Undertaking a Life Cycle Assessment (LCA) is becoming a fundamental part of how companies are working toward net zero and more sustainable production, consumption, and supply chain processes. A LCA, which evaluates and measures the environmental impacts associated with products, services, processes, or activities, from the extraction of raw materials to the end of the lifecycle, is evidence of a company adopting more sustainable practices. It enables more systematic integration of sustainability information into reporting cycles, such as corporate sustainability reports.

With the LCA driving how companies and organizations manage and report on their environmental responsibilities, they can also use the information it provides to inform Circular Economy strategies, analyzing the entire environmental performance of a circular economy, rather than an individual product or single life cycle. LCAs are becoming more common, initiated by regulations such as ISO 14000 Environmental Management Standards1, or by mandatory industry standards. Environmentally responsible practices like LCAs can enhance company reputations and brands, leading to increased investor interest, stronger consumer loyalty and improved employee engagement, while also driving significant cost savings, as product and processes improve, and waste is reduced.

Life Cycle Assessment stages

The product life cycle consists of 5 main steps:

  1. Raw Material Extraction
  2. Manufacturing & Processing
  3. Transportation & Distribution
  4. Usage & Retail
  5. Waste Disposal/Recycling

There are several approaches to follow when carrying out the LCA:

  • Cradle-to-gate: this stage measures the impacts from the raw material extraction to the manufacturer’s gate. It is one of the simplest and least expensive methods.
  • Cradle-to-grave: this stage measures the impacts from the raw material extraction to the end of the product’s life. It is more comprehensive than the cradle-to-gate approach as it includes the use/maintenance and the disposal phase of the product.
  • Cradle-to-cradle: this stage measures the impact from the raw material extraction to when the product is recycled or reused and starts a new life cycle. It is considered the most comprehensive assessment of all the stages of a product’s life cycle as it promotes the concepts of circularity, recyclability, and reuse, meaning the entire environmental impact of the product is assessed.
Life cycle assessment stages

Life Cycle Assessment Regulations

The International Organization for Standardization (ISO) has drawn up two complementary standards for carrying out a Life Cycle Assessment: the principles and framework of which are described in ISO 14040 while the requirements themselves are set out in ISO 140442. Following these standards lets the organizations set the goals and scope of the LCA, model the system to be analyzed, collect the data, and report on the results.

These ISO standards include the definition of the LCA, the inventory and impact phase and how to report and review the LCA results. They also have guidelines on the limitations of the LCA, how to manage the relationship between the phases, and set out options for value choices. A standard-compliant LCA typically includes four phases: the scope of the study, preparing a life cycle inventory (an inventory of inputs and outputs), the impact assessment, and the evaluation.

  • ISO 14040: 2006 Environmental management - Life cycle assessment - Principles and framework.
    ISO 14040 describes the key features of the LCA and outlines the phases of the analysis including: what areas of the environment should be covered, in what timeframe, the methodologies followed, and outlining parameters for transparency and public disclosure.
  • ISO 14044: 2006 Environmental management - Life cycle assessment - Requirements and guidelines.
    ISO 14044 is used in conjunction with ISO 14040 as a supplementary standard. It expands and explains the elements and approach in ISO 14040 and requires the modelling of a product or service life cycle as a system to determine environmental impacts.

Further sub standards to these regulations set out guidelines and definitions for environmental claims and eco labels regarding products and services, making sure they are not false, misleading, or misunderstood, aiming to reduce green washing. Examples include:

  • ISO14024 – defining the environmental criteria for a group of products (Type I ecological labels, such as Ecolabel).
  • ISO14021 – assessing Type II environmental labels, also known as environmental self-declaration.
  • ISO14025 – the primary tool for obtaining an Environmental Declaration of Product (EPD), a Type III ecological label.

Main Phases of the Life Cycle Assessment

 According to these standards, a life cycle assessment study is a systematic, phased approach and consists of four interconnected phases:

  1. Goal definition and scoping,
  2. Inventory analysis of the inputs and outputs of a system.
  3. Impact assessment related to these inputs and outputs.
  4. Interpretation of the results
Phases of life cycle assessment

Based on the methodology of Life Cycle Assessment (LCA), the European Union has set out a framework, known as the Product Environmental Footprint (PEF) It aims to improve how EU member states evaluate the environmental performance of their products, goods, and services.

The purpose of the PEF is to reduce the environmental impact of goods and services. It considers activities across the whole supply chain from the extraction, production, and use of raw materials to end of life waste management. This is achieved through detailed modelling of the environmental impacts of the flow of materials and energy as well as all emissions and waste associated with the product life cycle.
The PEF is not yet mandatory and is still in its pilot phase. PEF studies underway are producing information and data that can be reproduced, verified, and compared, contributing to the finalization of PEF measurement rules, targeted for the end of 2024.
The PEF rules are industry specific. For example, in the European construction sector, the PEF standard EN15804+A2 has already resulted in some mandatory changes in LCAs.

Life Cycle Assessment opportunities

One output of a Life Cycle Assessment study is the quantification of how a product has impacted climate change. The LCA is often used as a methodology to assess the carbon emissions associated with products, processes, or the operations of an organization. However, the focus of the LCA is not limited to this, and companies can broaden the LCA assessment from solely measuring the greenhouse gas (GHG) equivalent emissions of a product, process, or activity over its life cycle, to other impact categories such as ozone depletion, eutrophication, acidification, human toxicity, ecotoxicity, photochemical ozone formation, land use, and resource depletion.

Also, a LCA can identify so-called “hotspots” in a life cycle indicating where the company or its suppliers can quickly adapt their processes to decrease environmental impact. A better understanding of context in which a product operates allows a more targeted action plan to deal with product impacts on the environment as well as highlighting the critical phases in which to act. This is important, as sometimes, a product can perform well as regards emissions and the impact on global warming but could be consuming too much water over its life cycle. This broader remit means LCAs can also protect our oceans, biodiversity, and natural environment.   

An LCA study also means measuring waste, and the impact of related disposal and treatment operations. By evaluating all phases of a production process, including waste management, companies can understand which output streams are affecting the environment and can work on alternative treatment options. The LCA can also identify potential new uses for the waste outputs, supporting circular economy processes.

As reducing operational impact on the environment becomes more urgent, more regions, countries and industries are implementing regulations and voluntary programs, requiring and incentivizing companies to measure and report carbon footprints and other operational impacts. Industries, such as construction and textiles are also bringing in specific regulations or standards that mandate or encourage the Life Cycle Assessment for products or supply chain processes. For example:

  • The Ecodesign Directive in the European Union3 aims to improve the environmental performance of energy-related products and may require a LCA as part of the product design and assessment process for specific product groups.
  • Public procurement policies in various countries or regions, including the European Union, may require LCA or LCA-derived environmental criteria to be considered when procuring products or service4.
  • Environmental Product Declarations (EPDs)5 are standardized documents that provide transparent and verified information about the environmental impacts of a product throughout its lifecycle. Many countries and regions have developed EPD programs that encourage or require LCAs for certain product categories, such as construction materials or waste packaging, which are designed to assess the environmental impacts of different materials and designs.
  • Green building certification systems, such as LEED (Leadership in Energy and Environmental Design) and BREEAM (Building Research Establishment Environmental Assessment Method)6, often require LCAs as part of the assessment process as they help to evaluate the environmental performance of building materials and components. In Denmark, for example, it will become mandatory to carry out LCAs for all new buildings bigger than 1,000m2, with a threshold limit value of 12kg CO2-eq/m2/year coming into place from 20237.

The Value of a Life Cycle Assessment

The LCA can be either a framework or an accounting or operational tool which collects product and process input & output data. Either way, LCAs can drive value, primarily from the insights and the data produced by going through the LCA process: 

  • LCAs allow users to compare environmental performance between two or more products. For instance, in construction, the use of ordinary Portland cement versus Portland slag cement; in transportation the use of electric versus internal combustion engine vehicles; in manufacturing, the use of steel created using raw materials versus Electric Arc Furnace steel made using recycled material, and much more.
  • The LCA can provide insights on the environmental impacts across various stages of the product life cycle such as extraction, transportation, manufacturing, and use phase. This enables the user to make focused and informed decisions against the identified hotspots and better identify pathways to carbon reduction goals.
  • The LCA can improve product design and marketing. It promotes “Design for Environment (DfE)”, reducing the environmental impact by improving the design phase through to the manufacturing process. It can also support the marketing of products and services, by producing data and trends which can be used to better inform communications.
  • LCAs can improve innovation, as they facilitate more sustainable product development and drive research of the impact on the environment of new materials and manufacturing processes.
  • The focus on the whole lifecycle and the treatment and reuse of waste means the LCA can become the foundation of Circular Economy strategies and processes.
  • Procurement and purchasing departments can use the LCA to learn which suppliers have the most sustainable products and methods. They can then design contracts to be more transparent and standardized, transforming the whole supply chain into one that is much more sustainable. The KPMG Contract Lifecycle Management team can help with this process. 

Main challenges

A detailed LCA study can be complex and expensive to perform, as it involves gathering extensive environmental data during each phase of the life cycle. Setting up and employing the methodology and databases all takes considerable time and money. Increasingly, simplified LCA tools are being developed which allow immediate verification of the life cycle of a product, useful for those companies who do not have all the skills and the resources to carry out a detailed study.

The need for more availability of reliable data is recognized as being fundamentally important to the success of an LCA study. Efforts are underway at the international and European levels to improve the accessibility and availability of LCA data. Databases such as Ecoinvent8, which is both open use and accredited, allows the free exchange of information and enables Life Cycle Inventory analysis for a variety of sustainability assessments.

The limitations of an LCA should also be understood. Its focus on environmental impacts means that often economic and social challenges are not addressed.  Also, the LCA methodology, while evaluating potential and non-real environmental impacts, calculates global or regional rather than local environmental effects. It means that while the LCA has recognized that emissions have a global impact, it has not identified more local or smaller impacts on ecosystems or human health.

Life Cycle Assessment Tools

Lifecycle assessment tools or LCA tools, are analytical instruments used to evaluate the environmental impacts of a product, service, or process throughout its entire lifecycle, from raw material extraction to disposal or recycling. These tools provide a systematic and quantitative assessment of various environmental factors, such as energy consumption, greenhouse gas emissions, water usage, and waste generation. By considering the full range of environmental impacts associated with a product or process, LCA tools enable decision-makers to identify and focus on areas for improvement, make informed choices, and design more sustainable alternatives.

The software tools listed below are generally suitable for conducting life cycle assessments (LCA) and sustainability assessments across various sectors and industries. Some tools may have specific features or are databases tailored to certain sectors.

  1. SimaPro9: suitable for a wide range of sectors, including manufacturing, energy, construction, agriculture, transportation, and consumer goods.
  2. GaBi10: applicable to diverse sectors such as manufacturing, chemicals, energy, electronics, automotive, and packaging.
  3. OpenLCA11: a versatile open-source tool that can be adapted to different sectors and applications, including product manufacturing, building construction, waste management, and renewable energy.
  4. Umberto12: suitable for sectors such as manufacturing, process industries, energy production, waste management, and circular economy initiatives.
  5. EarthSmart13: primarily used for assessing the sustainability of products, materials, and packaging across various sectors, including consumer goods, electronics.
  6. Sustainable Minds14: designed for product designers and engineers across multiple sectors, such as consumer goods, electronics, furniture, and building materials.
  7. OneClickLCA15: specifically focused on the building and construction sector, providing lifecycle assessment capabilities for assessing the environmental impacts of buildings.

While the software tools mentioned above may have sector-specific features or databases, their core functionality and methodologies can be applied across a wide range of industries to assess environmental impacts and support sustainable decision-making. It's recommended to explore each software's website or contact the respective providers for more detailed information and suitability for specific requirements.

KPMG Insights

With government and EU regulations and stakeholders increasingly mandating that LCA processes are embedded into company operations, capital projects and products, carrying out an LCA efficiently and cost effectively is important. A successful LCA can result in both a positive environmental impact and greater value in terms of corporate profitability and reputation and can allow companies to better meet the demands of their investors, stakeholders, and employees for stronger environmental practices.

KPMG firms have a dedicated team of professionals who can support the LCA, offering a thorough understanding of the environmental impact associated with the complete lifecycle of a product or service, combined with local knowledge in regulations. KPMG teams understand the importance of striving to reducine environmental impacts, including assessing greenhouse gas emissions throughout various stages of the product's life cycle. KPMG professionals can also liaise with senior management to position the LCA into wider ESG and circular economy strategies and frameworks.

For businesses aiming to enhance their sustainability reporting and credentials, transparent and trustworthy information is indispensable. KPMG professionals can provide support for external third-party verification. They strive to ensure that the LCA is a dynamic tool, which can track emissions and other key environmental metrics in real time. Managing the LCA process using the latest KPMG data driven tools and platforms can mean a more robust assessment of core product and supply chain processes. KPMG professionals can also help structure new contracts that incentivize project suppliers or contractors to consider the whole product life cycle resulting in the use of low-carbon alternatives.

How KPMG professionals can help

  1. Goal definition and scoping: defining what will be measured, by agreeing on the purpose and audience for the LCA, defining the system boundaries, the function unit, allocation procedures and the depth of the analysis, what is out of scope, and the impact categories to be measured.
  2. Inventory analysis of the inputs and outputs of a system: collecting and structuring the data, by mapping each in-scope process, modelling the data into input-output flows, defining background data and sources to be collected for each process, and collecting the required data points.
  3. Impact assessment related to these inputs and outputs: translating data into impacts, by modelling the life cycle to define the impact of the Life Cycle Inventory and by calculating all the environmental impact categories (e.g., the potential impact on Climate Change and Global Warming).
  4. Interpretation of the results: translating impacts to conclusions and opportunities, by understanding the drivers for the outputs across the environmental impacts, determining the opportunities and risks, identifying where improvements can be made across the life cycle, and calculating the value creation opportunities from the reduction in environmental impacts.

Richard Lin


KPMG in China

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Chiara Catgiu

SME Circular Economy Global Decarbonization Hub, KPMG International and Manager

KPMG in Italy

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