Bringing Lifecyle and Value Chain Analyses together…at Last

A webinar hosted by the Supply Chain Council this morning on GHG Accounting in the Supply-Chain brought me back to a question I’ve been chewing on for a long time. How can we best take advantage of the complementary methodologies of life cycle assessment (LCA) and value chain analysis (VCA) for better supply chain management? In his very thoughtful presentation, Taylor Wilkerson from the not-for-profit government consulting group LMI, outlined a framework for greenhouse gas accounting using the SCOR (short for supply chain operations reference) model in conjunction with the WRI/WBCSD GHG Protocol (wow, what an alphabet soup!) under development and review. His case was compelling, that the SCOR model, already used by many supply chain professionals for tracking standard supply chain metrics (i.e. cost, quality, price and delivery) is an excellent tool for companies to track the greenhouse gas pollution emissions along their supply chains and in their operations. I think Taylor is off to a great start and his approach is extremely innovative. But I think we need more people, and a much deeper effort, working to integrate lifecycle thinking into how products are designed, manufactured and delivered to consumers.

LCA and VCA are two extremely useful platforms that can help push such an effort forward and each has its own strengths and limitations. In general, LCA is great for quantifying the impacts and giving a fairly good idea of where the most significant areas in a production chain exist from raw material extraction, through manufacture, use, and hopefully new life. But, in many ways, the raw numbers LCA provides are dumb. What it can’t do is explain the dynamics that exist within a particular industry or identify the most effective levers for change. This is where VCA holds the most power, and it seems to me, is a perfectly complementary methodology to use alongside LCA. Not only does VCA provide a roadmap of sectors, identifying with great detail the stages of production – from firms responsible for raw material extraction through the lead firms orchestrating production, but also the relationships among actors (firms, governments, industry groups, etc), and the power dynamics among them: a level of detail that LCA alone cannot hope to provide, even in a perfect world using the cleanest possible process-level data.

Imagine you are a global retailer, concerned with the environmental impact of a brand new must-have children’s toy. In order to better understand the environmental impact of this toy to satisfy eco-conscious moms, you commission an LCA to determine where in the lifecycle the “hotspots” (areas of greatest impact) exist. Your consultant comes back to you, two weeks later with a report full of bar charts and boxes connected by lines of varying thickness – telling you exactly which attributes you need to worry the most about and the relative impact of each. Ok, so now you know that the electric motor is by far the most impactful component and something you should target, but what do you do? Who makes that motor? Where is the factory? Is it even the same company who sold it to you? How deep in the supply chain is it? Are there competitors out there who could produce the same item in a much more environmentally sound manner? Is there much you can do about it given your relative influence in this industry? Who else might you recruit to help make this product better? These are all questions VCA can help answer.

The overlap between these approaches seems obvious, but the barriers to useful integration are substantial – but they don’t need to be. The communities that exist around each have their own languages, in many cases peculiar nomenclatures that can seem foreign-sounding even when using common English words (e.g. functional unit, reference flows, allocation through partitioning, et al). Even worse, they have their own fiefdoms, which can be difficult to penetrate. However, there are thoughtful scholars and practitioners in both areas, who see the benefits of each method and the inherent complementarity between them. This is good news.

In order to move forward, we need to get leading thinkers in each area together and help them better understand the linkages between approaches – how they can best design their studies to be of greatest collective value. Perhaps this is where initiatives such as the Sustainability Consortium can provide a forum, and framework, for collaborative innovation that leads to better environmental outcomes.

These kinds of data incorporated into a framework like SCOR could be really powerful across environmental media. I’d love to see what Taylor Wilkerson could do with that information and how supply chain managers, NGOs and governments around the world could take advantage of the new opportunities it would provide.

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