity (see “The Business Case for Sustainability and Life Cycle Assessment at Hypertherm").
Corporate Reporting Gets Integrated
And finally, sustainability reporting improves to the extent that LCA and other tools and methodologies offer transparency into resource utilization.
“One challenge is that the growth and sophistication of sustainability reporting is limited, if not undermined, by the tools companies are using to produce them. According to a 2012 report published by Ernst & Young in partnership with GreenBiz.com, ‘those tools remain rudimentary, even primitive, compared with those used for reporting on financial measures.’ When asked to name the tools used to compile their sustainability reports, most companies cited spreadsheets, centralized databases, emails and phone calls as the principal tools, with about one in four using packaged software. As integrated reporting catches on, it will push companies to use tools that help them generate higher-quality sustainability data.”
If companies spent some more time and resources to implement LCA, they’d find well-developed tools like SimaPro, EarthSmart, PackageSmart, and others that offer comprehensive and exhaustive environmental impact data. The process is ISO certified, meaning it has an accepted protocol developed and maintained by an impartial international consortium.
"The Old Rationale Hasn't Gone Away"
All in all, the GreenBiz report is worth a read. Perhaps most interesting about the piece is its keen attention on the way sustainability continues to evolve in both the public and corporate consciousness:
“The ‘old’ rationale hasn’t gone away — companies are still harnessing sustainability to cut costs, improve quality, engage employees, and all the rest — but the world of sustainable business made some slight but profound shifts in 2012. As the global economy sputtered back to life, companies began to link their sustainability strategy to critical business activities. Today’s rationale might sound something like this: We do these things to insulate ourselves from turbulent times, adhere to customer requirements, ensure that communities where we operate will welcome us, and protect our reputation. They help us be resilient and ensure our survival amid disruptions.
This is the new world of sustainable business. It goes well beyond the nice-to-do issues of ‘corporate responsibility’ and ‘eco-efficiency.’ It views incrementalism as insufficient, ignorance as unacceptable, and unpredictability as the new norm.”
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