235
• Sales growth and its duration : LCM has to be used effectively in the design of
products or product portfolios, services and business models that are convincingly sustainable. LCC experts have recognized that new business models may
be required to develop more integrated (not fragmented) value chain systems
(Swarr et al. 2011 ). Mindful of the lead indicators of customer attraction and
brand reputation, LCA applications also have to be used credibly and consistently in a manner that enables the communication of reliable information via
labels and the like to customers.
• Operating margin : The use of LCM standards, internally and through supply or
value chains, need to effectively promote innovation and operational effi ciency
in order to boost operating margins. This is not simply about short-term profi t. It
is about defi ning avoided and opportunity costs in making business approaches
that secure the longer-term sustainability of profi t and cash fl ows.
• Investment in fi xed and working capital : LCA experts need to consider in how far
their methodologies can be used to defi ne the value of closed loop manufacturing
(CLM), in particular remanufacturing, as well as product service systems (PSSs)
in enabling more optimal and sustainable capital expenditure. CLM and PSSs are
highly under-estimated.
• Cost of capital : LCM needs to be effectively integrated with risk management,
helping broadly to defi ne hot spots in value chains and, specifi cally, through the
collection of bottom-up data, risks of various kinds (including operational and
regulatory) that may be associated with specifi c products, operations and organizational entities. In addition, the providers of fi nancial capital need to be educated about the meaning of LCA fi ndings.
• Tax rate : The LCA community needs to illustrate how its research can be used by
regulators to defi ne convincing eco-tax regimes that succeed to reward early
adopters and penalize enterprises that persist with damaging products, services
and business models.
It is theoretically convenient to state that environmental LCC is different from
fi nancial LCC and activity-based costing (ABC) in management accounting (cf
Rebitzer and Nakamura 2008 ). One is focused on the costs of environmental
damage and the other on business costs. It is, however, imperative today to defi ne
the link between these two and not leaving this to regulators. It means that LCA
experts will need to support cost benefi t analysis in which the incentives and cost
structures for individual actors involved in whole life cycle systems or value
chains are assessed. Furthermore, analysis will also need to show an ability to
assess future costs and benefi ts likely to occur in the short, medium or long term.
While seeking to meet these expectations, the LCM community will need to take
cognisance of the preference among the mainstream investment community for
“using a handful of the most important indicators and proxies to capture risk
(that) can minimize complexity” (IIRC 2012 ). The three hypotheses examined in
this chapter suggest pathways to capture the attention of investors in tackling this
diffi cult task.
16 Taking Life Cycle Management Mainstream: Integration in Corporate Finance…
• Sales growth and its duration : LCM has to be used effectively in the design of
products or product portfolios, services and business models that are convincingly sustainable. LCC experts have recognized that new business models may
be required to develop more integrated (not fragmented) value chain systems
(Swarr et al. 2011 ). Mindful of the lead indicators of customer attraction and
brand reputation, LCA applications also have to be used credibly and consistently in a manner that enables the communication of reliable information via
labels and the like to customers.
• Operating margin : The use of LCM standards, internally and through supply or
value chains, need to effectively promote innovation and operational effi ciency
in order to boost operating margins. This is not simply about short-term profi t. It
is about defi ning avoided and opportunity costs in making business approaches
that secure the longer-term sustainability of profi t and cash fl ows.
• Investment in fi xed and working capital : LCA experts need to consider in how far
their methodologies can be used to defi ne the value of closed loop manufacturing
(CLM), in particular remanufacturing, as well as product service systems (PSSs)
in enabling more optimal and sustainable capital expenditure. CLM and PSSs are
highly under-estimated.
• Cost of capital : LCM needs to be effectively integrated with risk management,
helping broadly to defi ne hot spots in value chains and, specifi cally, through the
collection of bottom-up data, risks of various kinds (including operational and
regulatory) that may be associated with specifi c products, operations and organizational entities. In addition, the providers of fi nancial capital need to be educated about the meaning of LCA fi ndings.
• Tax rate : The LCA community needs to illustrate how its research can be used by
regulators to defi ne convincing eco-tax regimes that succeed to reward early
adopters and penalize enterprises that persist with damaging products, services
and business models.
It is theoretically convenient to state that environmental LCC is different from
fi nancial LCC and activity-based costing (ABC) in management accounting (cf
Rebitzer and Nakamura 2008 ). One is focused on the costs of environmental
damage and the other on business costs. It is, however, imperative today to defi ne
the link between these two and not leaving this to regulators. It means that LCA
experts will need to support cost benefi t analysis in which the incentives and cost
structures for individual actors involved in whole life cycle systems or value
chains are assessed. Furthermore, analysis will also need to show an ability to
assess future costs and benefi ts likely to occur in the short, medium or long term.
While seeking to meet these expectations, the LCM community will need to take
cognisance of the preference among the mainstream investment community for
“using a handful of the most important indicators and proxies to capture risk
(that) can minimize complexity” (IIRC 2012 ). The three hypotheses examined in
this chapter suggest pathways to capture the attention of investors in tackling this
diffi cult task.
16 Taking Life Cycle Management Mainstream: Integration in Corporate Finance…