Measuring the environmental footprint of organizations in the PEF initiative

In 2013, the European Commission started testing the environmental footprint rules in what is known as the environmental footprint (PEF) pilot phase. However, this pilot phase contains more than just PEF. Although the focus is predominantly on the product level (24 out of 26 pilots), this 3-year initiative also aims to test the development of environmental footprint rules for organizations. In this article, I will briefly describe the organizational environmental footprint (OEF) in the European Commission’s initiative.

The European Commission developed methods for assessing the environmental performance of products, services and organizations. These methods are based on a comprehensive assessment of the environmental impacts of the life cycle of the entity being assessed. The OEF method is a general method to measure and communicate the potential life cycle environmental impact of an organization. The aim is to make it easier for organizations to monitor and communicate their performance.

Developing sector-specific rules

Just as is being done for product assessment, the pilot phase is developing sector-specific guidance for calculating and reporting the life cycle impacts of organizations, the organization environmental footprint sector rules (OEFSR). The OEFSRs help to focus OEF studies on those aspects that are most relevant in determining the environmental performance of an organization in a given sector, thereby reducing the time, effort and money needed to do an OEF study. Two pilots are currently testing the development of OEFSRs, namely the pilots on copper production and retail.

Defining the organization and product portfolio

The PEF and OEF methods, including PEFCRs and OEFSRs, are methodologically consistent. But an OEF study has a number of elements that are exclusive to an organizational study. The most important ones are Organisational and OEF system boundaries; and definition of the organization and product portfolio, which we will discuss here.

An OEF study is intended to provide a measure of the potential environmental pressures related to the provision of products by the organization. This requires a reference unit for assessment, parallel to the concept of “functional unit” in an LCA study. The organization is the reference unit for an OEF analysis. For the purpose of calculating the OEF, the function of an organization is to provide goods and services over a specified reporting interval. The organization and its product portfolio define the system boundaries.

The product portfolio is defined similarly to the functional unit in the PEF. It encompasses the functions and services provided (“what”), the extent of the functions and services (“how much”), the expected level of quality (“how well”), and the lifetime or duration of the products and services (“for how long”). Additionally, in an OEF study, the reporting interval should be one year, clearly defined (e.g. 2015).

I’ll define PRé, as an example, following the rules in the OEF method:

Organization Organization PRé Sustainability
Goods/services sector Sustainability software and consultancy services
Locations of operation Netherlands
NACE codes* M71.1.2 – Engineering activities and related technical consultancy
Product portfolio Functions and services provided Sustainability software tools and consultancy services
Extent of functions and services Tools and consultancy services sold in the reporting period
Quality n.a.
Duration The duration of the service contracts
Reporting period 2015

* NACE is a system for statistically classifying economic activities in Europe, similar to ISIC (the international system). The principal activity is the activity which contributes most to the added value of the organization

Organizational and OEF boundaries

The system boundaries need to include and clearly distinguish both the organizational boundaries (corresponding to the activities under the control of the organization) and OEF boundaries (specifying which aspects of the value chain are included in the analysis). The two sets of boundaries define which aspects are included in the environmental performance assessment.

Organizational boundaries

Organizational boundaries are defined to encompass all facilities and associated processes that are fully or partially owned or operated by the organization and that directly contributes to the provision of the product portfolio. This implies that the organization being evaluated should be able to leverage direct access to specific data for activities in the organizational boundaries. These are then considered “direct” activities and impacts. This is traditionally defined as gate-to-gate system boundaries.

OEF boundaries

The OEF boundaries are defined by considering the value chain of the organization and its product portfolio. The OEF boundaries include, at a minimum, the site-level (direct) and upstream (indirect) activities associated with the organization’s product portfolio. By default, OEF boundaries are cradle-to-grave, including all upstream and downstream activities from raw material acquisition to processing, production, distribution, storage, use and end-of-life treatment of the product portfolio. If downstream or indirect activities are excluded (e.g. use stage of intermediate products or products with an undeterminable fate), this requires explicit justification.

Now, let’s think about the OEF of a retailer that sells a wide variety of products, considering that the complete value chain has to be assessed for each product, up to the OEF boundaries of the retailer… Quite a challenge, right? Luckily, integration with the PEF studies can save the day. Once there are PEFCRs for all product groups and average models for their “representative products”, this exercise will be much easier. The retailer will be able to focus its data collection efforts only on its direct activities and impacts – its organizational boundaries – but, at the same time, the retailer will be able to identify the actors in the value chain to engage with to reduce its OEF boundaries. I guess this is what the European Commission is going for.

Why should we make the effort?

Starting an OEF study is quite an endeavor. There have to be solid benefits to OEF studies, or we wouldn’t even think about doing one.

Some of the applications and benefits of doing an OEF (retrieved from Commission Recommendation 2013/179/EU):

  • optimization of processes along the whole supply chain of an organization’s product portfolio;
  • communication of life cycle environmental performance to interested parties (e.g. through annual reports, in sustainability reporting);
  • entering reputational schemes that give visibility to organizations calculating their life cycle environmental performance, or to organizations improving their life cycle environmental performance over time (e.g. year on year);
  • being able to join schemes requiring reporting on life cycle environmental performance;
  • being able to provide information on life cycle environmental performance and objectives in the framework of an environmental management system;
  • providing incentives based on the improvement of life cycle environmental performance as calculated based on the OEF method.

Future outlook

The OEF pilot phase is exploring whether it is possible to compare two similar organizations operating in the same sector, or, in case of organizations covering several sectors, to compare the performance of business units.

Given the variance of product portfolios from organization to organization, I believe that comparison across organizations won’t be possible. However, I think that OEF results constitute a good tool for monitoring environmental performance, particularly when the results are expressed per selling unit or per unit of revenue.

Learn more about PEF

If you want to learn more about PRé’s role in the PEF initiative, please send me an email. See other episodes of this series:

Marisa Vieira

Principal Consultant

The time of the industrial revolution is over. Now it is time for the green revolution to go full steam ahead! Everybody needs to be involved in this process, therefore I aim to guide individuals and businesses in understanding the trade-offs between impacts. This will help them make informed decisions, which will truly help sustainable living thrive."

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