An efficient and sustainable use of resources, as well as pathways to achieve carbon neutrality, are central topics of the FfE. Notably, with the EU’s Sustainable Finance Strategy, methods for assessing carbon neutrality are gaining relevance. In the following series of articles, components and criteria of sustainability assessment will be introduced. The focus will be on available methods, their application areas, and differences. This is the first contribution of the following topics, which will now appear successively on our website.

1. Life Cycle Assessment (LCA)
2. “Scopes 1-3” in corporate evaluation
3. Future-oriented LCA in energy system assessment
4. Circular Economy Approaches

What is a Life Cycle Assessment (LCA)?

Mandatory reporting under the EU’s Sustainable Finance Strategy and growing interest among customers and investors – Life Cycle Assessment (LCA) is becoming increasingly important.

What is a Life Cycle Assessment and what is its purpose?

The term “Life Cycle Assessment” (LCA) refers to the evaluation of the environmental impact associated with a product, process, or service throughout its entire life cycle – from raw material extraction to disposal. Based on an energy and material flow analysis, LCA takes into account not only the manufacturing phase but also the upstream and downstream processes, including raw material extraction, transportation, product use and disposal (see Figure 1). The method of Life Cycle Assessment is standardized and its implementation is specified in ISO 14040 and 14044.

The LCA is used to analyze the environmental aspects and impacts of a product. Figure 1 illustrates the wide range of application areas where LCA can be employed. However, it’s important to note that LCA primarily focuses on environmental aspects and impacts. Economic and social aspects, on the other hand, can be addressed by complementary methods such as Life Cycle Costing (LCC) and Social Life Cycle Assessment (SLCA).

With the introduction of the EU’s comprehensive “Sustainable Finance Framework,” which includes the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy, and the Sustainable Finance Disclosure Regulation (SFDR), Life Cycle Assessment (LCA) has gained significant relevance for many companies. These companies are now faced with the responsibility of reporting both qualitative and quantitative sustainability information. LCA results play a crucial role in assessing the sustainability of economic activities, especially for the EU Taxonomy. Additionally, LCA is relevant to the CSRD, which mandates the reporting of “Scope 3” emissions. Scope 3 emissions consider the entire life cycle of a process or activity, going beyond the traditional product-level environmental impacts assessed in LCA. Instead, it focuses on the organizational level and determines the ecological impacts of corporate activities.

How is a Life Cycle Assessment carried out?

A Life Cycle Assessment (LCA) is conducted following four fundamental steps or phases, as outlined in ISO 14040 and 14044 standards. These phases are illustrated in Figure 2 (cf. DIN EN ISO 14040:2021-02).

The Life Cycle Assessment (LCA) is an iterative process that involves several loops, allowing for adjustments and refinements based on intermediate results. This iterative approach helps enhance the level of detail and accuracy in the final outcomes. The LCA consists of the following four phases:

1. Goal and Scope Definition
2. Life Cycle Inventory (LCI)
3. Life Cycle Impact Assessment (LCIA)
4. Life Cycle Interpretation

1. Goal and Scope Definition

In conducting a Life Cycle Assessment (LCA), it is essential to establish clear and well-defined goals and scope for the study in collaboration with relevant stakeholders. Due to the complexity of LCA, it is not feasible to analyze every individual aspect in great detail. Therefore, the goal and scope should be established upfront and aligned with the intended application.

These defined parameters and conditions are critical as they form the basis for the entire LCA process and significantly influence the final results. The scope of the study sets the system boundaries, determining the specific processes to be considered, as well as the temporal and geographic context. Equally important is the definition of the functional unit, which describes the specific benefit or service provided by the product system being assessed. For example, in the case of a passenger car, the functional unit could be defined as one kilometer driven in Germany.

2. Life Cycle Inventory (LCI)

The Life Cycle Inventory (LCI) is used to quantify the relevant inputs and outputs of a product system throughout its entire life cycle. It involves the systematic assessment of material and energy flows entering or leaving the system boundary. Thus, both the inputs that are taken from the environment in the process, such as energy, raw materials and supplies, and outputs that are released into the environment, such as emissions generated during combustion in the engine, or discharges into water and soil contamination, are determined.

Furthermore, the dependencies of the inputs and outputs of the individual processes within the system boundary are quantified. For example, this step specifies how much gasoline a passenger car requires to travel one kilometer. These parameters can be obtained from measurements, estimates, stoichiometric calculations, literature data or from LCA databases.

3. Life Cycle Impact Assessment (LCIA)

The Life Cycle Inventory is evaluated by means of the Life Cycle Impact Assessment (LCIA). This step aims to evaluate the potential environmental impacts of product systems and provide a deeper understanding for communication and decision-making purposes.

For instance, greenhouse gases such as carbon dioxide, methane, and nitrous oxide are combined and quantified in the impact category of climate change based on their respective global warming potentials. Impact categories are used to systematically assess and characterize the relevant environmental impacts of a system. These categories can include climate change, acidification, resource depletion, human toxicity, particulate matter, and land use, among others.

4. Evaluation and Interpretation / Life Cycle Interpretation / Interpretation

During the Life Cycle Interpretation phase of a LCA, the results from the previous phases are analyzed and combined. This step ensures that the defined objectives are met and all aspects within the scope of the study are considered. The results of the LCI and the LCIA are examined together. Key questions are addressed, such as: Which product is more environmentally friendly? Which environmental impacts are particularly relevant? How can the environmental impacts be reduced?

The results can be analyzed in more detail using contribution analyses or sensitivity analyses. In a contribution analysis, the proportion of total environmental impacts attributed to specific life cycle phases, materials, or processes is evaluated. In this way, ecological hotspots and potential for improvement can be identified. Sensitivity analysis involves varying parameters in the life cycle inventory and studying their influence on the overall results. This enables understanding the impact of factors such as engine efficiency, material selection, or product lifespan on the overall environmental performance.

The final step involves interpreting the results. Conclusions, recommendations, and limitations are explained, providing insights into the significance and implications of the findings. An expert review, conducted by internal and/or external experts, critically evaluates the LCA to enhance understanding and credibility.

How can we assist you?

At FfE, we have extensive experience in conducting Life Cycle Assessments and developing methodological competencies for companies. Here are some highlights from our projects on LCA:

• Implementation roadmap for systematic Life Cycle Assessment at ThyssenKrupp Bilstein GmbH.
• Decarbonization network – “dekarbN”
• EU taxonomy: Project for training and implementation of LCAs for evaluating green investments at EnBW
• Sustainability indicators for companies – a reporting guide at alpitronic GmbH
• Calculation of avoided emissions from renewable energy plants at Aquila Capital
• “Kreislauffähige Energiewende” project for balancing greenhouse gas reduction through future material cycles in the life cycle of energy technology plants and components
• Project “Accompanying Research Energy Turnaround in Transport (BEniVer)”, where we lead the subproject on “Ecological Assessment”
• Dissertation on “Development of Instruments for a Circular Energy Economy”

We are ready to support your company in preparing for new requirements. Here’s how we can assist you:

• Training and building up methodological expertise in the area of emissions accounting and “Life Cycle Assessment (LCA)” methodology within your company
• Implementation of Life Cycle Assessments
• Collection of energy & emission data and derivation of key figures for reporting purposes

Feel free to contact us without any obligation at: aregett@ffe.de, +49 (0)89 158121-45, or info@ffe.de.