Why Choose LCA-Based Accounting Over Spend-Based Accounting

As the world grapples with the urgency of climate change, the way companies account for their environmental impacts is in the spotlight. Among the myriad accounting methods, two have risen to prominence in recent discussions: LCA-based (Life Cycle Assessment) accounting and Spend-based accounting. For those aiming for a more comprehensive, accurate, and actionable understanding of their environmental impacts, LCA-based accounting emerges as the superior choice. Here's why:

1. Comprehensive Insight into Environmental Impact

• LCA-based accounting provides a holistic view by analyzing the environmental impacts of a product or service throughout its life cycle—from the growing of ingredients to end-of-life disposal or recycling.
• Spend-based accounting focuses on the financial expenditures of a company, assuming that higher spend equates to higher environmental impact. This method can miss out on many nuanced environmental impacts not directly tied to financial costs. For example, if you were to negotiate a new price for your ingredients, but purchase the same amount by weight, it would show that you reduced emissions when in reality the emissions remained the same. 
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LCA-based accounting offers a more complete picture of environmental impact, considering every phase of a product's life.

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2. Accuracy and Specificity

• LCA-based accounting uses detailed data, such as energy consumption, water usage, and GHG emissions, specific to each stage of the life cycle. This specificity allows for pinpointed interventions.
• Spend-based accounting relies on broad averages and assumptions. A high-cost material might not necessarily have a high environmental impact, and vice versa.

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LCA’s provide a more accurate reflection of environmental impacts, allowing companies to make data-driven sustainability decisions based on every input in their supply chain. 

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3. Scope of Consideration

• LCA-based accounting encompasses direct operations (e.g., manufacturing) and indirect operations (e.g., transportation, raw material sourcing). It ensures companies don't overlook "hidden" impacts.
• Spend-based accounting often limits its scope to direct operations, potentially overlooking significant environmental impacts in the value chain.

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LCA’s capture both obvious and hidden environmental costs, leading to a more thorough impact assessment.

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4. Adaptability and Flexibility

• LCA-based accounting can be tailored to focus on specific environmental concerns (e.g., water scarcity, deforestation) relevant to the particular food product or region in question.
• Spend-based accounting has limited flexibility, sticking to a more generalized view based on financial data.

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LCA’s can be customized to the unique environmental challenges and priorities of each company or product.

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5. Alignment with Stakeholder Expectations

• LCA-based accounting is recognized and respected by experts in the field. LCA-based reports often meet the standards and expectations of stakeholders, including consumers, investors, and NGOs.
• Spend-based accounting might be perceived as a less rigorous method, potentially leading to skepticism among informed stakeholders.

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LCA-based accounting increases corporate credibility and trustworthiness in the eyes of stakeholders.

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6. Driving Actionable Interventions

• LCA-based accounting identifies the most impactful stages of a product's life cycle so companies can target interventions effectively and efficiently. This leads to better resource allocation and more significant and targeted improvements in overall sustainability.
• Spend-based accounting provides broad-brush insights that might lead to misdirected efforts, with companies potentially investing resources in areas with minimal environmental impact.

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LCA’s supports focused, efficient, and effective sustainability initiatives.

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7. Economic and Environmental Synergy

• LCA-based accounting can help identify areas where cost savings and environmental benefits align. For instance, reducing waste can lead to both reduced costs and environmental impacts.
• Spend-based accounting may miss out on cross-functional opportunities. 

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LCA’s can drive both economic and environmental value.

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For food companies committed to leading the way in sustainability, the choice is clear.

LCA-based accounting offers a robust, accurate, and actionable approach to understanding and reducing environmental impacts. While legacy spend-based accounting solutions promised a quicker, more efficient calculation method, recent advances aided by AI-powered decarbonization platforms like Planet FWD have enabled food companies to tap into LCA-based accounting and sophisticated farm-based models at a fraction of the time and cost with the same depth, breadth, and actionability of insights.

As sustainability leaders, your decisions shape the future of our planet and the food industry's role in it. By adopting LCA-based accounting, you not only make a commitment to better corporate stewardship but also position your company as a frontrunner in the race toward a sustainable future.