Strategic perspectives on Life Cycle Assessment

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1 Strategic perspectives on Life Cycle Assessment Finish Society of Industrial Ecology Annual Conference 2009 Rupert J. Baumgartner

2 Agenda The meaning and essence of strategy Life Cycle Assessment in the context of business management and sustainability Coordination mechanism of companies and value/supply chains Is there a strategic perspective of Life Cycle Assessment? Åbo Akademi University - Domkyrkotorget Åbo 2

of companies and value/supply chains Is there a strategic perspective of

3 Actual state Global financial crisis Ecological crisis, global warming Poverty Population growth... There is a need for Sustainable Development, but there is little progress! Lack of strategic relevance and strategic thinking in approaches for Sustainable Development? (Robèrt et al. 2002) Åbo Akademi University - Domkyrkotorget Åbo 3

.. There is a need for Sustainable Development, but there is little progress!

4 The essence of strategy Definitions of Strategy A strategy is a plan of action designed to achieve a particular goal. (Wikipedia) Strategy is the way of using resources and capabilities of an organization. (Hinterhuber, 2004) Strategy is concerned with deciding what business an organization should be in, where it wants to be, and how it is going to be there. (Boddy, 2005) Approaches in strategic management Market based view (Porter, 1980) Resource based view (Barney, 1991) Emergent strategies (Mintzberg, 1990) Åbo Akademi University - Domkyrkotorget Åbo 4

(Hinterhuber, 2004) Strategy is concerned with deciding what business an organization should be in, where it wants to be, and how it is going

5 The essence of strategy Strategic means Existence of an overall goal, objective or vision (picture for success) Ability to identify general guidelines and pathways toward the goal Criteria to determine the strategic relevance of concepts Does the concept lead towards the direction of the overall goal and vision? Can there any general guidelines or pathways towards the vision be derived from the concept? Is the concept flexible in sense of keeping the door open for future changes/progress? Does the concept acknowledge/solve the risk of problem shifting Åbo Akademi University - Domkyrkotorget Åbo 5

and vision? Can there any general guidelines or pathways towards the vision be derived from the concept?

6 Life-Cycle Concepts Seuring 2004 Åbo Akademi University - Domkyrkotorget Åbo 6

7 LCA LCA approach looks at the function of a product or service ( Functional unit ) from the standpoint of the value chain Forces economic players who usually interface aggressively though markets to work together and to exchange information to integrate an environmental vision in their activities Introduce environmental value in an economic world where the environmental cost does not always factor in an economic cost Life cycle thinking is a tool developed to maintain a vision of the public good in supposedly unruly markets But is there a common understanding between nature (governed by natural laws, connected with material flows) and society (governed by economic and societal laws)? Åbo Akademi University - Domkyrkotorget Åbo 7

environmental cost does not always factor in an economic cost Life cycle thinking is a tool developed to maintain a vision of the public good in supposedly unruly markets But is there a

8 Challenges of LCA (1) Is LCA contributing to Sustainable Development? LCA focuses on known environmental impacts, not on the underlying principles and mechanisms that are their causes Spatial, temporal or impact category system boundaries in LCA always exclude dimensions, e.g. because of methodological convenience. Dimensions should, however, be excluded/included not by system boundaries, but through the question and mental model: is this relevant for sustainability? Forecasting vs. backcasting: LCA methodology derives from past, present and known bads and their fix, the wrong way to envision a desirable future state of any development Åbo Akademi University - Domkyrkotorget Åbo 8

LCA always exclude dimensions, e.g. because of methodological convenience.

9 Challenges of LCA (2) LCA does not have a business enterprise perspective Quantitative vs. qualitative data: in many business situations (process of radical product or technology innovation, or design for environment/sustainability), we have a lack of data. Nevertheless there is a need for the right decisions (decisions which contribute to sustainability and must not violate the sustainability principles). Return on investments: even the most polluting activities can be strategic if they fuel non-polluting activities elsewhere or in future What is the optimum for a system? Optimizing function in case of conflicting goals: economic, ecological or societal function The whole may be much more than its parts what is the societal value of a product/service/material assessed with LCA? Åbo Akademi University - Domkyrkotorget Åbo 9

Nevertheless there is a need for the right decisions (decisions which contribute to sustainability and must not violate the sustainability principles).

10 Different Systems Micro-economic system of consumption markets LCA was developed for this system These markets are very competitive and communication among value chain partners is often poor prior to the introduction of LCA LCA has to deal with the complexity of the organization of the value chain and to deal with the time consequences that are caused as a consequence of the initial creation of the functional unit LCA does value negative impacts and not positive ones It looks at the contribution of one functional unit, there is no solution for aggregating impacts due a whole family of products during the time they stay in the market or for aggregating products of several generations together It adds up impacts of the whole value chain assuming additionality (true for global impacts, not true for regional impacts) Birat 2009 Åbo Akademi University - Domkyrkotorget Åbo 10

the functional unit LCA does value negative impacts and not positive ones It looks at the contribution of one functional unit, there is no solution for aggregating impacts due a whole family of

11 Different Systems Macro-economic systems, aggregation like for Total national or world market for the functional unit (FU) (relevant for estimating the impact of the FU) Total energy market renewables, non-renewable, mixed (nuclear power for hydrogen?) Total material market primary and secondary materials Major (metals, concrete, wood ) vs. minor (platinum, lithium) materials: minor are essential for sustainable technologies, but scarce! Time dimensions/temporality systems LCA is usually static Future studies (will there be cars in years?) Ecological system Can we really measure all impacts on a scientific basis? Social system: Is there a world without that product/service/material? Åbo Akademi University - Domkyrkotorget Åbo 11

minor (platinum, lithium) materials: minor are essential for sustainable technologies, but scarce!

12 Strategic Management - Coordination mechanism Coordination (actions, strategies,..) of a company Culture Structure Processes Information Coordination of a value chain Supply chain management SCOR-model (Supply-Chain Operations Reference), consists of Process Modeling Performance Measurements Best Practices Åbo Akademi University - Domkyrkotorget Åbo 12

Supply chain management SCOR-model (Supply-Chain Operations Reference), consists of

13 LCA according to ISO Definition of the goal and scope of the LCA (ISO 14040) Life Cycle Inventory (ISO 14044) Interpretation (ISO 14044) Life cycle impact assessment (ISO 14044) I. characterization II. normalization III. weighting Åbo Akademi University - Domkyrkotorget Åbo 13

cycle impact assessment (ISO 14044) I. characterization II.

14 LCA: Strategic relevance of phases Definition of the goal and scope of the LCA System boundaries (spatial, temporal) Connection to strategic questions of company! Life Cycle Inventory Allocation rules Data availability Data quality Life cycle impact assessment Methodologies for impact assessment Interpretation Link to strategic decisions Åbo Akademi University - Domkyrkotorget Åbo 14

Life Cycle Inventory Allocation rules Data availability Data quality Life cycle impact assessment

15 Strategic perspective on LCA Strategic for Sustainable Development and for Business - Sustainability mechanisms/ principles/causes - Strategic approach Env. impacts Env. impacts Env. impacts Env. impacts Copyright 2004 The Natural Step Åbo Akademi University - Domkyrkotorget Åbo 15

16 Strategic perspective on LCA Two Central Aspects LCA should contribute to Sustainable Development LCA should be relevant for Strategic Management Sustainability principles to make LCA strategic for Sustainable Development FSSD IE principles (roundput, diversity, locality, symbiosis) Focus on decision processes and coordination mechanism to make LCA relevant for Strategic Management Åbo Akademi University - Domkyrkotorget Åbo 16

Development FSSD IE principles (roundput, diversity, locality, symbiosis) Focus on decision processes and

17 Strategic perspective on LCA Strategic for Business Management Coordination within company and supply chain Decision processes Strategic for Sustainable Development FSSD principles IE principles Life Cycle Assessment Life cycle perspective Product perspective Boundaries Known quantitative impacts Åbo Akademi University - Domkyrkotorget Åbo 17

principles IE principles Life Cycle Assessment Life cycle perspective Product

18 References Barney, J.B. (1991): Firms Resouces and Sustained Competitive Advantage. In: Journal of Management, Vol. 17, Nr. 1, pp Birat, J.-P. (2009): Materials, beyond Life Cycle Thinking. 24. Aachener Stahlkolloquium, Vortrag 1.3 Boddy, D. (2005): Management; Prentice Hall/Financial Times Hinterhuber, H., (2004), Strategische Unternehmensführung (strategic management), 4. ed., de Gruyter Korhonen, J. (2004). Theory of industrial ecology. Progress in Industrial Ecology An International Journal. Volume 1, Nrs. 1-3, pp Mintzberg, H. (1990): Strategic Formation: Schools of Thought. In: Fredrickson, J.W. (Ed.): Perspectives on Strategic Management. New York: Longman Higher Education, pp Porter, M.E. (1980): Competitive Strategy. New York: Free Press. Robèrt, K.-H, et al. (2002): Strategic sustainable development - selection, design and synergies of applied tools. In: Journal of Cleaner Production, Vol. 10, Nr. 3, pp Seuring, S. (2004): Emerging Issues in Life-Cycle Management. In: Greener Management International, Vol. 45, pp. 3-8 Åbo Akademi University - Domkyrkotorget Åbo 18

, de Gruyter Korhonen, J. (2004). Theory of industrial ecology. Progress in Industrial Ecology An International Journal. Volume 1, Nrs. 1-3, pp. 61-88. Mintzberg, H.

FINLCA Finnish platform on life cycle methods for supporting the strategic decision making of companies Starting points: FINLCA is funded by the funct

FINLCA Finnish platform on life cycle methods for supporting the strategic decision making of companies Starting points: FINLCA is funded by the funct Introduction to Finnish Platform on Life Cycle Assessment, FINLCA Prof. Jyri Seppälä Finnish Environment Institute Finnish Society for Industrial Ecology conference 14.-15.12-2009, Turku FINLCA Finnish