Comprehensive in-supply chain life cycle assessment of the preventative cost-based externalities of products. An assessment methodology as first step to a sustainable and responsible true price economy: “Oiconomy”

Abstract

This thesis describes a new type of LCA, enabling supply chain actors the comprehensive sustainability assessment of products by determination and bottom-up transfer along the supply chain of the aggregated preventative cost-based externalities. The assessment provides an indicator, the “Eco Social Cost Unit” (ESCU), equal to the extra costs for the sustainable version of the product, subdivided in 10 aspect-categories, including both environmental, social and economic aspects and including all 17 sustainable development goals. The system provides a method for the uniform calculation and bookkeeping of the product-embedded externalities. Every supply chain actor collects the extra costs for sustainable supplies from suppliers, calculates his own and transfers the aggregated result to the next actor, similar to standard economic price build-up. This enables the supply chain actors together to determine the most efficient route to sustainability and invest to put that into practice. Every ESCU allocation is the product of a quantitative factor and a price factor for an aspect. The developed “Oiconomy Standard” ensures the verifiable, uniform and aggregable measurement and transfer of ESCU’s through the supply chain. In the envisioned operational system, both factors should be determined by the supply chain actors themselves. The price factor is equal to the costs of preventing their specific impact, verified by means of certification. Without such “foreground” preventative costs, a default price factor based on “background” data is provided by a database, representing the marginal preventative price factors for the aspect category. Key differences with other LCA systems are the “bottom-up” character of standardized in-supply chain measurement and aggregated transfer of ESCU’s through the supply chain and the prevention costs as indicator. Key prerequisite is external verification of the self-assessment by the actors, resulting in trustworthy “foreground data". Several features and environmental background data were derived from the EcoCost/Value system, maintained by the Delft University. Developed in this research were methods for the determination of performance reference points (PRP’s) for social and economic aspects. Where possible, PRP’s for social aspects were determined based on a benchmark of the 20% best performers (mostly countries). For aspects without concrete reference points, a method was developed based on a Plan-Do-Check-Act (PDCA) derived measurement of the governance level of the company. Based on the benchmark method, performance reference points were determined for “fair income inequality” and for fair minimum wages in each country. Based on the method of governance level determination, ESCU’s could be developed for the aspects of corruption and violence. A study into the consequences of inclusion of positive impacts in LCA demonstrated several serious ethical and practical issues and challenges. The importance of a “capacity raising” character of a positive impact was demonstrated. For a consistent LCA, inclusion of most internalities and “absence of negative impacts” must be dissuaded, which also applies to employment and wages without a range of additional criteria. Great caution must be taken with inclusion of a positive product utility, comparing positives for one stakeholder group with the negatives for another, and mixing measurement by status with measurement by change. Complying to the found criteria, positive contributions were added to the developed system. A series of pilots with companies demonstrated that the Oiconomy system is feasible, challenging companies to transfer foreground data, but offering default data in absence of foreground data. Comprehensive assessment on all three PPP pillars and including the 17 SDG’s was enabled. The methodology for the determination of PRP’s and ESCU’s for social and economic aspects was successfully practiced for the aspects of fair inequality, fair wages, child labor and corruption and further tested by preliminary studies on various other aspects.