57
greatest with respect to a company's own operations and workers, the ability to act
gradually declines as consideration moves outward to the supply chain, to local
communities, and beyond.” Therefore, UN GC is developing further guidance on
how to take a more proactive approach to integrate the Global Compact principles
into supply chain management practices. Supply chain sustainability is an important
work stream of UN GC.
2.4 Due Diligence: Assessment Through LCSA?
Referring to the expectations of stakeholders when taking up social responsibility,
exercising due diligence means an identifi cation of “the actual and potential negative social, environmental and economic impacts of an organization’s decisions and
activities over the entire life cycle of a project or organizational activity”
5 (ISO
26000). The following questions arise: (1) what does it mean actual and potential
negative social, environmental and economic impacts”? and (2) how can “the entire
life cycle of a project or organizational activity” be described?
2.4.1 The Social, Environmental and Economic Impacts
The reason for societal concerns about the social, environmental and economic
impacts is because of the externalities produced by “activities that affect the wellbeing of people or damage the environment, where those impacts are not refl ected
in market prices. The costs (or benefi ts) associated with externalities do not enter
standard cost accounting schemes” (Valdivia et al. 2011 ). Figure 5.1 shows a matrix
illustrating the distinction between private costs and externalities and refl ecting
what is at stake when assessing the value chain producing goods or services within
the context of sustainable development. “An externality occurs when a decision
within the value chain imposes costs or benefi ts on others which are not refl ected in
the prices charged for the goods and services being provided by the value chain.
Externalities are sometimes referred to as spill overs. An externality may also result
in private costs, even though it might not be accounted for in the decision-making”
(Benoit and Mazijn 2009 ).
The solid black line in Fig. 5.1 delimits the private costs and benefi ts refl ected in
the market price. Sometimes external relevant costs and benefi ts anticipated to be
privatized, such as increasing prices of CO 2 emissions, are taking into account in
monetary terms: see dashed line. However, it is illusory to think one can refl ect all
5 This is a quote coming from ISO 26000. Note that ‘life cycle sustainability assessment’ tries to
provide a more comprehensive picture of the positive and negative impacts along the product life
cycle. However, this is as such not contradictory because in terms management ISO 26000 recommends: “ An organization can exercise its infl uence with others either to enhance positive impacts
on sustainable development, or to minimize negative impacts, or both ”.
5 Life Cycle Sustainability Assessment: A Tool for Exercising Due Diligence…
greatest with respect to a company's own operations and workers, the ability to act
gradually declines as consideration moves outward to the supply chain, to local
communities, and beyond.” Therefore, UN GC is developing further guidance on
how to take a more proactive approach to integrate the Global Compact principles
into supply chain management practices. Supply chain sustainability is an important
work stream of UN GC.
2.4 Due Diligence: Assessment Through LCSA?
Referring to the expectations of stakeholders when taking up social responsibility,
exercising due diligence means an identifi cation of “the actual and potential negative social, environmental and economic impacts of an organization’s decisions and
activities over the entire life cycle of a project or organizational activity”
5 (ISO
26000). The following questions arise: (1) what does it mean actual and potential
negative social, environmental and economic impacts”? and (2) how can “the entire
life cycle of a project or organizational activity” be described?
2.4.1 The Social, Environmental and Economic Impacts
The reason for societal concerns about the social, environmental and economic
impacts is because of the externalities produced by “activities that affect the wellbeing of people or damage the environment, where those impacts are not refl ected
in market prices. The costs (or benefi ts) associated with externalities do not enter
standard cost accounting schemes” (Valdivia et al. 2011 ). Figure 5.1 shows a matrix
illustrating the distinction between private costs and externalities and refl ecting
what is at stake when assessing the value chain producing goods or services within
the context of sustainable development. “An externality occurs when a decision
within the value chain imposes costs or benefi ts on others which are not refl ected in
the prices charged for the goods and services being provided by the value chain.
Externalities are sometimes referred to as spill overs. An externality may also result
in private costs, even though it might not be accounted for in the decision-making”
(Benoit and Mazijn 2009 ).
The solid black line in Fig. 5.1 delimits the private costs and benefi ts refl ected in
the market price. Sometimes external relevant costs and benefi ts anticipated to be
privatized, such as increasing prices of CO 2 emissions, are taking into account in
monetary terms: see dashed line. However, it is illusory to think one can refl ect all
5 This is a quote coming from ISO 26000. Note that ‘life cycle sustainability assessment’ tries to
provide a more comprehensive picture of the positive and negative impacts along the product life
cycle. However, this is as such not contradictory because in terms management ISO 26000 recommends: “ An organization can exercise its infl uence with others either to enhance positive impacts
on sustainable development, or to minimize negative impacts, or both ”.
5 Life Cycle Sustainability Assessment: A Tool for Exercising Due Diligence…