Environmental Life Cycle Costing - Chapter 9 doc

9 Role of Environmental Life Cycle Costing in Sustainability Assessment Walter Klöpffer 9.1 SUSTAINABILITY The term “sustainability” was introduced into the political, as well as publi

9

Role of Environmental

Life Cycle Costing in

Sustainability Assessment

Walter Klöpffer

9.1 SUSTAINABILITY

The term “sustainability” was introduced into the political, as well as public, discus-sion by the World Commisdiscus-sion on Environmental and Development in the well-cited

report Our Common Future (Brundtland Commission 1987) This document

under-lined the responsibility humankind has toward the future generations with an elegant definition that has had far-reaching acceptance from governments, NGOs, as well as private organizations:

Sustainable development is development that meets the needs of present without com-promising the ability of future generations to meet their own needs (24 p)

Although this laudable claim was not easy to operationalize, it has been very successful in environmental politics as well as in mobilization Indeed, the United Nations declared sustainability as the guiding principle for the 21st century at the World Conference in Rio de Janeiro and promoted a concrete action plan, Agenda 21 (United Nations Environment Programme [UNEP] 1992) The confirmation of this concept, in Johannesburg in 2002, introduced the life cycle aspect Furthermore, the joint UNEP–SETAC Life Cycle Initiative was started just prior to the Johannesburg forum (Töpfer 2002) This initiative aims at a global promotion and use of life cycle thinking, life cycle assessment (LCA), and life cycle management (LCM)

Acting sustainability will require its quantification, the identification of appro-priate and valid indicators, as well as associated thresholds How this is achieved will be the topic of debate, though there is widespread belief that sustainability will involve an economic axis that will require life cycle costing The standard model, which is well accepted by industry and often referred to as the triple bottom line, is a 3-pillar interpretation of sustainability It states, essentially, that environ-mental, economic, and social aspects have to be tuned and checked against each another One of the 1st uses of 3 dimensions in a life cycle method for products has

been called “Produktlinienanalyse” (Öko-Institut 1987) This “product line

analy-sis” was a proto-LCA (i.e., a life cycle assessment before the name, harmonization, and finally standardization of the different methods began approximately in 1990;

Klöpffer 2006) Product line analysis included an impact assessment, as the reader would refer to it today, with 3 dimensions — ecology, economy, and society This clearly shows that the 3-pillar interpretation of sustainability is neither new nor an invention by industry It is, therefore, rather straightforward to propose the

follow-ing scheme in Equation (1) for sustainability assessment (SustAss) of products:

LCA is the environmental life cycle assessment (SETAC 1993; ISO 14040/44 2006) ELCC stands for environmental life cycle costing (see Chapter 3), while SLCA stands for societal life cycle assessment There are some prerequisites that have to be fulfilled in using Equation (1), the most important of which is that the system bound-aries of the 3 assessments are consistent This includes, of course, that in all 3 pillars

of sustainability assessment the physical, as opposed to the marketing, life cycle is used for the life cycle inventory (LCI; ISO 14040/44 2006) The 3 pillars may even

be able to utilize the same inventory data, using the language of ISO 14040, with the caveat being that SLCA may require the introduction of geographically specific data (Hunkeler 2006)

The underlying driver as to why sustainability assessment methods (ELCC and SLCA) have to be life cycle based is rather easily explained (Klöpffer 2003):

Only in this way, trade-offs can be recognized and avoided Life cycle thinking is the prerequisite of any sound sustainability assessment It does not make any sense at all to improve (environmentally, economically, socially) one part of the system in one coun-try, in one step of the life cycle or in one environmental compartment, if this “improve-ment” has negative consequences for other parts of the system which may outweigh the advantages achieved Furthermore, the problems shall not be shifted into the future.

The last point, avoiding the shifting of problems into the future, is of paramount importance due to the request for intergenerational justice (Brundtland Commission 1987) Life cycle thinking alone is not enough, however, since in order to estimate the magnitude of the trade-offs, which are nearly always present, the instruments required have to be as quantitative as possible Since we are living in a global econ-omy, the system boundaries used in the methods must also be global Within this context, the UNEP–SETAC life cycle initiative deserves attention and support

9.2 STATUS OF DEVELOPMENT

9.2.1 L IFE C YCLE A SSESSMENT (LCA)

LCA is the only internationally standardized environmental assessment method (ISO

14040 series) The historical development of LCA, beginning with the proto-LCAs

of the 1970s and 1980s, such as Hunt and Franklin (1974) or Ökoinstitut (1987), has been summarized (Klöpffer 2006) The international standards have recently been slightly revised with the modified standards ISO 14040/44 2006 in October

2006 (Finkbeiner et al 2006) superseding the older series ISO 14040 (1997), 14041 (1998), 14042 (2000a), T9043 (2000b) On the other hand, it is well known that

LCA is an active research field, so further methodological developments are to be expected A recent textbook on LCA outlines the development as well as the method and the most important applications (Baumann and Tillman 2004) The Dutch LCA guidelines can be considered a comprehensive recent monograph, based on the ISO series of LCA standards (Guinée et al 2002) A similar endeavor from the Danish point of view dates back to the late 1990s (Wenzel et al 1997; Hauschild and Wenzel 1998) The basic principles of LCA, which together distinguish this method from other environmental assessment methods, are as follows:

The analysis is conducted “from cradle to grave.”

r

All mass and energy flows, resource and land use, as well as potential r

impacts connected with these “interventions” are set in relation to a func-tional unit as a quantitative measure of the benefit of the system(s)

The method is comparative; LCAs are restricted to improvements of only 1 r

system, even if the future state is compared to the present one

The advantage, at least theoretically, of the completeness is partly offset by the uncer-tainty regarding where and when exactly some of the processes or emissions occur, which ecosystems or how many humans may be harmed, and whether or not thresh-olds of effects are really surpassed due to the emissions or other effects that can be attributed to the systems studied Furthermore, the magnitude of the reference flows, which quantify the functional unit, is usually fixed arbitrarily As a consequence, the absolute amount of the “interventions” (i.e., emissions and use of resources) has no meaning, and concentrations of emitted substances cannot be calculated (hence, no risk assessment is possible) The additional use of other absolute, noncomparative methods (e.g., risk assessment, material, and substance flow analysis) is, therefore, recommended for the sake of decision making It is difficult, however, to integrate such additional methods directly into LCA studies This may be seen as a disadvan-tage, though it is outweighed by the advantages of standardization of LCA, such as a clear structure and measures against misuse, for example in marketing Sonnemann

et al (2003) describe, for industrial processes, the integration of LCA and environ-mental risk assessment

The ISO structure of LCA goes back to a very similar scheme proposed by SETAC (1993) and now consists of the following four components (ISO 14040/44 2006): Goal and scope definition

r

Inventory analysis

r

Impact assessment

r

Interpretation

r

If comparative assertions (e.g., system A is better than or equal to system B in regard

to its environmental aspects) are part of an LCA and are intended to be made avail-able to the public, a critical review is mandatory according to the panel method (i.e.,

by at least 3 reviewers; ISO 14040/44 2006) This and many other “obstacles” were built into the ISO series of LCA standards in order to prevent their misuse, especially

by false public claims As a consequence of these preventive measures, a full LCA to

be used publicly has become a somewhat lengthy procedure Of course, the learning process is more rewarding in a long and carefully conducted LCA study compared

to a “quick and dirty” one

It has been widely observed that the design phase permits, quite often, only cur-sory assessments, and, therefore, simplified methods were proposed and also com-pared with each other (Hunt et al 1998) In design for environment, a compromise has to be found between a reasonably comprehensive coverage of the life cycle, the impact categories, and the time needed for data collection and modeling The actual calculation process is rapid due to the elaborate LCA software that is now available

It is also true that additional and higher quality data have become available recently (Frischknecht et al 2005) It should also be noted that the standards are much more flexible and less demanding if the results are used internally In this case, the criti-cal review is optional and can be performed by a single internal or external expert instead of a panel according to ISO 14040/44 (2006), and weighing between results

of different impact categories is allowed

9.2.2 L IFE C YCLE C OSTING (LCC)

LCC is older than LCA, though it is not yet standardized It also has a large potential for extending the scope of LCA in the direction of sustainability assessment (Hun-keler and Rebitzer 2001; Norris 2001; Rebitzer 2002; Klöpffer 2003; Klöpffer and Renner 2008) This environmental LCC (see Chapter 3) is based on the physical life cycle used in LCA and avoids the monetization of externalities that are not to be internalized in the decision-relevant future, since this would mean a double count-ing: environmental impacts are quantified in the life cycle impact assessment (LCIA) component of LCA in physical units (ISO 14040/44 2006)

It should be noted that LCC includes the use and end-of-life phases (i.e., from cradle to grave, as in LCA), so that the result cannot be approximated by the price

of a product (so-called cradle to factory gate or cradle to point of sale) Furthermore, LCC is an assessment method, not an economic cost-accounting method Potential links of sustainability assessment and, in particular, LCC with environmental man-agement accounting have been discussed by Klöpffer and Renner (2007)

9.2.3 S OCIETAL L IFE C YCLE A SSESSMENT (SLCA)

SLCA is generally considered to be still in its infancy, although the idea is not new (Öko-Institut 1987; O’Brian et al 1996) Quite to the contrary, a significant increase

in the number of papers published can recently be observed:

Dreyer et al (2006) aim at assessing the responsibility of the companies r

involved, although the products are the point of reference This necessarily gives more weight to the foreground activities and to the people involved

in them

Labuschagne and Brent (2006) strive for completeness of the social indica-r

tors to be used in a social impact assessment

Weidema (2006) includes elements of cost–benefit analysis (CBA) and r

proposes quality-adjusted life years (QALY) as a main measure of human

health and well-being (a common endpoint for toxic and social health impacts) The author holds the view that social impacts should be treated within LCA as a special section of impact assessment, that is, a common inventory (LCI) would be required

Norris (2006) considers social and socioeconomic impacts leading to poor r

health; life cycle attribute assessment as a web-based instrument should complement classical LCA methods

Hunkeler (2006) deals with the connection of societal indicators with the r

functional unit This is a daunting problem, given the mostly qualitative nature of societal indicators and the need for quantification in comparative assessments It seems to now be near a solution, taking the working hours spent per functional unit as the link; furthermore, regional income per hour and the number of working hours needed to satisfy important social needs (e.g., education and health care) are used to quantify the different social development statuses of the regions The higher regional resolution needed for the establishment of societal life cycle inventories (SLCIs) will

be a challenge for the LCA community, but, on the other hand, there are researchers claiming for a much better regional resolution in LCA or LCIA, too (Potting and Hauschild 2006)

9.3 DISCUSSION

There are at least 2 options to include the social aspects into a life cycle–based sus-tainability assessment The 1st option corresponds to Equation (1) and is based on 3 separate life cycle assessments with consistent system boundaries and the same func-tional unit (Klöpffer 2003) A formal weighting between the 3 pillars, although pos-sible, would, more appropriately, be avoided The main advantage of this approach

is its transparency The attribution of advantages and disadvantages in comparative assessments is clear in this variant; there is no compensation between the pillars As

a consequence, a favorable (economic) ELCC result for a given product cannot out-weigh less favorable or even poor results in (environmental) LCA and SLCA Such

an overweighting of the economic part, as is daily practice in business today, would perpetuate the (largely unsustainable) status quo of economy

SustAss = LCA (new, expanded relative to ISO 14040/44 [2006],

and including elements of ELCC and SLCA as additional impacts in LCIA) (2) The 2nd option (equation (2)) would imply that 1 LCI would be followed up by

3 impact assessments covering the potential environmental, economic, and social impacts per functional unit of the product system studied The advantage of this option would be that the same LCI could be used for all 3 impact assessments, solv-ing the system boundary problem Such a solution seems to be preferred by Weidema (2006) Disregarding for the moment the danger of mixing up the 3 dimensions, there remains the question of whether or not option 2 is compatible with ISO The revised framework standard ISO 14040/44 (2006) says, “LCA addresses the environmental aspects and potential impacts” throughout a product’s life cycle from

raw material acquisition to production, use, end-of-life treatment, recycling, and final disposal (i.e., from cradle to grave) It also noted, “LCA typically does not address the economic or social aspects of a product, but the life cycle approach and methodolo-gies described in this International Standard may be applied to these other aspects.” These statements clearly favor option 1, and future separate standardizations of ELCC and SLCA would be a logical consequence On the other hand, ISO 14040/44 (2006) could be revised again in the future and possibly accommodate economic and societal impact assessments Since this revision will certainly not begin in the immediate future, the coming years should be used for discussing the best way to formalize sustainability assessment Additional experience with the new social indi-cators will be required, in particular establishing the means to unambiguously link them to the functional unit of a product system The selection and quantification of the most appropriate metrics per functional unit will be the main scientific problem regardless of whether option 1 or 2 will be followed As in LCIA, it will not be pos-sible to properly quantify all desirable impacts