I recently responded to a questionnaire from Copper8 on “social valuation” and thought that some of the answers might be of general interest, so I share them here:
1. What is your definition of social valuation?
We normally speak of social assessment, where assessment is the full study including human activities, their interaction, the externalities and their cause-effect chains (as in ‘Life cycle sustainability assessment’), while valuation is only the last step in the impact assessment where the relative severity of different impacts are valued by individuals in order to make comparisons and trade-offs.
We normally speak of social in the sense of ‘aggregated at the level of society’, which is the common usage in economics since Marx (1885), but acknowledge that it can also be used in the more narrow sociological sense of ‘pertaining to the interactions between people’; see also reply to question 4. Maybe it would be best to talk only of social in the societal sense and call the rest inter-personal?
2. What is the scope of social valuation in current methodologies?
The scope for our assessments is the full product life cycle, i.e. the system of interlinked activities that change as a consequence of producing and consuming a product. We may additionally assess the impacts of the supply chain (the system of interlinked activities that contribute one or more specified and intrinsically linked physical properties to a product), or the value chain (the system of interlinked activities that contribute added value to a product). The three types of systems are described in our article at https://lca-net.com/p/2919.
3. What is the status of quantifying social impacts currently? We want to measure social impact on a product or material level, how would you do this? What is the best way to link social impact to (components of) products or materials?
First, social impacts are quantified per product at the organizational level and these are then aggregated over the analysed product system, using the standard life cycle assessment methodology.
4. Is there an overlap between economic, environmental and social valuation and how do you deal with that?
The social assessment (=Life Cycle Sustainability Assessment) includes the internalised costs and benefits by the use of Life Cycle Costing, as well as the social (inter-personal) externalities, the economic externalities, and the biophysical externalities by the use of Life Cycle Assessment. At the level of pressure indicators, it is possible to distinguish between the social (inter-personal), economic and biophysical pressures (see https://lca-net.com/p/3289), but at the level of midpoint impacts it only possible to distinguish socio-economic and biophysical indicators, and in the end all impacts contribute to a single indicator of social (sustainable) wellbeing.
The same human activity or the same pressure indicator (such as toxic substance emissions) or the same midpoint impact indicator (such as unemployment) can contribute to more than one impact pathway, where some impact pathways may be classified as economic, some as social (inter-personal) and some as biophysical. However, this classification is irrelevant for the actual assessment, which will proceed in the same way, disregarding the classification. Each impact is assessed individually and then aggregated at the societal level, taking into account synergies and dysergies as well as the (dis-)utility to the affected population.
5. Could you give an example of social value that you have measured?
We assess indicators quantitatively at different levels of detail. The most generic level (for simple screenings) is what we call the ‘Social footprint’, which is composed of three elements: the income redistribution impact, the productivity impact of missing governance, and the potential credits for positive action. This can then be broken down into quantified contributions from more specific impacts, such as the impacts from insufficient education, insufficient health care, insufficient clean water, or undernutrition, as described in https://lca-net.com/p/2858.
We have had two crowdfunded projects that contribute to further detailing and improving these impact pathways, their indicators and their characterisation factors; one specifically addressing social (inter-personal) impacts (Social LCA Club) and one addressing each of the SDG indicators (SDG-Club). The latter includes all impacts that contribute to sustainable development. Both crowdfunded projects were based on the same top-down approach to valuation. Activities now continued in the crowdfunded LCSA Club.
6. How do you assess the value of ambiguous social impacts, e.g. child labour can normatively be seen as a negative social impact, but it also adds to income and employment.
An activity (or a pressure such as child labour) can have several impacts. When one is detrimental and the other is beneficial, they may counteract each other. In practice, each impact is modelled separately and from that the net result can be calculated.
7. How to deal with feedback loops?
Generally, we deal with loops as a standard part of the models. Our models are system of linear equations, and when solving these, either by iteration or matrix inversion, the effects of loops are implicitly a part of the solution.
8. We want to make choices based on the right metrics, not only the measurable ones. How can we make this happen? How do you deal with this?
Our approach is top-down, starting from an assessment of the current annual level of impacts on human wellbeing (people), species loss (planet), and the productivity gap (prosperity). The causes of these impacts are then traced backwards to human activities. To avoid that something is left out due to missing knowledge or missing metrics, we always identify one impact pathway as ‘default’ to take care of the residual impact that is not explained by any of the other impact pathways.
9. What social impact data should/could be collected?
The analysed system will normally be divided in a foreground system for which activity-specific data are collected, and a background system where data come from average statistics for an industry and/or a geographical area. The minimum data that are required per activity or industry are work hours and value added.
10. How do you collect social impact data?
Companies usually supply data for the foreground systems, sometimes these may be verified by an external accountant. Background data are collected from statistical data sources. In the best case, data are available from several independent sources, allowing for triangulation.
11. What is the reliability of social impact data?
Reliability of social impact data is very variable. We use uncertainty estimates that include an assessment of reliability.
12. How to deal with a lack of benchmark data? And what data collection questions are relevant without benchmark data?
The global averages can always be used as benchmark. National and industry averages are also often available. For specific companies, the data for the previous years can be used as benchmark, giving a time series of impact, e.g. per unit of revenue. Using competitor’s performance is more difficult, since these data will seldom be publicly available. An option is when companies cooperate in industry associations.
13. For environmental impact absolute quantitative thresholds have been defined, i.e. the planetary boundaries. Can product social impact be linked to absolute thresholds and would that be meaningful? And can these thresholds be expressed in a monetary value?
In general, the socially relevant threshold is where marginal abatement costs are equal to marginal damage costs. Both these metrics are expressed in monetary units. In our top-down approach, monetary valuation is applied to the endpoints (human wellbeing measure in quality-adjusted person-life-years, species loss measured in numbers, and the productivity gap measured in productivity-adjusted person-life-years). All other contributing indicators – and therefore also thresholds - can then implicitly be expressed in monetary values.
14. Would it be possible to attribute organisational social impact to separate products?
15. Can organizational social impact indicators be translated in product social impact data?
Organisational impacts are attributed to individual products by the standard allocation procedures (for combined production by modelling the changes when producing more of one product and no more of the others; for joint production by modelling how the dependent co-products affect the markets they supply).
Final question: What is the best way to quantify qualitative indicators? E.g. could we use 12 yes/no indicators, of which 8 are scored with a “yes” which accounts to 8/12 = 66.7%?
By nature, qualitative indicators are used when possibility for quantification is insufficient. Quantifying these indicators therefore would be violating the nature and purpose of these data. The purpose of qualitative data is to identify missing perspectives and indicators, and to provide richer local context and a deeper understanding of the motivations, culture, values, power relations and change potentials of the affected societal groups.
Since the UN Sustainable Development Goals (SDG) were published 2 years ago, much has been said on the difficulty in implementing them into business practice. Part of the difficulty comes from the wordings, which often appear better suited for governmental use than specifically for use in a business context. But the main difficulty comes from the sheer number of goals (17) and accompanying targets (169) and indicators (so far 230). While this should provide something for everyone, it also implies an obvious risk of cherry-picking and sub-optimised decision-making. These problems have been pointed out very eloquently by other bloggers, e.g. Nienke Palstra & Ruth Fuller from Bond.
The Business and Sustainable Development Commission have done a great job in pointing out the positive market opportunities that the SDGs open up for first-movers, and the UN Global Compact and the Global Reporting Initiative (GRI) have teamed up in an action platform to provide best practices for corporate reporting on the SDGs, with a first analysis report published last month and a “Practical Guide for Defining Priorities and Reporting” announced for January 2018.
So what can we add from an LCA perspective that has not already been said and is not already being done? Well, what is missing in the approaches mentioned above, and which LCA has always been focused on providing, is an overall framework can avoid shifting of responsibilities and avoid sub-optimised decision-making.
Therefore, we now launch the SDG club, a new crowd-funded project to place each of the indicators for 169 targets of the 17 SDGs into a comprehensive, quantified and operational impact pathway framework, linking forward to sustainable wellbeing (utility) as a comprehensive summary (endpoint) indicator for all social, ecosystem and economic impacts. At the same time, we will link each of the indicators for 169 targets back to company specific activities and product life cycles, using a global multi-regional input-output database with environmental and socio-economic extensions. Due to the use of a single endpoint, this framework will allow to differentiate major from minor impact pathways, to quantify trade-offs and synergies, and to compare business decisions, performance and improvement options, also across industry sectors. With this project, we wish to provide an actionable and rational method for businesses and governments to integrate the SDGs into decision making and monitoring.
This new project builds on and extends the impact assessment method developed by 2.-0 LCA consultants for social footprinting, which has been successfully tested for feasibility in global supply chain contexts. For example, a recent whitepaper from Nestlé appraised our method with these words:
“The great benefit of the Social Footprint method lies in the use of widely available background information from databases to assess social impacts top-down. As opposed to many other approaches, this means that some initial data is available for practically any specific case study, drastically reducing the overall cost”
We invite everyone to join the SDG club and thereby contribute to streamline and coordinate action and increase efficiency in implementing the 2030 Agenda.
Photo credits: UN Photo/Cia Pak, 22 September 2015, United Nations, New York, Photo # 643590, licence creative commons 2.0.
See also a previous blogpost on sustainability indicators.
Today, I give a keynote presentation to the “LCA Food 2016” conference in Dublin, on the topic of “Potentials and limitations of LCA for decision support”. The below figure is taken from one of my slides.
The three circles in the figure show our current knowledge, and the smaller circles within each illustrate how much of this knowledge is typically used by current LCA practice.
A wealth of knowledge is available for and from Life Cycle Assessment (LCA) as it combines three areas of knowledge:
The above considerations can be extended to cover additional aspects of data and model quality, such as the models used for linking data into product systems, the spatial detail of data, the age of the data used, the transparency of the data, the data quality indicators used, and the review procedures applied. For all of these aspects, current LCA practice leaves much to be desired.
The main question for my keynote presentation is therefore: Why is most of current LCA practice so limited?
I have three suggestions for an answer to this question:
My conclusion is that for our knowledge to be used in practice, we need to make these costs matter to LCA practitioners and decision-makers, which means that we need to become involved in the power game around decision-making.
In this power game, we must not only provide knowledge but also empowerment of those stakeholders that have the winning (more environmentally friendly) solutions but currently have too low power to have them implemented. One powerful tool in this game is to call for due diligence by the more powerful players that have the losing (less environmentally friendly) solutions. Because these players are powerful, it may be necessary to find ways to temporarily compensate their losses, to ensure that the best possible compromises can be implemented. To maintain our scientific integrity, we need to lose our political virginity.
As already described in a previous blog-post on social LCA my first entry into the world of LCA in the early 1990’ies was from a social (fair trade and organic agriculture) perspective. Compared to then, we have now much better data and also better methods for social impact assessment. My role in the development of social LCA has mainly been – and continues to be - to insist on the need and feasibility of a quantitative approach to measuring social pressures and impacts, as you can find e.g. in my suggestions of social indicators and characterisation methods (Weidema 2006a, 2006b).
While developing these indicators and methods, I divided the impacts in two groups: Those that were the responsibility of and could be influenced by governments and those that industry could directly influence, and thus be responsible for. Since most LCAs not to evaluate public governance, but rather for industries, I disregarded the former and focused on the latter.
I now realise that this was a mistake. Because industry plays a key role in influencing governments. And it makes all the difference whether industries play their roles passively, taking advantages of low labour costs or even perpetuating the unfair distribution of resources, or whether they play active and positive roles, by paying taxes - directly or indirectly - and creating shared value in their societies. This choice – between a passive and an active role – implies a co-responsibility of industries for the current state of the economies in which they operate. And using this concept, we have now found a way to quantify the overall social impact that an industry (and its products) has, both positively (in re-distributing income to low-income groups and by actively contributing to activities that create shared value together with the local communities) and negatively (via the co-responsibility for the missing local governance that comes with low labour costs). The net impact, measured in utility-weighted monetary units, we call the “social footprint”.
The quantification of the “social footprint” is based on the concept of potential productivity (Weidema 2009) and the quantification of relative income inequality (Layard et al. 2008), and has become possible due to the recent availability of global input-output databases with a high country and sector detail, such as EXIOBASE and EORA. Using standard LCA methodology, the “social footprint” provides a top-down aggregated value of all the externalities related to human activities, both biophysical, economic and social, and a breakdown by country and industry.
In contrast to other social LCA methods it does not initially require site-specific data and does not provide a breakdown of all the possible contributing impacts. Further development of the method will provide more details on specific social impact categories. For inclusion of positive impacts from creating shared value in the local social hotspots identified by the method, company-specific data will of course still be required. We first presented, shared and further developed the method and database through the social LCA club (work is now continued in the LCSA-club)
References
Layard R, Nickell S, Mayraz G. (2008). The marginal utility of income. Journal of Public Economics 92:1846–1857.
Weidema B P (2006a). The integration of economic and social aspects in life cycle impact assessment. International Journal of Life Cycle Assessment 11(1):89‑96. https://lca-net.com/p/1024
Weidema B P (2006b). Social impact categories, indicators, characterisation and damage modelling. Presentation for the 29th Swiss LCA Discussion Forum, 2006‑06‑15. https://lca-net.com/p/1021
Weidema B P (2009). Using the budget constraint to monetarise impact assessment results. Ecological Economics 68(6):1591‑1598. https://lca-net.com/p/194
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 (Handprinter) 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).
My personal interest in social LCA go way back - to the ideas of the fair trade movement and the ideas of organic agriculture of respecting both humans and nature (my original education was as an agriculturalist).
In the 1980'ies we tried to formulate these ideas in ways that could be measured and certified. Also, the definition of "environment" in the ISO 14000 is very broad, including the human and social environment, and in line with the awareness that the problems in the outer environment cannot be solved in isolation from issues of social change (cf. World Commission on Environment and Development 1987). With a starting point in the definition of a sustainable development given by the Brundtland-commission, a number of the social indicators have now been codified in ISO 26000.
That LCA should include social issues has been part of LCA thinking from the start. The very early framework on LCA developed at the SETAC workshop in Sandestin (Fava et al. 1992) resulted in a list of social welfare impact categories. Fava et al. (1991) also mention that effects on disadvantaged groups (children, pregnant women, minorities, low-income groups, future generations) should have special attention and that the voluntary versus involuntary exposure is a relevant issue. However, the workshops did not give any solution to how these social welfare aspects could be included in a practical product assessment.
It was not until the more general interest in social issues arose with the concept of "Corporate Social Responsibility" that this also returned to the main agenda of LCA (see e.g. my 2002 presentation Quantifying Corporate Social Responsibility in the value chain to the ISO TC207 meeting in Johannesburg). In 2004, the UNEP/SETAC Task Force on the integration of social criteria into LCA was initiated, which finally resulted in the 2009 "Guidelines for Social Life Cycle Assessment of Products". In parallel to this, ISO 26000 codified "Social Responsibility" which also integrates a life cycle concern.
Right now, the largest hurdles I see for social LCA to become mainstream are 1) To obtain adequately specific and relevant data 2) To adequately describe and quantify the impact pathways to allow comparisons across impact categories.
To bring quantitative social LCA further, there are also a gap to overcome in the communication between the quantitatively focused social engineers of LCA and the often more qualitatively educated social scientists.
So while I believe there are still some hurdles to overcome, I find that by now social LCA has proven itself as a feasible and applicable method for assessing the product life cycle.
References:
Fava, J.A., Denison, R., Jones, B., Curran, M.A., Vigon, B., Selke, S. & Barnum, J. (1991): A Technical Framework for Life-Cycle Assessments. Washington DC: Society of Env. Toxicology and Chemistry & SETAC Foundation for Env. Education Inc. (Workshop in Smugglers Notch, 18-23.08.1990).
Fava, J.A., Consoli, F., Denison, R., Dickson, K., Mohin, T. & Vigon, B. (1992): A conceptual framework for life-cycle impact analysis. Pensacola: SETAC Foundation for Environmental Education (Report from a workshop in Sandestin 1.-7.2.1992).
Weidema B P (2002) Quantifying Corporate Social Responsibility in the value chain. Presentation for the Life Cycle Management Workshop of the UNEP/SETAC Life Cycle Initiative at the ISO TC207 meeting, Johannesburg, 2002-06-12.
