Hybrid life cycle assessment (LCA) is emerging as a tool to more efficiently streamline environmental reporting for Scope 3 emissions, or those that occur in the upstream and downstream activities of a firm. These impacts are increasingly becoming a focal point for organizations due to the fact that many environmental impacts and risks associated with products and services can occur outside of a company’s direct operations. 

For example, in the average Fortune 500 company, less than two percent of environmental impacts and risks occur from direct operations, the rest are generated upstream in the supply chain or downstream in the use and end-of-life phases. As such, the production of high-resolution sustainability reports touting a company’s manicured environmental successes and direct carbon footprint is no longer satisfying investors, employees, environmental ratings agencies and a more educated consumer base. At the same time, defining a consistent and prudent system boundary for what and how to report Scope 3 impacts in a cost effective manner continues to challenge organizations.

What is the definition of a life cycle assessment (LCA)?

Life cycle assessment is a methodology used to examine the environmental impacts of a product or service throughout its life cycle, from raw material extraction to disposal, often referred to as cradle to grave. Consequently, LCA can uncover impacts in the supply chain and, in some cases, fundamentally shift the sustainability performance of a product.

For example, using LCA a recent study found that in some instances electric vehicles are more environmentally detrimental than conventional vehicles both when produced and when the electricity requirement is generated from coal-fired power plants. The method is also helpful when identifying a products main environmental contributions and locating where in the value chain significant impacts occur.

Using this methodology to compare energy derived from a coal fired power plant versus solar power generation will show that the primary environmental load is associated with the operation phase of the coal plant (due to fuel combustion) while most impacts for solar generation occur in the panel production phase (high energy inputs and large toxicity outputs).

Armed with the information generated from a LCA, a firm can readily identify important environmental issues in their production and consumption system. That said, one of the problems to date has been the high cost and time requirements associated with the collection of LCA data. Introducing hybrid LCA methods can help mitigate this issue.

The benefits of a hybrid LCA

Hybrid LCA combines traditional process-based LCA information with well-established input-output (IO) data, collected by the U.S. Bureau of Economic Analysis, on average industry transactions and emissions. The result is a powerful and more cost effective analysis of the environmental impacts of a product or service throughout the value chain, including scope 1-3 emissions.

The addition of IO data also helps maintain a more consistent system boundary for indirect impacts and thus improves standardization. Add to all of this the ability to better manage resources, uncover supply chain risks and generate stakeholder value through transparent reporting and the reduced LCA cost due to lower data requirements simply becomes icing on the cake. Lockheed Martin realized the value of hybrid LCA when it found that its supply chain represented 98% of its environmental impacts and from a financial perspective, the supply chain’s energy spending equated to 35% of the company’s EBIT.

Conclusion

Although optional by most environmental ratings organizations, openly and accurately reporting these represents a more proactive and innovative approach towards holistic sustainability reporting.

Some omissions such as Dell’s exclusion of laptop production impacts, Yahoo’s exclusion of data servers, and News Corp’s exclusion of newsprint production in their carbon reporting omits key business activities and sends mixed signals to stakeholders. This lack of accountability may become less tolerable in a post 400ppm atmospheric CO2 society. As large corporations such as Walmart launch initiatives to track the life cycle impacts of every product it sells, the bar for more inclusive sustainability reporting is likely going to rise while standardization improves. To stay ahead of the curve and manage reporting for the full value chain, hybrid LCA is certainly worth investigating.