Life Cycle Assessments: what they are and how to use them well

🌿 Why do we care?

As our planet struggles to cope with current levels of production and consumption, consumers, policymakers, and investors are increasingly conscious of the environmental impacts of products and services.

As a result, there is increasing pressure on startups to properly understand, measure, and quantify their environmental impact. This helps them demonstrate to stakeholders (e.g., consumers, investors) how their product is better than the status quo, as well as allowing them to track and improve performance on key metrics over time. Aside from being good for the planet, this can have commercial benefits too — such as winning and retaining customers or improving access to capital.

However, measuring environmental impact can be challenging for several reasons:

1. Complexity: A product’s environmental impact encompasses many inputs (resources, energy, affect on land use, etc.) and outputs (waste, emissions, etc.) across its whole lifecycle (production, transport, usage, etc.).
2. Need for standardisation: Despite the complexity, there is a need for impact to be calculated in a way that means it can be compared with other products.
3. Possible trade-offs: Most new products will not be comprehensively better or worse for the environment on all dimensions — for example, a new product may reduce emissions but increase water use. There is a need to be able to ‘net out’ different environmental impacts.

One approach that the ecosystem is using to work through these challenges is the Life Cycle Assessment — or LCA.

🌿 What is an LCA?

An LCA is a methodology used to evaluate the environmental impacts of a particular product or service. It looks at inputs (e.g., raw materials, water, energy) and outputs (e.g., emissions, waste) across the whole life cycle of a product — including raw material extraction, manufacture, transportation, usage, and end of life disposal. Environmental impact categories can include CO2eq emissions, depletion of resources, etc.

The approach gives a comprehensive picture of the entire environmental impacts of a particular product. For example, Tesla uses the LCA approach to compare its cars with internal combustion engine vehicles. By considering the vehicle manufacturing phase, supply chain emissions, vehicle use, and end-of-life for a particular model, it provides a more accurate comparison of the two products.

Given the number of choices that are made during the LCA process, there is a need for some standardisation. The ISO has produced guidelines for conducting LCAs (ISO 14040 and 14044). These outline a standard approach for how to conduct the analysis, which includes four stages: (i) definition of goal and scope; (ii) life cycle inventory; (iii) impact assessment; and (iv) interpretation. However, conducting a full LCA using these ISO guidelines can be time consuming and expensive, especially for startups. Companies that do not have the resources to conduct a detailed LCA can customise the approach so that it is lighter touch. This might involve focusing on only one type of environmental impact — e.g., All Birds has developed an LCA which focuses on carbon emissions. Alternatively, it might involve only considering certain parts of the life cycle — e.g., ‘cradle to gate’ — or using generic or qualitative data.

🌿 Why do an LCA?

There are a number of reasons why a company might do an LCA — see this helpful paper by Deloitte. This includes making better procurement and design decisions to improve the environmental impacts of a product, achieving compliance and staying on the right side of regulation, and attracting values-aligned consumers and investors. Investors are also starting to use LCAs to inform their decision making.

When considering what level of detail is most appropriate for an LCA, companies / investors should think about what they want to achieve by doing one. This will help inform the trade-off between rigour and depth vs. time and expense.

🌿 Benefits and limitations of LCAs and challenges from practice

LCAs can be a helpful framework for holistically evaluating a product’s environmental impacts. However, there are still a number of challenges with how they’re being used in practice.

1. The range of choices involved mean that LCAs looking at the same question could yield very different results. This makes it hard to compare and take meaningful action. This can even be the case when organisations follow processes like the ISO guidelines.
2. The inputs to LCAs are constantly changing, meaning it is inaccurate to rely on studies that are even a few years old. A landmark study by Martin Hocking in 1994 concluded that disposable cups were less energy intensive than reusable ceramic mugs. By 2014, updated inputs like average cup size and dishwasher efficiencies swung these results the other way.
3. It is still difficult to consider multiple types of impact. For example, how do you think about the trade-off of increased water consumption versus lower CO2 emissions?

It’s also important to remember that environmental impact is not the whole story, and companies should also consider other types of impact (e.g., social), and any trade-offs between these.

🌿 Recommendations for the future of LCAs

We need a method of accurately and comprehensively assessing the environmental impacts of different products. LCAs can be a helpful tool to do this, but they must be used correctly. To be most valuable, LCAs should:

1. Make clear what inputs and outputs are being considered — these should be as comprehensive as possible, without cherry picking favourable categories
2. Use robust data where available and comment on data quality where not available
3. Use up to date information or disclose where this is not available
4. Clearly articulate any assumptions made across the LCA

We would love to hear what you think about LCAs. Do you use the methodology today? Are you planning to use the approach in future? Why or why not?