This article is part of the “How to be a green changemaker?” series on the Zerwaste blog. In this post, we will try to identify methodologies to measure the impact of sustainability initiatives.
Welcome back to the green changemaker Journey!
In the previous article, we focused our attention on how to prioritize sustainability KPIs. Now, the question is: which methodologies can you use to measure those KPIs? And how can we measure the Impact of Sustainability Initiatives?
To follow the COP21 agreement, the global temperature rise should be kept to 2°C above pre-industrial levels and we should all respect the nine planetary boundaries to keep the planet habitable. With two additional boundaries crossed in 2022, immediate actions are required, including sustainable business decisions related to the impact of products, parts, or product portfolios.
The question that we will try to answer today is: how can a company evaluate the impact of those internal sustainability initiatives?
1- Science-Based Targets
Companies should set ambitious targets to reduce carbon emissions across their value chain, and plan investments and activities to deliver these targets.
The first references which can be used are the targets defined in the Sustainable Development Goals. Nevertheless, they only provide high-level guidance for companies. To have a clearly-defined pathway to reduce greenhouse gas (GHG) emissions, Science-based targets should be used.
Those targets are considered science-based if they are in line with the latest climate science required to meet the goals of the Paris Agreement – limiting global warming to below 2°c, helping prevent the impacts of climate change, and future-proof business growth.
Some companies can support you in this process, but we will get back to it in our next article.
2- Scenarios Comparison
Once you have defined your targets, it is key to compare the current and future situation. Those scenarios are used to explore different alternatives as sustainability strategies are characterized by uncertainty and complexity. Scenarios comparisons could therefore be used to support policy and guide action towards sustainability.
In our previous article, we mentioned how to prioritize your sustainability KPIs, and this methodology could be used to decide the elements which should be included in your assessment. Then, various tools and methods could be used to assess environmental and social sustainability aspects in scenarios.
We will not go into too many details here, but it can go from quantitative tools based on databases to assess scenarios within a shorter time horizon or qualitative assessment methods for long-term transformative scenarios.
For instance, in a short-term scenario, you could evaluate a change in material, a switch in sales strategy, but also the impact of those decisions on your environmental performance and on your carbon footprint.
3- Carbon Footprint Calculator
Your carbon footprint is the total amount of GHG generated by your actions, as an individual or as a company.
Globally, the average carbon footprint for a person is closer to four tons. To have the best chance of avoiding a 2℃ rise in global temperatures, the average global carbon footprint per year needs to drop to under two tons by 2050. The Nature Conservancy
This change will not be done in one day. This is not so easy to track the impact of your sustainable initiatives. Therefore, tools have been developed to monitor the evolution of your carbon footprint. However, the scope of those tools is limited to GHG emissions which is only one aspect of what drives your impact.
To make sure you focus on what really makes a difference, it is necessary to understand better your product, process, or entire supply chain, and what drives their environmental impact.
The VSMc mentioned in a previous article could be of immense help for this. This is also possible to use the Life Cycle Analysis (or Life Cycle Assessment) to move forward. This multi-step procedure is the next one to calculate the lifetime environmental impact of a product or service.
According to the Journal of Environmental Management (2010), the LCA is an impact evaluation method throughout the whole life cycle including extraction of raw materials, manufacturing, distribution, use, recycling, and final disposal.
The process of LCA includes:
- Goal and scope definition is the first step to defining the quality and completeness of the information.
- Life cycle inventory (LCI) is the data collection portion of LCA. LCI is the accounting of all-natural resources consumed and all substances emitted into the environment by the life cycle system. Raw resources or materials, energy by type, water, and emissions to air, water, and land by the specific substance are referenced in LCI databases.
- Life cycle impact assessment is the analysis phase of the environmental impact of the inventory including:
- the system boundary (upstream, downstream, and sidestream).
- the functional unit (volume/mass/purpose of the object being assessed).
- Specific LCIA methods such as allocation of impacts to products and by-products.
- Life cycle interpretation is a systematic technique to identify, quantify, summarize, check and evaluate information and to determine the level of confidence in the results. According to ISO 14040:2006, this phase should be used to communicate in a fair, complete, and accurate manner and include:
- Identification of significant issues based on results of the inventory and/or the assessment.
- Evaluation of the study, checking completeness, sensitivity, and consistency.
- Conclusions, limitations, and recommendations.
LCA could be applied to various fields of activities (mining, manufacturing…). For instance, manufacturing a product may consume a known volume of natural gas in the LCI and the global warming impact from the combustion of that fuel is calculated in the LCIA.
This kind of analysis is extremely complex and extensive as it may involve a high number of individual unit processes in a supply chain as well as hundreds of tracked substances.
It can therefore be complicated to compare different LCA studies and an expensive process to track all the substances. It is therefore key to use the prioritization of sustainability KPIs mentioned previously.
5- Return On Investment (ROI)
Of course, your sustainability initiatives must have a positive impact on the planet, but also on your cash flow. To do so, we recommend calculating the Return on Investment, meaning the amount of return, efficiency, or profitability of those initiatives. To calculate ROI, the benefit will be divided by the cost invested in the initiative. It is expressed as a percentage or a ratio.
We will get back later how to calculate the ROI for sustainability and on how to build a sustainability business case, but for now, we will focus on how to integrate it into the calculation.
It is of course important to integrate the purchasing price of a product in a scenario comparison, but this is not enough to avoid missing some hidden costs and to include future profits in the initial business case.
6- Total Cost of Ownership (TCO)
It would therefore be better to use a Total Cost of Ownership (TCO) approach integrating the lifetime cost of buying, owning, operating, and disposing of an asset. It is a great methodology to avoid missing some hidden costs and it is often a good opportunity to show the real value of sustainability initiatives as the upfront cost might be higher while benefits could appear at a later stage as they require less energy, less maintenance, or a more favorable regulatory landscape.
This approach is focused on the costs of the products if the customer holds it.
7- Life Cycle Costing (LCC)
Lately, companies go one step further toward lifecycle costing as they also want to include the research and manufacturing costs. Therefore, costs of the products from the product point of view, no matter who the owner is.
Let us not confuse LCC and LCA. Life cycle costing (LCC) is another life cycle approach, but the focus is on a linear system (cradle to grave) and on direct monetary costs, not the environmental impact. In a scenario comparison approach, the monetary aspects are of course significant, so they could be integrated into the LCA. This way not only the financial impact would be measured but the social and environmental impact!
In this article, we have seen how to measure the impact of sustainability initiatives on your business and on the planet using:
- Science-based targets
- Scenarios comparison
- Carbon footprint calculator
- Life cycle assessment
- Return on Investment
- Total Cost of Ownership
- Life Cycle Costing
See you next week if you want to know more about concrete tools that you can use to measure your impact.