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Sustainable Value Creation with Life Cycle Management

B.M. Krishna Manda, Henk Bosch, and Ernst Worrell

Abstract Life cycle management has gained traction in the last decades. However, even today it is not yet implemented in all companies due to lack of the connection between sustainability and value creation. In fact, managers are pressed to deliver value, and their performance is measured on how well they deliver the value. In this chapter the authors contribute to bridging the gap between sustainability science and business management by application of life cycle assessment (LCA) in corporate sustainability and aligning it with business activities/functions and value creation. They illustrate the context of corporations, sustainable value creation opportunities and the role of different business functions in integrating sustainability in the core business. Two cases demonstrate how business functions can use LCA-based insights for business decisions and how they are directly connected with value creation opportunities.

Keywords Corporate sustainability • Life cycle assessment • Life cycle costing • Life cycle management • LCM toolbox • Product sustainability • Social life cycle assessment • Sustainability • Value creation

Introduction and Objective

The relevance of the various sustainability aspects differs from company to company depending on the context, the type of product systems, geographical scope, and related social and environmental problems/drivers. Thus, the integration of sustainability in business is difficult and inherently complex. It requires a holistic understanding of the interdependence of industrial systems. To this end, sound tools are needed that can capture the complexity and provide metrics to embed sustainability in different business decisions. Systems thinking helps to understand the different parts within the system and their relation to other systems. Life cycle assessment (LCA) is a systems analysis tool that can assess and help improve the environmental performance (one of the three pillars of sustainability) of products and processes by providing powerful insights into the whole value chain (ISO 2006a, b; ILCD 2010). By doing this, LCA provides an understanding that allows avoiding shifting impacts from one process step/industry to another, from one impact category to another and from one place to another. LCA supports businesses in making various decisions such as the selection of processes, materials, and supply chains. By supporting these business decisions and actions, LCA can offer value creation opportunities to business and improves shareholder and stakeholder value simultaneously. Similarly, other tools such as Life Cycle Costing (LCC) and Social Life Cycle Assessment (Social-LCA) can be used to understand the economic costs (externalities can also be included) and social impacts and risks (both positive and negative) throughout product life cycles. The authors focus on environmental LCA and combine other tools wherever possible.

LCA has been applied in companies and in public policy making. When applied in companies, LCA has often been seen as a mere auxiliary technical tool and the insights were limited to the impact quantification, which is the major strength of the tool, without actively involving business functions. Many companies are not implementing LCA in their day-to-day business due to its resource-intensive nature, complexity and the difficulty of contextualizing the relevance of LCA for the circumstances of companies. There has hardly been any exploration of how LCA can offer advice to existing corporate structures through decision support of business functions. And most importantly, the insights of LCA have by far not been fully exploited for the potential value creation opportunities in companies. There is little research to understand the role of LCA in supporting business functions (Sandin et al. 2014) and consequently linking it with sustainable value creation opportunities (UNEP/SETAC 2009; Rebitzer and Buxmann 2005; Gloria et al. 2014).

The objective of this chapter is to bridge the gap between sustainability science and business management by contextualizing the application of LCA in corporate sustainability and aligning it with business activities/functions and business priorities (value creation). This alignment can mainstream and advance the implementation of LCM in business.

In order to fulfill the above mentioned objective, the authors explain the context of corporations, the opportunities for value creation, and the role of different functions in integrating sustainability in day-to-day business. Case studies show how LCA can be contextualized in business and connected to value creation opportunities. Based on case studies, the authors offer an iterative procedure to conduct LCAs and create sustainable value.

 
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