Customers require transparency. So do governments, business partners, procurement teams and investors, to name a few key stakeholders. To achieve the desired visibility into the potential environmental impacts of their products or services, companies can perform life cycle assessments (LCAs). The ability to provide data on the entire product life cycle characterizes companies that lead in environmental, social and governance (ESG) transparency.
The global chemical company BASF offers a good example of how leading companies recognize the business value of using LCAs for ESG. The chemical industry itself may be the most advanced in regard to this methodology. With chemicals used in roughly 95% of all manufactured goods, the industry’s products touch virtually every other sector.
As BASF demonstrates, delivering environmental impact data through LCAs offers benefits beyond transparency. Companies are integrating the methodology to drive product sustainability, identify strategic advantages and optimize operational performance.
Driving Product Sustainability
Governed by ISO 14044, a life cycle assessment is an internationally recognized methodology. Sometimes called an eco-efficiency analysis, data produced by such assessments reveals whether materials that are bio-based or based on renewables are actually more sustainable than those produced via conventional materials. Performing LCA calculations may demonstrate that bio-based solutions are not, indeed, more environmentally sustainable than conventional alternatives.
Why? Renewable products might be made from raw materials or organic substances called feedstock, which need a large input upstream to produce. One example is the starch from corn. When crops need a lot of fertilizer, produce suboptimal yields or require extensive downstream processing, the footprint of cornstarch could be higher than that of a fossil-based product.
Of course, there are many examples which confirm that using renewables can reduce the environmental impacts of a potential product. That is why an LCA, with its cradle-to-grave evaluation, is an effective tool.
Identifying Strategic Advantages
In the chemical industry, the ability to operationalize LCAs has long been a requirement. However, beyond any regulatory aspects, LCAs also provide numerous strategic advantages, including:
- Better business decisions: Companies might use LCAs to understand which products have the most favorable environmental profiles and then launch these first. With LCA data, businesses can measure and compare the upstream impacts of suppliers or their products.
- Improved product positioning: With LCAs, companies can identify their products’ advantages—versus those of their competitors—for better positioning. Data verifies which products are more energy efficient and have lower environmental impacts. In the case of BASF, this could be dishwasher detergents and household cleaners, for example.
- A license to operate: This indicates that society approves of a business’ overall conduct and has granted it a “license to operate.” By using a scientifically sound model of product evaluation, companies underline their commitment to ESG principles, which can help them earn the license to operate.
- Data on a product’s carbon footprint: LCA data answers questions about a product’s carbon footprint. In the chemical industry, companies can correctly position their products, identify the pros and cons or advocate for the launch of a chemical solution over a bio-based one. This applies to all manufacturing industries.
Improving Operational Performance
At BASF, strategic advantages are based on ESG considerations. The company aims to understand and document the potential environmental impacts of its products. With the results of their LCAs, a four-dimensional opportunity for improving operational performance arises through:
- Eco-design: When designing new products for customers, BASF performs LCA calculations on various materials to understand the potential footprint of the new product. Based on the LCA work, the customer selects the most favorable material.
- Process optimization: Companies with long production chains can analyze and optimize each of their process steps. When the impact comes from upstream, businesses can work with their suppliers on ways to lower the product’s footprint.
- Innovation: BASF customers include startups that have developed new products or production technologies. These young companies can compare the advantages of their innovation to existing products and technologies using LCAs.
- Decision-making: Clients of BASF have used comparative LCAs when considering future investment, such as building new factories. For instance, a plastic producer calculated the footprint of plastic products versus heavier glass, as well as versus metal, which requires more impact to produce. Such data-based decisions can lower the overall carbon emissions of the industry.
Accelerating Insights Through Automation
Many companies realize that they need LCA competencies in-house. Yet LCAs are complex, requiring a combination of skill sets and backgrounds to perform. Data is often located in silos such as packaging, formulation, production, logistics and marketing. Information may be in different systems, in various subsidiaries or the data ownership may be fragmented.
With digital tools, companies can bridge the silos of competencies and data to produce LCAs at scale. Through automation, BASF is capable of running thousands of LCAs for carbon footprint calculations in a matter of hours. This is a fraction of the time that is needed to perform LCAs manually. This would also be possible for other impact categories. Many other sectors are joining the chemical sector on this journey.
Providing Transparency
With LCAs, companies have facts at their fingertips. Having cradle-to-grave data on a product’s environmental impact supports strategic planning and helps to improve operational performance. Businesses from startups to global players are evaluating how this methodology can be a catalyst to support integrated sustainability throughout their operations. Last but not least, LCAs provide the transparency that is now in high demand.
Watch our panel discussion with BASF here. For more ESG success stories, view the sessions from the 2023 Sphera ESG Virtual Summit.
