Two Tools to Assess Environmental Impacts of Products

Two tools—life cycle analysis and input-output analysis—can help managers assess the environmental impact of products.

Two tools—life cycle analysis and input-output analysis—can help managers assess the environmental impact of products. Life cycle analysis evaluates the environmental impact of a product or process over its entire cycle of design, production, and disposal. Input-output analysis uses publicly available data on interrelationships among an economy’s industries. Together, these tools help managers identify organizational changes that may improve the environmental performance of their products or processes and weigh alternatives from an environmental standpoint.

Background

Measuring the environmental impact of individual products over their life cycle can help reduce environmental damage from industrial activity. The life cycle assessment techniques currently available are often difficult to implement because product inputs are part of a system with complex interdependencies. The author suggests that economics-based input-output models, which use publicly available data, can be used to overcome these difficulties.

Findings

• The input-output analysis used by economists can be adapted as a tool for life cycle assessment of individual products. This technique is convenient because it uses publicly available data. For example, the author applies the technique to compare use of steel versus plastic fuel tanks in automobiles. Plastic tanks are found to have a better environmental performance over their life cycle, yielding similar results to life cycle assessments conducted using other techniques and data sources.

• The model is sufficiently flexible to allow users to weight the inputs with their own values (e.g. economic value, toxicity).

Implications for Managers

Managers can use the input-output analysis technique to measure the environmental impact of individual products or processes both over their entire life cycle and in different stages of their life cycle. The author provides the formula, and then the manager can input the following data:

• The input-output matrix of the economy’s commodity sectors (provided by the Department of Commerce in the United States).

• Estimates of environmental burden per dollar output of each commodity sector for each environmental burden that needs to be measured (several estimates are provided in this paper).

• Estimates of all commodity sector inputs required in each stage of the product’s life cycle that needs to be measured. Results can be used as decision-making criteria to identify the more environmentally friendly alternatives among a set of products or processes.

Implications for Researchers

The main contribution of this paper is the extension of economic input-output models to assess the environmental impact of individual products and processes. However, the models make certain assumptions (such as constant prices) that can introduce some error into the analysis. Future research should aim to further improve the robustness of models.

Methods

The study mathematically models input-output analysis to enable an environmental life cycle assessment of products. In practice, the technique uses publicly available data on the interrelationships between industries provided by the U.S. Department of Commerce. The data used to demonstrate the value of this method are drawn from 498 commodity sectors in a 498 x 498 input-output matrix. Comprehensive environmental impact matrices are developed to augment this data.

Joshi, S. (2000). Product environmental life-cycle assessment using input-output techniques. Journal of Industrial Ecology. 3(2-3), 95-120.

Summarized by

Mohammad Keyhani & The NBS Team