228
the last decade. While globalization and trade liberalization has led to greater
integration in the world economy, it has also been accompanied by increasing
fragmentation in production (see OECD 2012 ; Elms and Low 2013 ). The life
cycle assessment (LCA) community has seen a lively debate on, for example, the
value of deepening research to the level of product subsystems versus widening
research through systems expansion (cf Curran 2013 ), as well as combining process-LCA and Input–output (IO) LCA to deal with the complexities of long supply chains and product chain organization (see Gereffi et al. 2005 ; Finnveden
et al. 2009 ; Koh et al. 2013 ; Lake et al. 2014 ; Eriksson and Olsson 2011 ;
Baumann 2012 ).
Furthermore, global fi nancial crises as well as dramatic cases of corporate failure
has led to renewed questioning of the role of corporate reporting. Frustration about
information overload in annual reports and apparent lack of what is really material
or strategic information has led to the birth of an integrated reporting movement.
The International Integrated Reporting Council (IIRC) seeks to promote “integrated
thinking”, akin to “life cycle thinking”. In defense of the GRI Guidelines, all its
environmental indicators refl ect a life cycle approach. This includes impacts at the
end of the useful life of the product, especially important for life cycle management
(LCM) as environmental life cycle costing (LCC) takes into account use- and endof- life phases and hidden costs (Klöpffer 2008 ). The LCA response to the integration challenge has been to defi ne the emergence of life cycle sustainability
assessment (LCSA) (see Finkbeiner et al. 2010 ; Guinee et al. 2011 ; Hellweg and
Canals 2014 )
Against this background of value chain complexity and initiatives in favor of
integration, this chapter seeks to defi ne pathways along which life cycle assessment
(LCA) applications and life cycle thinking can be integrated with core business
planning and strategic fi nancial performance (Eun et al. 2009 ). Importantly, this
chapter is not about moving from environmental and/or social LCA to economic
LCA. Rather, it is about moving from environmental LCA to business fi nance and
accounting. Its refl ections will also be relevant for what integration in the form of
sustainability LCA (a new integrated LCA or compilation of separate assessments)
implies, and how life cycle sustainability assessment (LCSA) could be engrained in
corporate fi nancial planning.
2 Linking Life Cycle Assessment with Financial
Value Drivers
The weighting of different impact categories and resource use in the impact assessment (LCIA) steps of LCA takes us to the heart of making the business case and
linking it with corporate fi nance. This is where relative importance of impacts and
dependencies are assigned, where the level of signifi cance is determined, where
ultimately the question of fi nancial materiality is asked from a business perspective.
C.T. Van Der Lugt
the last decade. While globalization and trade liberalization has led to greater
integration in the world economy, it has also been accompanied by increasing
fragmentation in production (see OECD 2012 ; Elms and Low 2013 ). The life
cycle assessment (LCA) community has seen a lively debate on, for example, the
value of deepening research to the level of product subsystems versus widening
research through systems expansion (cf Curran 2013 ), as well as combining process-LCA and Input–output (IO) LCA to deal with the complexities of long supply chains and product chain organization (see Gereffi et al. 2005 ; Finnveden
et al. 2009 ; Koh et al. 2013 ; Lake et al. 2014 ; Eriksson and Olsson 2011 ;
Baumann 2012 ).
Furthermore, global fi nancial crises as well as dramatic cases of corporate failure
has led to renewed questioning of the role of corporate reporting. Frustration about
information overload in annual reports and apparent lack of what is really material
or strategic information has led to the birth of an integrated reporting movement.
The International Integrated Reporting Council (IIRC) seeks to promote “integrated
thinking”, akin to “life cycle thinking”. In defense of the GRI Guidelines, all its
environmental indicators refl ect a life cycle approach. This includes impacts at the
end of the useful life of the product, especially important for life cycle management
(LCM) as environmental life cycle costing (LCC) takes into account use- and endof- life phases and hidden costs (Klöpffer 2008 ). The LCA response to the integration challenge has been to defi ne the emergence of life cycle sustainability
assessment (LCSA) (see Finkbeiner et al. 2010 ; Guinee et al. 2011 ; Hellweg and
Canals 2014 )
Against this background of value chain complexity and initiatives in favor of
integration, this chapter seeks to defi ne pathways along which life cycle assessment
(LCA) applications and life cycle thinking can be integrated with core business
planning and strategic fi nancial performance (Eun et al. 2009 ). Importantly, this
chapter is not about moving from environmental and/or social LCA to economic
LCA. Rather, it is about moving from environmental LCA to business fi nance and
accounting. Its refl ections will also be relevant for what integration in the form of
sustainability LCA (a new integrated LCA or compilation of separate assessments)
implies, and how life cycle sustainability assessment (LCSA) could be engrained in
corporate fi nancial planning.
2 Linking Life Cycle Assessment with Financial
Value Drivers
The weighting of different impact categories and resource use in the impact assessment (LCIA) steps of LCA takes us to the heart of making the business case and
linking it with corporate fi nance. This is where relative importance of impacts and
dependencies are assigned, where the level of signifi cance is determined, where
ultimately the question of fi nancial materiality is asked from a business perspective.
C.T. Van Der Lugt