- Published on: 26.11.2021
- 4:12 mins
Add transparency to your automotive value chain
Five steps for automated environmental assessments
In 2011, 20% of companies in the S&P500 published a sustainability report; by 2019 this rose to 90%. In 2021, companies releasing transparent reports on their environmental impacts is now the norm.
Assessing environmental impacts using a methodology called Life Cycle Assessment (LCA) has been a huge leap forward for companies in measuring, managing and reporting the overall impact they are having on the environment.
As companies seek to understand more about the impact they are having on the environment – and how they can reduce it further – they need ever more precise ways of assessing their environmental impacts. To get this level of precision, more and more companies are turning to LCA studies of individual products.
Product level LCA studies are an individualized assessment of a how the life-cycle of a specific product affects the environment across a wide range of categories, from climate change to ozone depletion and more.
The most ambitious companies are looking to perform an LCA study for every product in their portfolio.
Product specific LCA studies are a response to four major sources of pressure to increase disclosure on environmental impact:
- Conscious consumerism – Consumers want to know the environmental impact of the products they purchase
- Risk-averse investment – Investors demand to know that a business is not built on products that pose a high risk to the environment
“Companies have a responsibility – and an economic imperative – to give shareholders a clear picture of their preparedness.” - Larry Fink, CEO of the world’s largest asset manager, Blackrock.
- Regulation – As more and more countries set legally binding climate targets, regulatory pressure for companies to manage their carbon footprints is increasing
- Internal decision making – Decision makers need clarity on how to respond to the three pressures above, even down to a product-by-product level
The automotive industry is facing new challenges relating to the four pressures above. The focus of the industry’s discussion now goes far beyond direct emission values to include the overall life-cycle environmental impacts of automotive products. A holistic assessment of these product environmental impacts must cover all the major components of the product, including those which come from the upstream supply chain, such as synthetic materials. To satisfy the rise in demand for LCA studies of automotive products, suppliers in the automotive supply chain are under increasing pressure to provide environmental data on each individual product they provide.
The automotive industry is facing new challenges in relation to the four pressure points mentioned above.
The automotive industry is facing new challenges in relation to the four pressure points mentioned above. The focus of the industry discussion now goes far beyond direct emission levels and sheds light on the environmental impact of automotive products over their entire life cycle. A holistic assessment of the environmental impact of these products needs to cover all the main components of the product, including those that come from upstream in the supply chain, such as synthetic materials. To meet the increasing demand for life cycle assessments of automotive products, suppliers in the automotive supply chain are under increasing pressure to provide environmental data for each individual product they provide.
As useful as lifecycle assessments are, to benefit the industry they must be both accurate and easy to produce at scale.
As useful as product LCA studies are, for them to be practical in the industry they must be both as accurate as possible and easy to produce on a large scale.
These two challenges have long been hard to overcome, mostly because of problems related to the data product life cycle assessments rely on.
Data that truly represents a product’s entire life cycle, including notoriously opaque supply chains (so called ‘Scope 3 emissions’), has been almost impossible to find. Furthermore, integrating data from the many different stages in a product’s life cycle, including (again) the stages in the upstream supply chain, has also been incredibly difficult.
In short, manually assessing each product’s life cycle impacts for an entire product portfolio is so time consuming and difficult that it’s often not practical.
But automated LCA tools that combine representative data and automatic data gathering for entire product portfolios are starting to become available.
MHP and Carbon Minds have been working together with the GFaI to design a comprehensive tool for automated, portfolio-scale product life cycle assessment. The tool works in a five-stage process like this:
Import existing data
A company imports existing data from different formats, geographical locations and systems (e.g. enterprise resource planning systems). From this data, the tool creates a new, unified database.
Closing data gaps
Most companies collect economically relevant data, but not environmental data. The tool closes this gap with highly precise estimates. All that is required for these estimates is existing process data - the automatic modeling then estimates the direct emissions together with further emissions, e.g. those from waste incineration.
Import supply chain data
For a finished product, up to 90% of the environmental impact comes from the supply chain. To include these impacts, the tool imports data from relevant lifecycle databases such as cm.chemicals from Carbon Minds and others.
Automation of the tool
To run the tool, we install a secure software system and then fill it with the data set described above. To continue importing the data automatically afterwards, we connect the system to the company's internal data sources. Thus, the automated environmental impact assessment system is ready for use.
Creation and approval of carbon footprints for products
The company can use the tool to create the required product lifecycle analysis. To share the results, the tool creates intuitive graphs that are seamlessly uploaded to an online platform where internal and external stakeholders can view the product's LCA results.
With an automated product lifecycle assessment tool like this, representative data is combined to create accurate and product-specific lifecycle assessments for entire product portfolios.
In the future, this will enable business leaders to respond to pressure from consumers, investors, and regulators in these crucial years of the climate crisis.