229
ISO recognizes that this involves subjective judgment, and is dependent on the
overall goal of an LCA study (goal and scope defi nition). In the accounting and
reporting domain, international standards from International Accounting Standard
Board (IASB), IIRC (IIRC 2012 , 2013 ), GRI and AccountAbility (AA1000)
include recognized defi nitions of “materiality” and recommend procedures for
determining “levels of signifi cance” that involve various stakeholders to a greater or
lesser degree.
Monetized costing provides an important way of weighing or prioritizing
among various impacts and dependencies. A valuable fi eld for making the link
between LCA and business fi nance is life cycle costing (LCC), both fi nancial
LCC and environmental LCC (see Hunkeler et al. 2008 ; Reich 2005 ; Hunkeler
and Rebitzer 2003 ). The former refers to fi nancial economic analysis of a product
or a function, in other words, conventional business fi nancial analysis that would
be done for investment decision-making considering the economic life cycle of
the product or function. This contrasts with environmental LCC, which involves
weighting the environmental impacts of an LCA system in monetary terms. Links
between the two become evident when the environmental impacts have an economic impact on the system being analyzed, for example when environmental
externalities are being taxed by local authorities. The environmental LCC may
more scientifi cally refl ect resource scarcities than the fi nancial LCC, which when
using mainstream economic system prices or market values for resources signal
costs that may not adequately refl ect real, absolute resource scarcities. This is
where risk defi nition needs to be more science-based and refl ect appropriate context. Furthermore, in as far as an investment decision for a specifi ed number of
years to come needs to be made in the face of uncertainty (such as future pricing
or taxing of resource use or pollution), business managers can benefi t from the
application of real option (RO) theory in combination with LCA and LCC (cf
Cucchiellaa et al. 2014 ).
Any attempt to integrate monetized values of signifi cant life cycle impacts or
dependencies in business decision-making has to address the indicators that are of
greatest interest to chief fi nancial offi cers (CFOs) and those who provide fi nancial
capital to enterprises. This is essential in making the business case, mapping out
cause and effect relations between environmental or sustainability actions and
fi nancial results for the business. It can be illustrated by using a “Green Business
Case Model” (Van der Lugt and Bertoneche 2013 ) that includes the core fi nancial
value drivers of special interest to fi nancial managers.
The listed action areas and connectors included in the model (see Table 16.1 )
have been identifi ed based on the review of over 60 research articles and business
reports on the business case that have been published from 2002 to 2012 (see, for
example, Margolis et al. 2007 ; Ambec and Lanoie 2007 ; Berger et al. 2007 ; EABIS
2009 ; Molina-Azorín et al. 2009 ; Business in the Community 2011 ). Considering
the evolution of business case research over the last decade, it is evident that the
indicators most commonly referred to can best be grouped in a three step model of
(i) action areas, which lead to change in the area of what can be described as (ii)
16 Taking Life Cycle Management Mainstream: Integration in Corporate Finance…
ISO recognizes that this involves subjective judgment, and is dependent on the
overall goal of an LCA study (goal and scope defi nition). In the accounting and
reporting domain, international standards from International Accounting Standard
Board (IASB), IIRC (IIRC 2012 , 2013 ), GRI and AccountAbility (AA1000)
include recognized defi nitions of “materiality” and recommend procedures for
determining “levels of signifi cance” that involve various stakeholders to a greater or
lesser degree.
Monetized costing provides an important way of weighing or prioritizing
among various impacts and dependencies. A valuable fi eld for making the link
between LCA and business fi nance is life cycle costing (LCC), both fi nancial
LCC and environmental LCC (see Hunkeler et al. 2008 ; Reich 2005 ; Hunkeler
and Rebitzer 2003 ). The former refers to fi nancial economic analysis of a product
or a function, in other words, conventional business fi nancial analysis that would
be done for investment decision-making considering the economic life cycle of
the product or function. This contrasts with environmental LCC, which involves
weighting the environmental impacts of an LCA system in monetary terms. Links
between the two become evident when the environmental impacts have an economic impact on the system being analyzed, for example when environmental
externalities are being taxed by local authorities. The environmental LCC may
more scientifi cally refl ect resource scarcities than the fi nancial LCC, which when
using mainstream economic system prices or market values for resources signal
costs that may not adequately refl ect real, absolute resource scarcities. This is
where risk defi nition needs to be more science-based and refl ect appropriate context. Furthermore, in as far as an investment decision for a specifi ed number of
years to come needs to be made in the face of uncertainty (such as future pricing
or taxing of resource use or pollution), business managers can benefi t from the
application of real option (RO) theory in combination with LCA and LCC (cf
Cucchiellaa et al. 2014 ).
Any attempt to integrate monetized values of signifi cant life cycle impacts or
dependencies in business decision-making has to address the indicators that are of
greatest interest to chief fi nancial offi cers (CFOs) and those who provide fi nancial
capital to enterprises. This is essential in making the business case, mapping out
cause and effect relations between environmental or sustainability actions and
fi nancial results for the business. It can be illustrated by using a “Green Business
Case Model” (Van der Lugt and Bertoneche 2013 ) that includes the core fi nancial
value drivers of special interest to fi nancial managers.
The listed action areas and connectors included in the model (see Table 16.1 )
have been identifi ed based on the review of over 60 research articles and business
reports on the business case that have been published from 2002 to 2012 (see, for
example, Margolis et al. 2007 ; Ambec and Lanoie 2007 ; Berger et al. 2007 ; EABIS
2009 ; Molina-Azorín et al. 2009 ; Business in the Community 2011 ). Considering
the evolution of business case research over the last decade, it is evident that the
indicators most commonly referred to can best be grouped in a three step model of
(i) action areas, which lead to change in the area of what can be described as (ii)
16 Taking Life Cycle Management Mainstream: Integration in Corporate Finance…