Building on our Golden Rules for Sustainable Business blog, we continue the series that explores each of these five rules in a bit more depth. In the first of this series – Bring Your Customer In – Josh Hendry explored the first of these golden rules. Now we hear from Curtis Harnanan, Lauren Bromfield and Jim Fava on the next rule – Success Requires Action.
Are you often “getting into the weeds” and debating decimal points in sustainability assessments? Does your organisation have trouble in identifying what areas of sustainability are most critical to business success and deciding where to start? If so, we have a solution that will help you determine what’s most important as quickly as possible and spend more resources on improving your performance!
With today’s global, complex value chains, how can you effectively identify, assess and address the most significant sustainability impacts, or “hotspots”, of your business in a way that provides reasonably accurate and robust information? If you’re a diverse company that sells many products, where would you begin?
What exactly are the most significant impacts? Where within your business value chain do they lie? Which opportunities to improve sustainability will yield the greatest benefit? Within the business context, where should effort and investment be placed?
In looking at products or product categories, life cycle assessment (LCA) may be used to gain deep insights into where impacts occur through the product life cycle. While this may provide valuable information in some applications, practicality quickly vanishes as you try to scale up and take into account the realities and complexities of contemporary business systems. For example, if your business only makes one product (e.g., car tires) and you are looking for ways to optimise your system, then it may be valuable to invest in a detailed LCA. However, if your company makes many different products (e.g., if you are a diverse company like 3M with approximately 50,000 products) then it becomes much more challenging to conduct detailed assessments on each product or SKU! Moving toward more holistic assessments (e.g. including social impacts) may prove to be an even greater challenge. Here’s where hotspots analysis can help.
Why Choose Hotspots Analysis?
Hotspots analysis is the tool of choice if you want to gain high-level insight into the most significant life cycle sustainability impacts and enable quick decision-making on actions to improve. Organisations may then elect to go deeper or broader on addressing these impacts using other tools (e.g., screening-level or full ISO-compliant LCA).
Hotspots analysis allows the user to rapidly assemble and analyse a wide range of information, blending both evidence-based data with common sense from expert judgment and stakeholder engagement Graphic outputs typically illustrate where significant environmental and social impacts and stakeholder concerns exist across the life cycle of the subject.
The Product Sustainability Forum conducted hotspots analysis for several grocery products. Below is a sample heat-map graphically illustrating the outcomes of their hotspots analysis on chocolate.
Source: Product Sustainability Forum.
Hotspots analysis replaces the paralysis and inertia that may occur with the scales of analysis required today, with a clear path toward:
Early identification of risks and opportunities: including issues that may have a material impact on net sales, revenues, brand reputation, operational efficiency, compliance, etc.
- Prioritisation and strategic focus: outcomes produce meaningful results that feed into strategic planning, risk management, etc.
- The ability to drive larger sustainability impact reduction by addressing the most significant environmental and social hotspots
- Increased efficiency and reduced effort for management and reporting: avoid spending time on issues that are not as important
- More useful information to communicate with internal and external stakeholders
- Opportunity to promote productive engagement with stakeholders, respond to stakeholder concerns proactively, and align management plans and actions with the expectations, needs, and demands of key stakeholders.
Hotspots analysis also ensure that you optimise your time and resources by:
- Prioritising and working on the most significant issues (e.g., water, waste, energy, materials of concern)
- Focussing on the appropriate life cycle phase (e.g., material acquisition, manufacturing, use, end of life)
- Conducting holistic assessments (include social impacts, stakeholder concerns)
- Identifying and engaging the right stakeholders (e.g. producers, manufacturers, suppliers, retailers, customers) to evaluate and implement solutions
- Informing implications of trade-offs
- Balancing resource limitations by rapidly analysing a range of information sources
- Identifying potential solutions and help with systematic portfolio improvements.
There is a range of applications of hotspots analysis in play globally, several of which the UNEP/SETAC Life Cycle Initiative catalogued in results of mapping study to identify existing hotspots analysis methodologies and studies world-wide: Hotspots Analysis: mapping of existing methodologies, tools and guidance and initial recommendations for the development of global guidance. A few examples of such applications include:
- Product Sustainability Forum utilised hotspots analysis to help establish which of over 150 grocery products are likely to contribute most to the environmental impacts associated with UK household consumption
- The Sustainability Consortium (TSC) used hotspots analysis in the development of Category Sustainability Profiles (CSPs) and Key Performance Indicators (KPIs) in an array of product sustainability toolkits
- The Association of Home Appliance Manufacturers (AHAM) and the Water Quality Association (WQA) have both used hotspots analysis as a key step within their individual sustainability standards development processes to identify and prioritise impact areas for specific product categories to be addressed in these resultant standards. Hotspots analysis quickly enabled these associations and their member companies to move forward with a high degree of confidence in the contents of their standards, without compromising scientific rigour. In the space of six years, these associations have been able to analyse several product categories for dozens of products and developed associated standards (and certification programs) to improve sustainability across their life cycles.
Hotspots analysis may be applied at many different scales (i.e., global, national, sector, product category, product), and as the field of sustainability has matured, various tools are now available to help identify hotspots at these different scales and levels of focus – such as materiality assessments, life cycle studies, ISO 14001-style significant aspects and impacts, etc.
The lack of a globally consistent approach or harmonisation on communicating results of hotspots analysis is a significant challenge with a variety of methodologies being applied at different scales and geographies. Fortunately, efforts are already underway to remedy this issue. The UNEP / SETAC Life Cycle Initiative’s Flagship Project 3a has set out to develop global guidance for hotspots analysis to help bridge the existing inconsistencies. In addition to its initial mapping study, a final common methodological framework for hotspots analysis will soon (in the next couple of months) be published.
It is important to note that these tools, whether they are overarching hotspots analysis, materiality assessments or a specific product LCA, represent the starting point to action. Using one or more of these tools can help to identify and build the priorities for your business. The next steps are even more critical – they require your business to take initial action and then to continue to assess and work on them.
Prioritising the right sustainability issues is critical, but ensuring you implement improvements and activate business value is even more critical (e.g., address key stakeholder and customer needs, create opportunities for brand enhancement and product differentiation, proactively managing business risks and costs, etc.). Success starts where business value may be sustained and continues to build with time.
Can You Answer the Following Questions?
- What are some of your key areas of vulnerability or sustainability risk within your business and value chain?
- What are your business’ most significant sustainability impacts?
- Who is responsible for these impact areas?
- What solutions are available to address these impacts?
- How do you decide on and prioritise remedial action?
- What tools does your business currently employ in identifying and prioritising action on sustainability impacts?
- What are the areas of opportunity for you to promote the sustainability aspects of your business and products?
- What types of benefits or opportunities has your company realised from improving its sustainability (e.g., enhanced shareholder value, market differentiation, enhanced brand, increased sales, ROI from project or investment)?
- How does your business quantify benefits of sustainability?
If you are unable to answer these questions, your immediate next step is hotspots analysis.
Anthesis continues to be a key player in the evolution of footprinting tools and methodologies that are simple, scalable and enables business to quickly take meaningful action to manage business sustainability impacts. We can help you identify the best approach and tools to identify your business’ significant sustainability impacts, work collaboratively with you and your key stakeholders to prioritise action and support the implementation of your selected remedial efforts. Over time we can also help to track the success of implemented actions and align with overall strategic business objectives or those at specific levels of interest (product, product category, business unit, regions, markets and/or full enterprise).
Watch out for the next instalment in our Golden Rules Blog Series, Rule #3 “The Value is in more than just tightening your belt.”