Sustainable Value Creation and LCA Applications

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Questions and Answers

What is the primary focus of sustainable value creation?

Maximizing profit regardless of environmental impact

Increasing market share through aggressive competition

Reducing costs without consideration for societal impacts

Balancing economic, social, and environmental value (correct)

Which of the following is NOT a main purpose of Life Cycle Assessment (LCA) applications?

Development and selection of indicators for environmental performance

Marketing purposes like eco-labelling

Creating financial reports for shareholders (correct)

Decision support in product and process development

In terms of environmental value, what does sustainable value creation aim to reduce?

Consumer demand for goods

Monetary investments in sustainable practices

Economic growth rates

Natural resource consumption (correct)

What are organizational assets considered in value creation?

A combination of tangible and intangible assets Signup and view all the answers

What does the term 'sustainable decision' imply in the context of business strategy?

A decision that considers future economic and environmental conditions Signup and view all the answers

What is the primary focus of Life Cycle Thinking (LCT)?

Considering environmental, social, and economic impacts throughout a product's life cycle. Signup and view all the answers

Which of the following best describes the relationship between Life Cycle Thinking and sustainable development?

Sustainable development is a primary goal and foundation of LCT. Signup and view all the answers

At which levels are applications of supplier selection or subcontractors observed?

Both goods/services and corporate level. Signup and view all the answers

Which of the following statements is true regarding the Life Cycle Assessment (LCA) process?

LCA must consider the entire product life cycle to avoid pollution transfer. Signup and view all the answers

What is one of the essential components of integrating Life Cycle Thinking into business practice?

Implementing appropriate policies and strategies. Signup and view all the answers

What role does each actor have in the life cycle system as per Life Cycle Thinking principles?

Every actor from cradle to grave has a responsibility and role. Signup and view all the answers

Which aspect is NOT a focus of Life Cycle Thinking?

Focusing only on the initial production phase. Signup and view all the answers

What is primarily assessed in the first step of a Life Cycle Assessment (LCA)?

Environmental and health impacts Signup and view all the answers

What type of decisions can benefit from the results of an LCA?

A variety of sustainability-related decisions Signup and view all the answers

In the context of LCA, what is a critical aspect of understanding the 'Who?' question?

Determining the audience for the LCA findings Signup and view all the answers

Which of the following is NOT a reason for undertaking an LCA?

Identifying customer satisfaction levels Signup and view all the answers

What is the overall goal of the MIT LCA study on hand dryers commissioned by Dyson?

To compare the life cycle environmental impact of hand-drying systems Signup and view all the answers

What year did SETAC and UNEP first initiate the Life Cycle Initiative?

2002 Signup and view all the answers

Which standard series by ISO specifically focuses on Life Cycle Assessment (LCA)?

ISO 14040 Signup and view all the answers

Which of the following is NOT one of the direct applications of Life Cycle Assessment?

Human resource management Signup and view all the answers

What has been a primary focus of the Life Cycle Initiative since 2012?

Developing consensus on impact indicators and guidance for organizational LCA Signup and view all the answers

During which time period did ISO publish over 350 standards related to environmental issues?

1980 and 1990s Signup and view all the answers

What is the first step in the Life Cycle Assessment methodology?

Goal & Scope definition Signup and view all the answers

What is emphasized as a need for comprehensive analysis in LCA?

Inventory analysis Signup and view all the answers

Which organization is associated with the launch of the Life Cycle Initiative?

United Nations Environment Program Signup and view all the answers

Which of the following statements about LCA is correct?

LCA helps in strategic planning along with marketing. Signup and view all the answers

What aspect of LCA was focused on during the 2007 to 2011 period?

Spreading awareness and use of life cycle approaches worldwide Signup and view all the answers

What is a primary consideration in the concept of the circular economy?

Reducing resource use through recycling Signup and view all the answers

Which of the following authors wrote about the growth prospects within a circular economy?

Peter Lacy Signup and view all the answers

What aspect does the report from the International Resource Panel address within the circular economy?

Remanufacturing and Repair Signup and view all the answers

Which year marked the publication of 'Global Inequality: A New Approach for the Age of Globalization'?

2016 Signup and view all the answers

What is a critical viewpoint highlighted by the 'World Employment Social Outlook 2018' report?

Greening the economy can lead to job creation Signup and view all the answers

What distinguishes a circular economy from a linear economic model?

It encourages continuous use of resources and waste minimization. Signup and view all the answers

Which principle is NOT part of the six Rs associated with circular economy?

Replace Signup and view all the answers

What is a fundamental feature of products designed under the principles of a circular economy?

They must be durable, repairable, and recyclable. Signup and view all the answers

What aspect of resource consumption is emphasized in the concept of circular economy?

A balance between resource consumption and waste production. Signup and view all the answers

What is a major goal of shifting to a circular economy?

To create a closed-loop system with zero waste. Signup and view all the answers

How does a circular economy approach the issue of pollution?

By designing out waste and minimizing toxic byproducts. Signup and view all the answers

What is the significance of the closed-loop systems in a circular economy?

They ensure resources are perpetually recycled and waste is minimized. Signup and view all the answers

Which of the following is considered a challenge for international trade in relation to circular economy principles?

Differences in sustainability policies across countries. Signup and view all the answers

What is one reason for the low share of the re-manufacturing industry in production?

Regulatory barriers across jurisdictions Signup and view all the answers

What issue can arise from trading second-hand goods?

Lock-in of economies into outdated technologies Signup and view all the answers

Which of the following illustrates a concern related to the promotion of the Circular Economy (CE)?

The emergence of new trade barriers Signup and view all the answers

What has been a trend in income distribution within countries since the 1980s?

Increased income inequality Signup and view all the answers

How has income inequality changed across countries since 1980?

It has decreased significantly Signup and view all the answers

What potential global job increase is predicted due to the transition to a circular economy by 2030?

6 million jobs Signup and view all the answers

What impact has the income share of the top 1% had in the US from 1980 to recent years?

Increased from about 10% to over 20% Signup and view all the answers

Which of the following sectors could experience an 80% reduction in artificial fertilizer use through a circular economy?

Agriculture Signup and view all the answers

What material cost reduction is expected in the automotive sector due to the circular economy?

20-30% Signup and view all the answers

Which group has experienced a loss of income share according to trends since the 1980s?

Low-and middle-income groups Signup and view all the answers

Which of the following statements about trade in used goods is false?

It enhances the value of new technologies. Signup and view all the answers

Which practice in construction could reduce costs by 10-15%?

Recycling building materials Signup and view all the answers

What was the increase in value of global exports of second-hand textiles from 1988 to 2018?

26% Signup and view all the answers

Which statement best describes the effect of a circular economy on international trade?

It will decrease trade in raw materials. Signup and view all the answers

What percentage of the total export value of second-hand textiles did OECD countries represent in 2018?

77% Signup and view all the answers

What was the increase in the value of second-hand car exports from 2000 to 2018?

79% Signup and view all the answers

What was the impact of the COVID-19 pandemic on global inequality between 2019 and 2020?

It resulted in the largest rise in global inequality since World War II. Signup and view all the answers

Which factor is identified as a fundamental driver of income inequality according to 'Capital in the Twenty-First Century'?

r > g (return on capital exceeds economic growth rate) Signup and view all the answers

How has technological progress affected income inequality?

It has contributed to widening the income gap in various economies. Signup and view all the answers

What trend regarding within-country and between-country inequality is noted in the content?

Between-country inequality decreases as within-country inequality becomes more prominent. Signup and view all the answers

Which of the following is a noted consequence of rising inflation in the context of inequality?

It exacerbates inequalities, especially in low- and middle-income countries. Signup and view all the answers

Who are the primary 'winners' of globalization according to 'Global Inequality: A New Approach for the Age of Globalization'?

The global super-rich and middle classes in emerging economies Signup and view all the answers

What does the term 'pre-distribution' refer to in the context of addressing income inequality?

Creating more equal distribution of capital ownership and education Signup and view all the answers

In which region has inequality risen more sharply compared to others?

United States Signup and view all the answers

What is one of the primary economic benefits associated with transitioning to a circular economy?

Creation of new market niches leading to job opportunities Signup and view all the answers

Which of the following is NOT a predicted benefit of the circular economy by 2030?

Decrease in conservation of resources Signup and view all the answers

How does the circular economy contribute to environmental sustainability?

By reducing CO2 emissions and waste generation Signup and view all the answers

Which factor is considered a driver for innovation within a circular economy?

Development of new technologies and business models Signup and view all the answers

What is a major potential impact of transitioning to a circular economy in Australia?

Increase in present value GDP by $210 billion Signup and view all the answers

What is one social benefit associated with the circular economy?

Strengthened relationships with stakeholders Signup and view all the answers

Which of the following statements about the circular economy is FALSE?

It focuses exclusively on the manufacturing sector. Signup and view all the answers

In what way does the circular economy enhance brand reputation?

Through early adoption of circular principles Signup and view all the answers

What is the predicted net job gain globally by 2030 due to the transition to a circular economy?

6 million jobs Signup and view all the answers

In the construction sector, what is the expected reduction in costs through circular practices?

10-15% Signup and view all the answers

How much reduction in artificial fertilizer use could be achieved in European food systems through a circular economy?

80% Signup and view all the answers

What percentage reduction in material costs is estimated for the manufacturing sector under a circular economy model?

30-50% Signup and view all the answers

What trend was observed in the export of second-hand textiles between 1988 and 2018?

Exports increased in weight by 12% Signup and view all the answers

Which of the following factors contributes to reduced international trade in raw materials within a circular economy?

Increased focus on re-use of resources Signup and view all the answers

According to recent data, which region accounted for the majority of second-hand car exports?

Intra-EU Signup and view all the answers

What is the average per unit value of a second-hand vehicle exported outside the EU?

4165 Euros Signup and view all the answers

What aspect does the report by the International Resource Panel highlight regarding remanufacturing in the circular economy?

It emphasizes refurbishment and direct reuse. Signup and view all the answers

What does the circular economy primarily aim to achieve in terms of resource management?

Reduction of resource consumption and waste generation. Signup and view all the answers

Which author focuses on economic growth in the context of a circular economy?

Peter Lacy Signup and view all the answers

According to the trends since 1980, which group has faced a decline in income share in developed nations?

The middle-income population Signup and view all the answers

What significant change in agricultural practices is projected through the adoption of circular economy principles?

A significant reduction in artificial fertilizer use. Signup and view all the answers

What percentage gap has the average incomes between the top 10% and bottom 50% increased to over the past two decades?

15% Signup and view all the answers

Which of the following factors significantly contributed to the widening income gap?

Technological progress Signup and view all the answers

During which global event did the steepest rise in global inequality occur since World War II?

The COVID-19 pandemic Signup and view all the answers

Which country has seen more modest increases in inequality compared to the US?

France Signup and view all the answers

What is identified as the primary fundamental driver of income inequality according to economic theories discussed?

r > g Signup and view all the answers

What has been one major outcome following the decline of labor market institutions?

Widening income inequality Signup and view all the answers

Who are considered the 'losers' in the context of globalization according to the discussed concepts?

Middle classes in developed countries Signup and view all the answers

What approach is suggested to create more equal market incomes?

‘Pre-distribution’ through education and capital ownership Signup and view all the answers

Which factor primarily contributes to the low share of the re-manufacturing industry in production?

Regulatory barriers across jurisdictions Signup and view all the answers

What adverse effect can result from the trade in second-hand vehicles?

Importation of high-emission vehicles Signup and view all the answers

How has income inequality changed within countries since the 1980s?

Generally increased in many countries Signup and view all the answers

What is a concern raised by countries regarding trade restrictions linked to the Circular Economy (CE)?

Imposition of tariffs affecting domestic production Signup and view all the answers

What trend has been observed regarding the income share of the top 1% in the US since 1980?

Increased to over 20% Signup and view all the answers

Which issue is associated with the movement of non-new products in Brazil and India?

Restrictions on the import of second-hand goods Signup and view all the answers

What impact has economic growth in emerging economies had on global inequality since 1980?

Decreased across countries significantly Signup and view all the answers

What potential loophole can arise from trading second-hand goods?

Illegal trade in contaminated waste Signup and view all the answers

Study Notes

Sustainable Value Creation

Value creation is defined as the performance of actions (using organizational assets) that increase the worth of goods, services or a business.
Value is measured in monetary value as well as environmentally, socially, and economically.
Sustainable value creation increases the economic, social and environmental value of goods, services or a business.

The Big Question

How to make the most sustainable decision?

### Purpose of LCA Applications

Decision support for product and process development (R&D)
Marketing purposes (e.g. Eco-labelling)
Development and selection of indicators for environmental performance monitoring
Selection of suppliers or subcontractors
Strategic planning

Levels of LCA Applications

Products (goods and services) level
Corporate level: Organizational LCA (O-LCA)

Life Cycle Thinking (LCT) to Life Cycle Assessment (LCA)

The Quantis company states that Life Cycle thinking is applied to achieve Life Cycle Assessment (LCA).
LCA is the methodology used to perform a life cycle assessment
LCA is the tool used to produce the Life Cycle Assessment

Life Cycle Thinking (LCT)

"Life Cycle Thinking (LCT) is about going beyond the traditional focus on production site and manufacturing processes to include environmental, social and economic impacts of a product over its entire life cycle." - Life Cycle Initiative – UNEP/SETAC
Sustainable development is both the origin and the objective of Life Cycle Thinking.
Each life cycle stage has the potential to reduce resource consumption and improve performance.
Each stage must be considered globally to avoid pollution transfer.
Every actor from cradle to grave/cradle has responsibility and a role to play.

Full LCA - A Standardized Process

SETAC (The Society of Environmental Toxicology and Chemistry) is a scientific platform for LCA development.
UNEP and SETAC launched the Life Cycle Initiative in 2002.
ISO (The International Organization for Standardization) has published over 350 standards related to environmental issues.
The ISO 14000 series focusses on environmental management systems.
The ISO 14040 series focusses on LCA, updated in 2006.

Life Cycle Assessment Methodology

There are 4 main steps for LCA:
- Goal & Scope Definition: What are the goals of the study?
- Inventory Analysis (LCI): Data collection and inventory of input and output for each stage.
- Impact Assessment: Evaluation of potential environmental impacts.
- Interpretation: Analysis and evaluation of results, conclusions, limitations.

Step 1: Goal and Scope

The goal and scope of an LCA must be defined to properly analyze the study.
The "WHY, WHO, WHAT, WHERE" are the key questions that need to be answered.

Goal

The "Why" should define the objectives of the study.
Examples of study objectives:
- Assess environmental and health impacts
- Improve design decisions
- Make better procurement decisions
- Meet communication needs
- Achieve compliance
- Make better policies
- Identify cost saving
- Enhance brand value for competitive differentiation

Target Audience

The "Who" should identify who the intended audience for the study is.
Examples of key questions:
- Is the study for internal use only?
- Will the study be used by specific teams?
- Will the study be shared with suppliers or executives?
- Will the study be shared publicly?

System Boundaries

The "Where" is where the system boundaries are defined for the study.
Boundaries define the phases that will be considered.
Boundaries define the level of scrutiny with:
- % total weight
- % total cost
- % environmental contribution
Boundaries need to be defined carefully.
- If a product is made up of 100 pieces and only the 95% most important piece is considered, then the boundaries must be defined to include only that 95%.

System Boundaries: Location

It is important to define the location for the study.
If a car is made in China and is used in the United States, then both the manufacturing and use location must be considered, as well as transportation costs.

Circular Economy

Argues for interdependence between environment and economic system
Emphasizes closed-loops, continuous recycling, and minimizing virgin resource use
Emphasizes reusing resources, minimizing waste, and regenerating natural systems
Promotes the six Rs: Rethink, Refuse, Reduce, Reuse, Repair, Recycle
Could lead to a net gain of approximately 6 million jobs globally by 2030
In agriculture, could lead to an 80% reduction in artificial fertilizer use
In the automotive sector, could reduce material costs by 20-30%
In manufacturing, could lead to 30-50% savings in materials
In construction, could reduce costs by 10-15%

International Trade and Circular Economy

Countries attempt to achieve 'within growth' rather than through international exchange
Reduced trade in raw materials is replaced with higher trade in secondary raw materials
Trade in second-hand goods increased 12% in weight and 26% in value between 1988 and 2018
Second-hand car exports increased by 79% between 2000 and 2018
The share of the re-manufacturing industry to aggregate production remains low (2% in the US and 1.9% in the EU)
Trade in second-hand goods can create lock-in of importing economies into old and inefficient technologies
Trade in second-hand goods can raise potential issues with the right-to-repair and their relationship with protecting Intellectual Property Rights in certain trade agreements
Concerns about promoting CE raising new trade barriers have been raised, such as Russia, China, Brazil, and India
Many importing governments are concerned about illegal trade in hazardous or contaminated waste

Global Inequalities

Within-country income inequality has generally increased since the 1980s
Across countries, inequality has decreased significantly since 1980
The income share of the top 1% and 0.1% has increased significantly
Low- and middle-income groups have suffered a loss of income share
The gap between the top 10% and bottom 50% incomes has almost doubled in the past two decades
Inequality has risen more sharply in the US compared to most European countries
The 2008 financial crisis temporarily reduced top income shares, but they have since rebounded
The COVID-19 pandemic caused the steepest rise in global inequality since World War II
Rising inflation, especially in low- and middle-income countries, has exacerbated inequalities since 2021
The fundamental driver of inequality is r>g (return on capital exceeding economic growth rate)
Technological progress and the resulting rise in skill premiums have contributed to widening the income gap
Globalization has played a role in reinforcing increasing inequalities
The decline of labor market institutions is another driver of inequality
Between-country inequality decreases, within-country may become more dominant

Inequality and Sustainable Development Goals (SDG)

SDG 10 aims to reduce inequality within and among countries
Achieving SDGs requires addressing income inequality
The link between income inequality and sustainable development is complex
Addressing income inequality is crucial for promoting sustainable and inclusive development

Circular Economy (CE)

CE promotes resource conservation and biodiversity.
CE reduces CO2 emissions and contributes to a greener environment by reducing waste and resource consumption.
CE creates new market niches, stimulating innovation in recycling, manufacturing, and design sectors.
CE generates welfare gains by reducing costs for businesses, potentially leading to lower prices for consumers.
CE promotes a more sustainable economic model by disentangling growth from resource consumption.

Benefits of CE for Businesses

Reduced raw material costs.
Enhanced brand reputation and customer loyalty.
Strengthened relationships with customers and stakeholders.
Competitive advantage for early adopters.

Impact of CE in Figures

The circular economy represents a $4.5 trillion economic opportunity by reducing waste, stimulating innovation, and creating employment (Waste to wealth: The circular economy advantage).
Transitioning to a circular economy in food, transport, and built environment sectors in Australia could lead to $210 billion in present value GDP by 2047-48.
The ILO report suggests a net gain of approximately 6 million jobs globally by 2030 due to the transition to a circular economy.

Sector-Specific Impacts of CE

In agriculture, a CE approach to food systems in Europe could lead to an 80% reduction in artificial fertilizer use.
The transition to a CE in the automotive sector could reduce material costs by 20-30% and drive innovation in vehicle design, focusing on modularity, disassembly, and recycled materials.
Circularity in manufacturing could lead to 30-50% savings in material costs.
Circular practices in the construction sector could reduce costs by 10-15%.

CE and International Trade

CE encourages 'within growth' rather than relying solely on international exchange.
As economies rely more on resource reuse, trade in raw materials decreases, replaced by trade in secondary raw materials.
There is an increase in waste management services and demand for products fulfilling CE standards.

Evidence of International Trade in CE

Between 1988 and 2018, global exports of second-hand textiles increased 12% in weight and 26% in value.
OECD countries are major exporters of second-hand textiles, representing 77% of total export value in 2018.
The value of second-hand car exports increased by 79% between 2000 and 2018.
The share of the re-manufacturing industry in aggregate production remains low, not exceeding 2% in the US and 1.9% in the EU.

Trade-offs from International Trade in CE

Trade in second-hand goods can create lock-in of importing economies into old and inefficient technologies.
Importing second-hand vehicles with high emissions can have adverse environmental effects.
There is a potential loophole for illegal trade in hazardous or contaminated waste.
Second-hand goods can raise concerns about the right-to-repair and intellectual property rights protection.

Trade Restrictions and CE

Promotion of CE raises concerns about new trade barriers.
The WTO has recorded disputes over tariffs in Russia that imposed a recycle fee, potentially supporting domestic automobile manufacturing.
China's 'Green fence' in 2013 raised concerns about the quality of imported raw materials.
Brazil and India have restricted the movement of non-new products.

Global Inequalities- Some Stylized Facts

Within-country income inequality has generally increased since the 1980s in many countries.
Across countries, inequality has decreased since 1980, mainly due to economic growth in emerging economies like China and India.
The income share of the top 1% and 0.1% has increased significantly, particularly in the US.
The top 1% income share in the US rose from about 10% in 1980 to over 20% in recent years.
Low- and middle-income groups have suffered a loss of income share.
The gap between the average incomes of the top 10% and bottom 50% within countries has almost doubled in the past two decades.
Inequality has risen more sharply in the US compared to most European countries.

Recent Trends in Global Inequalities

The 2008 financial crisis temporarily reduced top income shares, but they have since rebounded in many countries.
The COVID-19 pandemic caused the steepest rise in global inequality since World War II between 2019-2020.
The pandemic led to the largest rise in between-country inequality in three decades.
Rising inflation, especially in low- and middle-income countries, has exacerbated inequalities since 2021.

Causes of Income Inequality

According to Capital in the twenty-first century, the fundamental driver is r>g (return on capital exceeding economic growth rate).
Technological progress, resulting in a rise in skill premiums, has widened the income gap.
Globalization has played a smaller role in reinforcing increasing inequalities.
The decline of labor market institutions is another driver of inequality.

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Description

Explore the principles of sustainable value creation and the critical role of Life Cycle Assessment (LCA) in decision-making. This quiz covers various applications of LCA in product development, marketing, and corporate strategy, highlighting how organizations can enhance their economic, social, and environmental value.