Blog archive: November 2014

Creating shared value with Life Cycle Assessment

November 19, 2014 by Bo Weidema

Life Cycle Assessment is not about blaming businesses for negatively impacting environmental or social conditions – rather, it is about identifying leverage points for improving the role of business in society. In many ways, enterprises have the powers to solve issues that societies have struggled with for many years – namely the internalisation of the social (and environmental) externalities.

“Creating Shared Value”, “Net positive” and “Handprints” are some of the existing business concepts that aim to shift the focus from the negative impacts of businesses to the positive force of business in solving societal problems.

Creating Shared Value (CSV) is a business policy and practice that aims to increase both economic and social well-being and business competitiveness based on an understanding of their co-dependence (Porter and Kramer 2006, 2011).  “Net positive” is a similar concept defined as adding greater value to society than you take away (Green Mondays 2013), but applied to more specific issues like returning more to nature than you use. Finally “Handprints” is a concept (www.handprinter.org) to measure the benefits a person or an organization can provide, rather than the impacts (social costs) it incurs.

These concepts borrow from earlier ideas of “footprints”, “bottom-of-the-pyramid”, industrial symbiosis, strategic corporate social responsibility etc. but what is excitingly new about these concepts is the radical way they re-formulate the role of business in society; to paraphrase Porter: “to harness the power of capitalism in the service of society”.

An example of this, given by Porter and Kramer (2011), is Vodafone’s pioneering M-Pesa mobile-phone based banking service in Kenya, helping the poor save money securely and increasing the ability of small farmers to produce and market their crops. M-Pesa has become the most successful mobile phone based financial service in the developing world. When introduced in Afghanistan the direct payments proved a tool to combat corruption (Rice and Filippelli 2010).

Essentially, the idea is all about internalizing externalities by creating the markets that are currently missing. Thus, it is actually not capitalism as such that is harnessed, but rather the market economy. In fact, the proposals of Porter and Kramer (2011) do not warrant the strong focus they give to re-inventing capitalism and the role of companies, since these roles could as well be performed by non-profit or public organizations. What is important from the idea of CSV is that the organizations work under the efficiency imposed by a market economy.

In relation to Life Cycle Assessment (LCA), CSV implies an expansion of the scope of social LCA to include the social impacts normally left aside to be handled by government. I believe the addition of the CSV perspective can enhance the comprehensiveness and practical relevance of LCA.

On the other hand I think that LCAs strong tradition for quantitative measurement can contribute a lot to a realistic and credible valuation and prioritization of the opportunities for CSV, enhancing its capability to optimize both social and corporate decision-making.

See also our previous blog on social LCA https://lca-net.com/blog/2014/06/

References:

Porter, M. E., and M. R. Kramer. 2006. Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review December 2006, pp. 78-93.

Porter, M. E., and M. R. Kramer. 2011. Creating shared value. How to reinvent capitalism – and unleash a wave of innovation and growth. Harvard Business Review January/February 2011, pp. 1-17.

Green Mondays. 2013.  Crowdsourced Green Mondays: Net positive. An expert crowd’s view of Net Positive business strategies. www.green-mondays.com/admin/uploads/media/NetPositive (accessed 2013-12-26). This is now a broken link. But see http://thecrowd.me/sites/default/files/NetPositive.pdf

Rice, D., and G. Filippelli. 2010. One Cell Phone at a Time: Countering Corruption in Afghanistan. Small Wars Journal September 2, 6:17pm. http://smallwarsjournal.com/blog/journal/docs-temp/527-rice.pdf (accessed 2013-12-26).