LCA and Natural Capital

Accounting (NCA)

in product design

Julie Raynaud - TRUCOST

Lise Lyngfelt Molander - thinkstep

Today’s speakers

Trucost

Senior Research Analyst

Thinkstep

Director, Strategic Accounts

Principal consultant

Julie Raynaud Lise Lyngfelt Molander

thinkstep• thinkstep enables organizations

worldwide to succeed sustainably.

• Our industry-leading software, data

and services help businesses drive

operational excellence, product

innovation, brand value and regulatory

compliance.

• With a global presence in 19 countries

we serve more than 2,000 companies,

including 40 percent of the Fortune 500

such as BASF, Hewlett-Packard,

Interface, Siemens, Unilever and

Volkswagen.

Trucost• Delivered the world’s first public

Environmental Profit and Loss Account, PUMA

• Other Profit and Loss Accounts include:

Yorkshire Water and Novo Nordisk

• Study for TEEB for Business Coalition

estimating the natural capital cost across a

range of business sectors at a regional level. It

demonstrates that some business activities do

not generate sufficient profit to cover their

natural resource use and pollution costs.

• Is leading the development of the Sector’s

Guide (Food and Beverage and Apparel) as

part of the Natural Capital Protocol

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Feedback from the participants

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37%

56%

7%

What is your experience with Natural Capital Accounting?

I don't know anything about it

I know something about it

I have experience but I'mstuggling to implement it

Agenda

14.05.2015 5

1. Presentation of todays webinar

2. LCA and NCA – how can it create value

3. Basic steps for a NCA

4. Business cases

5. From LCA to NCA – live demo

6. Q & A session

SUBMITTING QUESTIONS

Why Use Life Cycle Assessment?

1

2

3

Enables You To

Quantify the environmental performance – holistically and systematically

Compare environmental impacts at each stage of the product’s life

Benchmark and compare environmental impacts between products

RAW MATERIALS

MANUFACTURING

PACKAGINGDISTRIBUTION

USAGE

DISPOSAL

LCA

To develop more sustainable products and resilient supply chains

Life Cycle Assessment

Cradle Grave

Examples of LCA’s Success• One of several decision support tools considered “best practice” in measuring environmental performance• Specified in rating and sourcing systems (e.g., green buildings, product standards)• Numerous commercial software systems• Thousands of practitioners

To what extent does your business depend on the environment? How much of the

resource is available?

How is environmental performance linked to financial performance?

Sustainable Product

Development

Evolving considerations in sustainable product development

Some Current Challenges with LCA

Survey Question 1. What kind of challenges do you have communicating LCA results to others in your business?

Except for the sustainability team and LCA practitioners, most business people do not readily understand LCA study results

LCA results are not easily understood by:

25%

29%

28%

18%

Other stakeholders?

No one

Other business functions?

The wider sustainability team?

Some Current Challenges with LCA

Survey Question 2. How well are you able to weigh trade-offs using LCA results?

Over 80% of survey respondents are unable to sufficiently evaluate environmental trade-offs in different scenarios

29%

18%

53%

Use existing methods, which areinsufficient

Use existing methods, which aresufficient

Unable to weight trade-offs

Some Current Challenges with LCA

Survey Question 3. Are you able to consider regional resource availability or scarcity with your LCA results?

Over 60% of survey respondents think its important to consider regional resource availability but are unable or have insufficient information to do so

53%

31%

5%11%

Unable

Able but insufficient information

Able and have sufficient information

Not important

WHAT IS NATURAL CAPITAL?

CORPORATIONS

SOVEREIGNINVESTORS

NGOs

MULTI-STAKEHOLDER GROUPS

Scale • Enterprise-wide• Supply Chain• Product Category or

Brand Portfolios• Products• Technologies• Site or Facility level

Trends in Natural Capital Valuation

Our General LCA Valuation Approach

For each mid-point impact

LCA mid-point impacts

Climate change

Acidification

Eutrophication

Ozone creation potential

Human toxicity

Eco-toxicity

Water consumption

etc

Results in physical terms

Results in monetary terms

Investigate the characterization

model

Define the scope

Identify the valuation technique

Develop and apply the valuation

Calculate and aggregate the

results

1 2 3 4 5

What impact do we want to capture?• Health impacts• Impact on forests• Impact on crops• Etc

How does the model calculate the considered mid-point impact?

Is the valuation going to be geographically specific?

What is the most appropriate valuation technique given the budget and data available?

Shall we integrate end-point models?

Reflects the damage impacting society and human well-being, expressed in

monetary terms

Extending Insights from LCA Studies

Natural Capital Valuation

• Which impacts are most material• Which environmental trade-offs are

more important in design or optimization schemes

• Understand regional sourcing or production risks (for example, related to water scarcity)

• Allows businesses to integrate the LCA results alongside standard business metrics (e.g., profit, margin, etc.)

• Allows businesses to communicate the results to a general audience not expert in LCA or sustainability

• One common metric for all environmental impacts allows for comparison

• Links the regional availability or scarcity of the natural resource to its use,

• Provides results in standard monetary, business terms

Provides these business insights

Example 1: Evaluating a cell phone take-back program

Business Implications: Recycling has significantly lower environmental impacts overall, compared to other disposal options

What is the environmental and financial ROI of a cell phone take back program?

Example 2: Optimizing T-Shirt Design and Production

Business Implications: Focus product optimization and sourcing efforts on reducing greenhouse gas

emissions, followed by air pollutants

Which type of environmental impact is most material?

Example 3: Apparel Sourcing and Production Locations

Business Implications: Same product, but different natural capital costs as a result of sourcing from a region where water is more scarce

How does sourcing and production in different regions affect environmental impacts? How important is water scarcity in the region where commodities are being sourced?

Example 4: Beverage Production

Comparison of natural capital costs for two breweries based on water availability

Bilbao

SPAIN

Cordoba

100,000 m3 water used

Cordoba

Bilbao

High water scarcity (100%)

Moderate water scarcity (53%)

Natural capital cost:$14.1/m3 = $1,410,000

Natural capital cost:$4.0/m3 = $400,000

Example 5: Integrating Environmental and Financial Results

0.00

0.20

0.40

0.60

0.80

1.00

1.20

Bio-based butanol - Europe Bio-based butanol - US Propylene-based butanol -Europe

Propylene-based butanol - US

Financial costs GHGs VOCs Sox CO N20 PM Water Land conversion

Financial and Natural Capital Costs (NPV, $ per kg)

What are the financial and natural capital costs of a new production facility for biobasedor petroleum based ingredients?

Example 6: Communicating Results

Summary

• Integrate environmental and business results

• Communicate environmental performance to a broader audience

• Determine which impacts are most material

• Assess trade-offs • Quantify regional

resource risks

More resilient business models

Market differentiation, leadership, and

transparency

Better strategies for sustainable product

development

Applying a single, impact oriented metric expressed in financial terms enables businesses to:

The value to your business

Basic steps to conduct Natural Capital Analysis

What is the business case? What business decision will be supported by

research and question?

What is the scope?

Analysis

Feedback, review and integration

How can Trucost- thinkstep solution feed into this process?

Getting Started: Trucost-thinkstep solution

Full scale natural capital assessment can be a lengthy and costly process….

Materiality assessment allow s you to: - Save time and focus effort

- Get familiar with the process

Data to quantify impacts (tonnes of CO2eq, m3 of water …)

Natural capital valuation coefficients ($ per tonne of CO2eq, $ per m3…)

Analyse several products, impacts, life cycle stages in one clickCan be applied to any GaBi datasets across 9+ impact categories

Build a business case and refine focus for potential further, more –detailed assessment

30. april 2015 25

LCA to NCA

Aluminium

Bauxite to aluminium sheet

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Mining bauxite

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Processing bauxite to ingots

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Refining process to sheets

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Use of aluminium and recycling

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LCA and NCA

Results

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LCA results 1 kg Aluminium sheet

GWP

Total

1 Bauxite Production

2 Alumina

3 Electrolysis (Pre-baked)

5 Aluminium alloy mixer

6 Aluminium sheet

Rest

Clim

ate

change [

kg C

O2-E

quiv

.]

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

Water

Total

1 Bauxite Production

2 Alumina

3 Electrolysis (Pre-baked)

4 Cast house

6 Aluminium sheet

Rest

Resourc

e d

eple

tion,

wate

r

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

• Global Warming

Potential

• Water depletion

NCA – Total cost of production

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Natural Capital Accouting (NCA), ILCD/PEF recommended impacts

Acidif ication, accumulated exceedance [Mole of H+ eq.] Ecotoxicity for aquatic fresh w ater, USEtox (recommended) [CTUe] Freshw ater eutrophication, EUTREND model, ReCiPe [kg P eq]

Human toxicity cancer effects, USEtox (recommended) [CTUh] Human toxicity non-canc. effects, USEtox (recommended) [CTUh] IPCC global w arming, incl biogenic carbon [kg CO2-Equiv.]

Particulate matter/Respiratory inorganics, RiskPoll [kg PM2,5-Equiv.] Photochemical ozone formation, LOTOS-EUROS model, ReCiPe [kg NMVOC] Resource Depletion, fossil and mineral, reserve Based, CML2002 [kg Sb-Equiv.]

Total freshw ater consumption, including rainw ater, Sw iss Ecoscarcity [UBP]

Total

1 Bauxite Production

2 Alumina

3 Electrolysis (Pre-baked)

5 Aluminium alloy mixer

6 Aluminium sheet

Rest

NC

A [

US

D,

2014],

ILC

D/P

EF

recom

mended im

pacts

2.5

2.4

2.3

2.2

2.1

2.0

1.9

1.8

1.7

1.6

1.5

1.4

1.3

1.2

1.1

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

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NCA for aluminia production

Natural Capital Accouting (NCA), ILCD/PEF recommended impacts

Acidif ication, accumulated exceedance [Mole of H+ eq.] Ecotoxicity for aquatic fresh w ater, USEtox (recommended) [CTUe] Freshw ater eutrophication, EUTREND model, ReCiPe [kg P eq]

Human toxicity cancer effects, USEtox (recommended) [CTUh] Human toxicity non-canc. effects, USEtox (recommended) [CTUh] IPCC global w arming, incl biogenic carbon [kg CO2-Equiv.]

Particulate matter/Respiratory inorganics, RiskPoll [kg PM2,5-Equiv.] Photochemical ozone formation, LOTOS-EUROS model, ReCiPe [kg NMVOC] Resource Depletion, fossil and mineral, reserve Based, CML2002 [kg Sb-Equiv.]

Total freshw ater consumption, including rainw ater, Sw iss Ecoscarcity [UBP]

Total

Bauxite transport

EU-27: Alumina EAA update 2010 EAA <u-so>

EU-27: Electricity grid mix PE

EU-27: Thermal energy from heavy fuel oil (HFO) PE

EU-27: Thermal energy from natural gas PE

Rest

NC

A [

US

D,

2014],

ILC

D/P

EF

recom

mended im

pacts

0.5

0.4

0.3

0.2

0.1

0.0

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World bank price for Aluminium vs NCA

0

1

2

3

4

5

6

US $ per kg Aluminum, 99.5%

• Global factors of the NCA method implemented into

GaBi database

• Implementation enables to convert LCIA based results

into dollars of natural capital

• Implementation done for the flowing LCIA methods

• CML 2013 EU25+3

• Traci 2.1, US-CA 2008

• PEF recommendation

• ReCiPe 1.08 (H)

14.05.2015 36

What is now available in GaBi regarding NCA method?

• Trucost NCA methodology and coefficients are now available in

your GaBi Datasets and is offered as:

Subscription license

• First license: 450€ annually

• Additional license: 225€ annually

Perpetual license

• First license: 900€ plus 25% annual maintenance

• Additional license: 450€ plus 25% annual maintenance

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TRUCOST valuation coefficients in GaBi Datasets

“NCA Insights” is the first step you can do to dig into NCA and see in real what value

your company can get from it.

What is it?

o A first and quick approach to help you…

• build the business case for NCA internally,

• get initial results based on existing LCA/EPD project done with thinkstep /

GaBi

• identify main contributors to your NCA results

• understand the results and value for your company

What benefits for you ? With NCA Insights, you will get…

o NCA results (reviewed by Trucost) on the basis of a selected and existing project

o Key findings to help you promote NCA internally

o Some initial background information on the NCA methodology used

What you will get ?

o A PPT document (approx.10-15 pages) with results, main NCA contributors,

comments/suggestions

o A suggested roadmap for action

o Presentation of the results through a Web Conference (approx. 1h30)

5K €

14.05.2015 38

Moving forward with « NCA Insights »

Time limited offer – valid until end of June 2015

SUBMITTING QUESTIONS

Q & A

20 minutes

Survey questions

Thank you for your attention!

For more information – please visit

www.thinkstep.com and www.trucost.com