Use Analytical Tools to Evaluate Sustainability Initiatives (for long term economic viability?)
The World Commission on Environment and Development is credited with coining what is now the generally accepted definition of sustainability: “to meet the needs
of the present without compromising the ability of future generations to meet their own needs.” Efficiency is inherent in this definition and interesting to note that sustainability isn‟t just good for the environment; it's also good for business. In some ways, sustainability reveals flaws in traditional business economics, and includes market externalities, like pollution, that are too often obscured by a purely cost-based approach. The WCED definition takes into account the environmental,
social and economic impacts of sustainability; oftentimes referred to as the three “pillars” of sustainability. Elsewhere in the book we talk more in-depth about the
three pillars, here we are primarily concerned with pointing out that analyzing the economic viability of a sustainable initiative involves more than the simple economics of the equation. But how do we evaluate sustainability with an eye for economic viability without ignoring the obvious interconnection of the three pillars? The answer is we don‟t. To truly evaluate sustainable initiatives within your
company, you must consider all three aspects.
Two widely accepted methods to help you accomplish this are (1) Life Cycle Analysis (LCA) and (2) payback periods.
The goal of LCA is to look at and compare the “full range of environmental and
social damages assignable to products and services, to be able to choose the least burdensome one.” In this way, LCA takes a closer look at what goes into a product or service, from the point at which raw materials are extracted, through the process of refining and distributing materials, through factories and their workers, to the shelf of a department store, to the end of a product's life. With California‟s recent
adoption of consensus and life cycle standards for “green” products, manufacturers
are starting to legitimately compete for the growing sustainability products markets. However the concept can also be applied holistically to the performance of a company.
If you are focusing on the performance of your business or company, LCA looks at variables to quantify and assess the amount of “damage” (environmental, social,
economic) your company or business does. It looks at a suite of categories—land
use, energy use, transportation, packaging, people and water use—to name a few.
LCA can be performed by an environmental management professional or by a software package, depending on the parameters of the situation you need to analyze. Perhaps the most meaningful results from LCA are those that provide information on the assessed damages connected to global warming related variables like transportation, emissions and greenhouse gases. As stated elsewhere in the book, the assessment and potential mitigation by businesses of the effects of their choice or products and/or their operations on global warming is perhaps the primary
lens used to validate the sustainability of a business operation. (Should we mention
cradle-to-cradle concept? And/or cap and trade? Also--what does the assessment
look like—is it a report. Is it part of a baseline assessment? What do you do with it?
How do you then make decisions?)
The complementary analysis tool to LCA is assessing the payback periods for green
initiatives—how long will it take “for the return on an investment to „repay‟ the
sum of the original investment.” All things considered, the shorter the payback
period, the more attractive the investment. Payback periods have been widely used
as a tool to support, (or dissuade) companies that are considering green initiatives.
A widely assumed misconception holds that green products, services and operations
means high upfront capital investment and long pay back periods. In reality many
greening initiatives‟ payback period is under three years. (Who says?) In regards to
sustainable initiatives, payback periods are associated with initiatives involving new
technology, existing technology upgrades and/or energy efficiency.
In addition to LCA that measures the environmental sustainability of a product or
service, it is as important as ever to ensure that your decisions are economically
viable. Ensuring that payback periods are not too long is a crucial part of sustaining
sustainability. When gathering data for payback periods, be sure to include notes
about possible social paybacks (higher consumer approval, eligibility for
recognition based on environmental stewardship) as well as the more
straightforward data around return on investment. Many of the practices that are
simplest to adopt are not revolutionary, but are simply more efficient that the status
quo. Move to the front of the curve by adopting low-cost, high-return technologies,
and when your company is ready, move to the forefront with more innovative
I think that title of the chapter is a little bit scattered – the main point is not to be ad hoc, but to
use analytical tools to evaluate sustainability initiatives. Maybe that’s even a better title for the
chapter, “Use Analytical Tools to Evaluate Sustainability Initiatives.”
We’ve got two of them here (1) life cycle analysis and (2) payback periods. Let’s let the chapter
be about just those. Define them more clearly.
I love the line “efficiency is inherent in the idea of sustainability” – we should milk a couple of
more sentences about why that’s so insightful.
Each of the analytical tools refers to a different slightly different definition of efficiency, I think. There‟s a distinction between what‟s efficient for the world and what‟s efficient for your firm, right. #1 pertains more to the former, #2 pertains more to the latter. We need the examples where you say we do to support firms responding to #1.