Organisational Life Cycle Assessment (O-LCA) identifies organisations’ environmental and social issues. These “hotspots” are the starting point to achieve the most meaningful and cost effective improvements when integrating sustainability in the procurement process. Here are four reasons why O-LCA is key to sustainable procurement.
1/ O-LCA is the new black
Life cycle assessment (LCA) is the leading method for comparing and quantifying environmental and social impacts. Traditionally, LCA has been focussed on the sustainability performance of products and services, but recently the United Nations Environment Programme (UNEP) and the International Standards Organisation (ISO) turned their attention to employing LCA to organisations: the Organisational Life Cycle Assessment (O-LCA).
O-LCA is used to quantify risk and impacts for the whole organisation – supply chain, operations as well as products and services – from cradle to grave. As a rule of thumb, for 80% of all organisations, 80% of their risks and impacts sit within their supply chain. O-LCA takes a 360-degree view and points out the highest impacts or risks that can be addressed in the procurement process.
2/ Scientific assessment of impacts
The complete value chain of products and services are global and complex. The top-level screening O-LCA methodology uses categorisation of all suppliers based on their sector and country. This mapping process provides a global yet precise picture of the supply chain. Typically, focussing on 80–90% of the spend captures the key suppliers and impacts. Broader categories are used to combine suppliers in the remaining 10–20%. This allows an efficient and cost-effective assessment.
A typical O-LCA goes further than single focus on climate change. With state-of-the-art tools and databases, O-LCA includes up to 18 environmental categories and 5 social categories. All this contributes to make O-LCA a scientifically robust assessment of the impacts of the supply chain.
3/ Hotspot identification for tailored actions
The organisation spend in specific sectors and countries can be associated with environmental impacts and social risks. They are the organisational “hotspots”. These hotspots show which categories of suppliers are at stake and what their main impacts are: electronic equipment associated with climate change and metal depletion, refrigerant sector associated with ozone layer depletion, etc.
The assessment also indicates how much the organisation can reasonably influence the impacts and where to get the best cost/effort-benefit ratio.
4/ Alignment of procurement KPIs with a robust assessment
We all know the usual “20% reduction by 2020”. Although this is a terrific target to strive for, and an organisation should always be looking for ways to reduce impacts, it should only be used with robust assessment.
A 20% reduction – usually in greenhouse gas emissions – may divert attention from bigger risks such as poor labour practices or child labour.
An O-LCA helps identify which impacts are material, where the “rational” focus should be, and what would make the best KPIs. Whether it is a specific social risk, a very specific category in the supply chain or a specific country, O-LCA will methodically point out what procurement should target. KPIs based on a meaningful analysis will always be more powerful.
O-LCA makes possible the implementation of targeted sustainable procurement processes and practices, in line with the organisation’s environmental footprint and social risks. It provides a robust assessment of impacts and risks, focuses on the organisational hotspots, to achieve the most meaningful improvements in procurement.